FHA loan refinances: Requirements, pros, and cons

•

Contributed by Tom McLean

Updated Mar 5, 2026

•

9-minute read

A well-lit living room with tasteful grey furniture and green plants.

Homeowners often refinance¹ their mortgage to reduce their interest rate, save money on their monthly payment, borrow their home equity, or change their loan terms. If you have an FHA loan, you have multiple options for refinancing your mortgage. Learn more about FHA refinance options, requirements, and pros and cons.

What is an FHA loan?

An FHA loan is a government-backed mortgage offered to buyers who may not qualify for a conventional loan. FHA loans allow borrowers to qualify with lower credit scores and limited down payment funds. FHA loans have limits on how much you can borrow and require up-front and annual mortgage insurance premiums (MIP).

See what you qualify for

Get started

Why refinance an FHA loan?

You may want to refinance your FHA loan for many reasons, including the following:

You can save money. If you can refinance to a new mortgage with a lower interest rate and a lower monthly payment, you can save money on interest.
You can pay off your loan sooner. Refinancing to shorten your loan term allows you to pay off your home faster and pay less interest overall. The trade-off is usually a higher monthly payment.
To lock in a fixed interest rate. If you have an adjustable-rate mortgage (ARM), refinancing to a fixed-rate mortgage will avoid any potential rate increases. This makes your monthly payment predictable.

Common mistakes borrowers make when refinancing include:

Focusing only on the interest rate. Remember to check the loan's annual percentage rate (APR), which includes fees and other costs, to get a more complete understanding of what a loan costs.
Not asking about loan options. Don't take the first loan you're offered. Exploring available loan types, programs, and lenders allows you to shop around for the best deal.
Forgetting about closing costs. You typically need to pay closing costs when refinancing, which can total between 3% and 6% of the loan amount.
Not checking your credit report. A low credit score can make it challenging to qualify for a loan or to get the best available interest rates. Making sure your credit is accurate and correcting any errors can prevent problems.

Take the first step toward the right mortgage

Apply online for expert recommendations with real interest rates and payments

I want to buy a home

I’d like to refinance

How soon can I refinance an FHA loan?

A homeowner can refinance an FHA loan starting 210 days or six payments past the closing date, depending on the FHA option. If you assumed the FHA loan you're refinancing, you must have made six payments. You must also have made all mortgage payments on the property for the month due within the six months prior and have no more than one 30-day late payment in the previous six months.

FHA refinance options: At a glance

There are several FHA refinancing options, and here are the key features of each:

	Appraisal requirements	Cash-out allowed	FHA refinance waiting period	Constraints to eligibility	Closing cost requirements
FHA Simple refinance	Appraisal required.	No.	None.	Must have a credit score of 580², all loan payments from the last 6 months up to date.	Closing costs required. Can fold costs into the loan amount.
FHA Streamline refinance³	No appraisal required.	Cash out limited to $500.	Must wait 210 days or 6 payments past your closing date.	Must have a net tangible benefit, meaning the borrower must get a financial advantage.	Must pay closing costs up front.
FHA cash-out refinance	Appraisal required.	Your loan-to-value ratio (LTV) can’t exceed 80%.	No late mortgage payments during the past 12 months. Must have at least 12 months of residency.	Must be a primary residence. Must work with a HUD consultant.	Closing costs required.
FHA 203(k) refinance	Appraisal required.	No cash-out feature.	Up to a 2-year waiting period if you've experienced bankruptcy; up to 3 years after foreclosure.	Must be an eligible property with eligible repairs or improvements. Work must start within 30 days of closing.	Closing costs required.

Get approved to refinance

See expert-recommended refinance options and customize them to fit your budget

Start my application

FHA Simple refinance

An FHA Simple refinance is for homeowners with an FHA loan. As the name implies, this option allows homeowners to refinance or switch from an ARM to a fixed-rate loan without borrowing equity. In other words, it's a rate-and-term refinance for FHA loans.

Refinance requirements

Typically, a credit score of 580 is necessary to qualify for an FHA Simple refinance. Payment history also is considered, and all your mortgage payments from the past 6 months must be up to date. A home appraisal is required to determine your home’s value.

Pros and cons of FHA Simple refinance
Pros	Cons
The opportunity to finance closing costs: By lumping your closing costs into the overall loan amount, you can lower the up-front costs of refinancing.	Borrowers can’t take money out. The FHA Simple refinance option doesn't offer a cash-out feature, so it isn't the best option if you're looking to borrow your home equity.
The opportunity to adjust your interest rate: This could mean obtaining a lower rate or switching from an ARM to a fixed-rate loan.	Borrowers will have to get a home appraisal. You'll need to get an appraisal to determine your home's value. This can take time and money, and it can extend the refinancing process.
The opportunity to remove the co-borrower from the mortgage: If you purchased your home with another person who no longer needs to be on the loan, refinancing can give you the chance to remove the co-borrower.

