You can refinance an FHA loan to change your rate, payment, term or loan structure, access equity or move into a different mortgage program. The right refinance depends on your goal and whether you meet the requirements for the new loan.
FHA Refinance Basics
| Refinance Option |
What It Does |
Appraisal |
Cash Out |
| FHA Streamline |
Refinances an existing FHA-insured mortgage with limited documentation and underwriting. |
Not required. |
No. Incidental cash back is limited to $500. |
| FHA Simple |
A no-cash-out refinance of an existing FHA-insured mortgage. |
Required. |
No. |
| FHA Rate and Term |
A no-cash-out refinance used to pay eligible existing liens and transaction costs. |
Generally required. |
No meaningful cash out. |
| FHA Cash-Out |
Refinances the mortgage and allows eligible equity to be taken as cash. |
Required. |
Yes. |
| FHA 203(k) |
Refinances existing debt and finances eligible rehabilitation or repairs. |
Required as part of the 203(k) process. |
Funds are restricted to eligible refinance and rehabilitation purposes. |
| FHA to Conventional |
Replaces the FHA mortgage with a conventional loan. |
Depends on conventional underwriting and whether a valuation waiver is available. |
Depends on the conventional refinance type. |
What FHA Refinance Options Are Available?
HUD's current FHA handbook identifies cash-out refinances, three no-cash-out refinance types and 203(k) refinances for rehabilitation or repair. If you are leaving the FHA program, you may also refinance into a conventional mortgage if you qualify.
FHA Streamline Refinance
An FHA Streamline refinance is available only when the mortgage being refinanced is already FHA-insured. HUD describes Streamline refinancing as a reduced-documentation process with credit-qualifying and non-credit-qualifying options.
HUD's Streamline guidance requires the existing mortgage to be current and the new loan to provide a net tangible benefit. Cash back above $500 is not permitted.
Streamline refinances also have seasoning requirements. On the date of FHA case number assignment, the borrower generally must have made at least six payments, at least six full months must have passed since the first payment due date and at least 210 days must have passed since the closing date of the mortgage being refinanced.
A Streamline refinance may be relevant when your goal is to change the rate, payment or loan structure without taking cash out. It is not designed to use a new appraised value to access equity.
FHA Simple Refinance
An FHA Simple refinance is a no-cash-out refinance of an existing FHA-insured mortgage. Unlike a Streamline refinance, a Simple refinance requires an appraisal and uses standard FHA underwriting requirements.
For principal residences, HUD currently permits a maximum LTV and CLTV of 97.75% for a Simple refinance, subject to the maximum mortgage calculation and other FHA requirements.
A Simple refinance can be useful when you want to stay with FHA but the transaction needs a new appraisal or does not fit the Streamline structure.
FHA Rate and Term Refinance
An FHA Rate and Term refinance is a no-cash-out refinance that can be used to pay eligible existing mortgage liens and transaction costs. Unlike the Simple and Streamline options, the mortgage being refinanced does not have to be FHA-insured.
If you already have an FHA loan, Rate and Term is another FHA-to-FHA path when the transaction does not meet the definitions of a Simple or Streamline refinance.
FHA Cash-Out Refinance
An FHA cash-out refinance replaces the existing mortgage and allows eligible home equity to be converted to cash.
FHA cash-out refinances are limited to 80% LTV and CLTV under current HUD policy. They are also limited to owner-occupied principal residences. In general, at least one borrower must have owned and occupied the property as a principal residence for the 12 months before case number assignment, subject to limited exceptions such as certain inherited properties.
You can use a cash-out refinance calculator to compare how a larger loan balance could affect the payment and total borrowing cost.
If you want to keep your existing first mortgage rather than replace it, a HELOC or home equity loan is a separate way to borrow against home equity.
FHA 203(k) Refinance
An FHA 203(k) refinance combines refinancing with financing for eligible home rehabilitation or repairs. HUD's 203(k) program can be used to refinance existing debt on an eligible property and finance qualifying improvements through the new FHA-insured mortgage.
This option serves a different purpose from a standard rate-and-term or cash-out refinance because rehabilitation funds are tied to eligible project costs and program requirements.
Can You Refinance an FHA Loan Into a Conventional Loan?
Yes. You can refinance an FHA loan into a conventional loan if you meet the conventional lender's credit, income, equity and other underwriting requirements.
This can be relevant when your goal is to leave the FHA mortgage insurance structure. If the new conventional mortgage requires private mortgage insurance, however, refinancing out of FHA does not necessarily eliminate mortgage insurance costs.
Can Refinancing Remove FHA Mortgage Insurance?
Refinancing from one FHA mortgage into another FHA mortgage generally does not eliminate FHA mortgage insurance. Most FHA forward mortgages require an upfront mortgage insurance premium and annual MIP under HUD's mortgage insurance rules.
If you want to eliminate FHA MIP, a conventional refinance may provide a path if you qualify and the new conventional loan does not require PMI. Whether PMI applies depends on the new loan's LTV and other conventional mortgage requirements.
How Soon Can You Refinance an FHA Loan?
The timing depends on the refinance type.
- Streamline refinance: FHA seasoning rules generally require at least six payments, six full months after the first payment due date and at least 210 days after the prior loan's closing before case number assignment.
