Can You Refinance a FHA Loan?
February 11, 2022 at 10:30 PM
Image of a home purchased and then refinanced with an FHA loan.

When you’re a first-time homeowner, you have access to unique loan products that make the path to homeownership easier. The federal government backs the Federal Housing Administration (FHA) loan. The FHA enables lenders to offer mortgages to candidates who may not meet requirements for traditional loan products. Because an FHA loan isn’t conventional, it has different standards for the borrower and unique terms and conditions. An FHA loan may be the only or best path to homeownership, depending on the borrower. After getting a federally backed mortgage, you might have follow-up questions, such as if you’re allowed to refinance your FHA loan. Keep reading to learn more about FHA loans and what it takes to refinance them.

What is an FHA loan?

The Federal Housing Administration guarantees certain mortgages through financial institutions. If a borrower defaults on a loan, the FHA protects the lender. Because of this, lenders can provide FHA loans to individuals who wouldn’t otherwise qualify for a mortgage. Common issues that don’t affect eligibility for FHA loans include:

  • Poor credit
  • Low down payment
  • Bankruptcy
  • Past financial issues

FHA loans allow some borrowers to achieve property ownership, even if they aren’t ideal candidates on paper.

How do you qualify for an FHA loan?

One component of your qualifications for an FHA loan is your credit score. While traditional mortgage products have a minimum credit requirement, the FHA loan is available to all borrowers regardless of credit score. However, if you have a score of 580 and higher, you qualify for a minimum down payment of 3.5 percent.

Borrowers with credit scores under 580 have to put down 10 percent of the home’s cost.

What are the requirements for an FHA loan?

Because FHA loans are available to otherwise ineligible borrowers, they come with certain restrictions for the property and the lender. When you work with an experienced broker like Atlas Crown Mortgage, it’s stress-free to find a lender with ideal terms for your needs. Typical FHA loan restrictions include:

  • You must work with an FHA-approved appraiser.
  • FHA loans are only for primary residences, not second homes and investment properties.
  • The buyer must occupy the house within 60 days.

For most borrowers looking for an accessible pathway to homeownership, the restrictions won’t affect which properties they can purchase.

living room

Can you refinance an FHA loan?

You can refinance an FHA loan without penalty. The first step to refinancing is either to qualify for a different mortgage product or another FHA loan. Once you reach 20 percent equity in your home, you might consider refinancing with a conventional loan product that may have better terms. Your credit score should be at least 620, without negative marks on your credit report.

Taking advantage of a new interest rate through an FHA loan is a streamlined process that often doesn’t require a second appraisal, with easy income verification.

Contact Atlas Crown Mortgage in Phoenix for expert help to refinance your FHA loan.

Atlas Crown Mortgage wants to streamline the process of getting a mortgage. We have diverse expertise that serves our nationwide clients, whether you’re a first-time homeowner, purchasing a luxury property, or have a non-traditional application. By comparing products from 75 lenders across the nation, we’re able to offer our clients competitive rates and terms that match their unique needs. Getting a mortgage doesn’t have to be stressful, no matter your circumstances. Working with an expert broker, like Atlas Crown Mortgage, you get streamlined service tailored to your needs.

See what we can do for you when you contact us for your mortgage needs, including refinancing FHA loans.

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