FHA Streamline refinance

Much like the Simple refinance option, the FHA Streamline refinance³ is available to homeowners with an FHA loan who want to reduce their interest rate and monthly payments.

In contrast to the Simple refinance, the Streamline refinance may not require an appraisal or an in-depth credit inquiry. As a result, the process should move more quickly.

Refinance requirements

To qualify for an FHA Streamline refinance, you’ll need an existing FHA loan with no outstanding monthly mortgage payments. You must not be within 210 days of the closing date of your original home loan.

Additionally, you’ll have to meet these conditions for your mortgage payments:

No payments have been more than 30 days late in the past 6 months.
No more than one payment has been more than 30 days late within the past 12 months.
At least 6 monthly payments have been made on your existing mortgage.

FHA Streamline refinances also have a tangible net benefit requirement, which refers to the financial advantage gained by the borrower from the refinance. This means that for the FHA to approve the refinance, it must be quantifiably beneficial to you as the borrower.

For example, if you're reducing the length of your loan repayment term, the new interest rate can't exceed the rate on your current mortgage. The new monthly mortgage payment also can't exceed the old payment by more than $50 per month.

Pros and cons of FHA Streamline refinance
Pros	Cons
Less strict mortgage lender requirements: Because the refinance is streamlined, this process requires fewer in-depth credit and income checks. In general, your lender may assume that if you can pay your current monthly payment, you'll be able to pay the new one.	Closing costs that must be paid up front: Unlike a Simple refinance, where you can lump closing costs into the loan, an FHA Streamline refinance requires the borrower to pay closing costs up front. These costs are typically 3% – 6% of the loan amount.
No home appraisal required: Not having to wait for the home appraisal lets you close on your refinance faster.	A limited cash-out opportunity: This refinancing option allows borrowers to withdraw up to $500 from their home equity.
An option for homeowners who owe more than their home is worth: Even if you owe more on your mortgage than your home’s value, you can still take advantage of this refinance program.	Mortgage insurance premiums (MIP): MIP is required on all FHA loans. If you’re looking to get away from MIP, refinancing into a conventional loan might be your best option.

FHA cash-out refinance

If you’re interested in borrowing money to consolidate high-interest debts, renovate or repair your home, or pay major expenses, an FHA cash-out refinance could help.

A cash-out refinance is taking out a new mortgage based on your home's current value. You pay off your current mortgage and can use the difference for anything you like. You repay what you borrowed as part of your new FHA mortgage.

An FHA cash-out refinance is an option for those who bought their home with a non-FHA loan. For example, a homeowner with a conventional loan could refinance into an FHA cash-out refinance because the lower credit-score requirements make it easier to qualify.

Refinance requirements

To qualify for an FHA cash-out refinance, you’ll need:

A minimum credit score of 580
A debt-to-income ratio (DTI) at or below 43%
No late mortgage payments during the last 12 months
Residency in your house for at least 12 months

In addition, you must meet loan-to-value limits, which can't exceed 80% of your home’s – meaning you’ll need to keep at least 20% equity in your home.

Pros and cons of FHA cash-out refinance
Pros	Cons
The potential for lower monthly payments: In addition to tapping into home equity, a cash-out refinance could mean obtaining a better interest rate, which could lower your monthly mortgage payments.	An increased loan amount: Cashing out your home equity means taking on additional debt in the form of a higher loan amount. It’s important to consider both the short- and long-term impact of this decision to determine if it makes sense for you.
A lump-sum payment you can use for almost anything: From home repairs to debt consolidation and emergency funds, the cash you receive from a cash-out refinance can go toward many projects.	Required MIP payments: If you're refinancing from a conventional loan into an FHA loan with an FHA cash-out refinance, you'll be required to pay MIP.
	A required home appraisal: Unlike a Streamline refinance, a cash-out refinance requires a home appraisal to determine the precise value of the home.

FHA 203(k) Refinance

Also known as a mortgage rehabilitation or renovation loan, an FHA 203(k) refinance loan allows homeowners to roll home improvement and renovation costs into their home loan.

Two options are available: the limited 203(k) refinance and the standard 203(k) refinance.