- Cash-out refinance: The property generally must have been owned and occupied as the borrower's principal residence for 12 months before case number assignment, subject to limited exceptions.
- Simple and Rate and Term refinances: These follow their own payment-history, ownership, appraisal and underwriting rules rather than the Streamline seasoning test.
If you recently completed a mortgage forbearance or modification, additional FHA payment-history requirements may apply.
Does an FHA Refinance Require an Appraisal?
It depends on the refinance type.
| Refinance Type |
Appraisal Requirement |
| FHA Streamline |
No appraisal is required. |
| FHA Simple |
An appraisal is required. |
| FHA Rate and Term |
Generally requires an appraisal. |
| FHA Cash-Out |
An appraisal is required to establish value for the LTV calculation. |
| FHA 203(k) |
The transaction uses the 203(k) valuation and rehabilitation process. |
If you are refinancing into a conventional mortgage, the conventional lender may require an appraisal unless the loan qualifies for an eligible valuation waiver or alternative.
What Costs Should You Compare Before Refinancing?
A lower mortgage rate or monthly payment does not automatically mean a refinance lowers your total cost. Compare the new loan with your existing FHA mortgage using the same time horizon.
- Interest rate and APR.
- Principal and interest payment.
- Upfront and annual mortgage insurance.
- Closing costs and cash to close.
- New loan term.
- Amount of equity converted to cash, if any.
- Whether financed costs increase the loan balance.
- The refinance break-even point.
- Total interest and mortgage insurance over the period you expect to keep the loan.
Extending the repayment term can lower the monthly payment while increasing the number of years you remain in debt. Compare both the near-term payment and the longer-term cost.
How to Choose an FHA Refinance Option
If You Want a Reduced-Documentation FHA Refinance
Review FHA Streamline eligibility. The existing mortgage must already be FHA-insured, the transaction must meet FHA seasoning and payment-history requirements, and the refinance must provide the required net tangible benefit.
If You Want a New Appraisal but No Cash Out
Compare the Simple and Rate and Term refinance rules. The right category depends on the debts being paid, the existing mortgage and how the transaction is structured.
If You Want to Access Equity
An FHA cash-out refinance may be available if you meet the occupancy, payment-history, LTV and underwriting requirements. Compare it with second-lien options if keeping the current first mortgage matters.
If You Want to Finance Renovations
A 203(k) refinance can combine the existing mortgage payoff with eligible rehabilitation costs under one FHA-insured mortgage.
If You Want to Leave FHA Mortgage Insurance
Compare an FHA-to-conventional refinance. A conventional refinance can remove FHA MIP, but PMI may apply if the new conventional mortgage requires it.
The Bottom Line
You can refinance an FHA loan in several ways. FHA Streamline, Simple, Rate and Term, cash-out and 203(k) refinances each have different purposes and underwriting requirements. You can also refinance from FHA into a conventional mortgage if you qualify.
Start with the outcome you want, then compare the new payment, mortgage insurance, closing costs, loan balance and repayment term. If eliminating FHA mortgage insurance is the main goal, an FHA-to-conventional refinance may be more relevant than refinancing into another FHA loan.
Frequently Asked Questions
Can You Refinance an FHA Loan Into Another FHA Loan?
Yes. FHA-to-FHA refinance options include Streamline, Simple, Rate and Term, cash-out and, when rehabilitation financing is needed, 203(k) refinancing. The requirements depend on the refinance type.
Can You Refinance an FHA Loan Into a Conventional Loan?
Yes. You must qualify for the new conventional mortgage. This may allow you to leave FHA mortgage insurance, although PMI may apply to the conventional loan depending on its LTV and other requirements.
Can You Refinance an FHA Loan Into a USDA Loan?
No, not through the USDA Single Family Housing Guaranteed Loan Program's refinance options. USDA states that refinancing under that program is available only for existing USDA Section 502 Direct or Guaranteed loans. An existing FHA loan therefore is not eligible for a USDA guaranteed refinance.
How Soon Can You Refinance an FHA Loan?
It depends on the refinance type. FHA Streamline refinancing has specific six-payment, six-month and 210-day seasoning requirements. FHA cash-out refinancing generally requires 12 months of ownership and principal-residence occupancy, subject to limited exceptions. Other refinance types follow their applicable FHA requirements.
Does an FHA Refinance Always Require an Appraisal?
No. An FHA Streamline refinance does not require an appraisal. FHA Simple and cash-out refinances require an appraisal, and Rate and Term and 203(k) transactions generally involve valuation requirements.
Can You Get Cash Out With an FHA Streamline Refinance?
No meaningful cash out is permitted. HUD limits incidental cash back on an FHA Streamline refinance to $500.
What Is the Difference Between an FHA Simple and Streamline Refinance?
Both refinance an existing FHA-insured mortgage without meaningful cash out. A Simple refinance requires an appraisal and standard underwriting. A Streamline refinance uses limited borrower documentation and does not require an appraisal, but it has specific seasoning, payment-history and net-tangible-benefit requirements.
Can an FHA Refinance Remove Mortgage Insurance?
Refinancing into another FHA mortgage generally does not eliminate FHA mortgage insurance. Refinancing into a conventional mortgage may remove FHA MIP if you qualify, although conventional PMI may apply depending on the new loan.
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