Limited 203(k) refinance: This refinance option lets you borrow up to $35,000 toward qualifying home improvements with no minimum spend. The limited FHA 203(k) refinance only covers uncomplicated surface-level repairs, such as new flooring.
Standard 203(k) refinance: This FHA 203(k) refinance has no price cap but requires the homeowner to spend at least $5,000 on home projects. The standard option covers significant home improvements, such as structural repairs.

Rocket Mortgage currently doesn’t offer FHA 203(k) loans.

Refinance requirements

As with a cash-out refinance, you don’t have to begin with an FHA loan to take advantage of an FHA 203(k) refinance. Homeowners with any loan type can leverage this option, but will need to meet specific requirements, such as a minimum credit score and a maximum DTI.

A home appraisal is required for an FHA 203(k) refinance. It's important to note that the FHA has specific rules regarding the types of home improvements this refinance option covers.

Pros and cons of FHA 203(k) refinance
Pros	Cons
Less-strict credit score requirements: FHA loans often have less-stringent requirements than other types of loans, making it easier for borrowers to get the financing they need when they need it.	The approval process can be longer than with other types of refinances. With many constraints, the process can take longer, and borrowers may experience delays.
Lower interest rates compared with other home improvement loans: If you have important home repairs and remodels planned, it will likely cost you less in the long run to finance them with an FHA 203(k) loan versus an alternative home improvement loan.	Borrowers can’t use this option for investment properties. Unlike some other refinancing options, the FHA 203(k) refinance is available only for primary residences.
	Borrowers might have to hire a HUD consultant. Depending on the type of repairs you have planned, the conditions of your loan might require you to consult someone from the U.S. Department of Housing and Urban Development (HUD) for approval.

Can I refinance a conventional loan into an FHA loan?

Yes, you can refinance a conventional loan into either an FHA cash-out refinance or an FHA 203(k) refinance, but not a Simple or Streamline refinance. You’ll need to meet the qualifications for either refinance.

Can I refinance an FHA loan into a conventional loan?

Yes, you can refinance from a government-backed loan to a conventional mortgage. You may want to do this to stop paying MIP, which all FHA loans require for at least 11 years. However, note that conventional loans require private mortgage insurance (PMI) until you have 20% equity in your home.

The bottom line: Choose the right FHA mortgage refinance option for you

Choosing the right FHA loan requires you to look at all the drawbacks and risks of each type of mortgage. It's also wise to examine your goals, whether you're looking to lower monthly payments, tap into equity, or switch up your loan terms.

Ready to refinance? Explore your options and apply today with Rocket Mortgage, which can help you align the right refinance option with your goals.

¹Refinancing may increase finance charges over the life of the loan.

²To qualify for this offer, you must meet all standard FHA eligibility requirements. In addition, your total mortgage payment, including taxes and insurance, cannot exceed 38% of your income, your debt-to-income (DTI) ratio cannot exceed 45%, and you must have 12 months of verifiable housing history immediately prior to your application, no late payments 30 days or greater in the last 12-months, and no derogatory marks on your credit report. Not available on jumbo loans. Asset statements may be needed, no more than 1 day of non-sufficient fund fees are allowed in the most recent 2 months prior to application. Additional restrictions/conditions may apply.

³The FHA Streamline program may have stricter requirements in some states. In order to qualify for the FHA Streamline program, an immediate .5% minimum reduction in interest and mortgage insurance premium is required. Some states may require an appraisal.

Rocket Mortgage is a trademark of Rocket Mortgage, LLC or its affiliates.

Get approved to refinance

See expert-recommended refinance options and customize them to fit your budget

Start my application

Melissa Brock

Melissa Brock is a freelance writer and editor who writes about higher education, trading, investing, personal finance, cryptocurrency, mortgages and insurance. Melissa also writes SEO-driven blog copy for independent educational consultants and runs her website, College Money Tips, to help families navigate the college journey. She spent 12 years in the admission office at her alma mater.

Related resources

A woman writing something on paper possibly working on taxes or finance.

8-minute read

7 ways to refinance if you have ‘bad’ credit

If you’re looking to refinance, you’ll typically need to meet credit requirements. But it’s still possible to refinance with bad credit.

An Afro-American woman using a portable computer and smiling, potentially in a home setting.

10-minute read

What is a limited cash-out refinance and how does it work?

A limited cash-out refinance replaces your current loan with a higher amount. Learn if a limited cash-out refinance is right for you.

Woman working with a laptop on a couch, potentially managing finances or exploring real estate options online.

8-minute read

What is a rate-and-term refinance?

A rate-and-term refinance allows you to replace your current mortgage with one that has better terms. Getting a lower rate or longer term can save you money.