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4 FHA Refinancing Options and How They Work

Because Federal Housing Administration (FHA) loans are specifically designed for borrowers who have low to moderate income, a limited amount to put down on a home, and/or a lower credit score, many first-time buyers’ dreams have been realized with the help of an FHA loan. 

As we’ve discussed before, interest rates continue to be the lowest we’ve seen in years and many homeowners are looking at their current mortgages – and growing equity – with an eye on refinancing.

4 FHA Refinancing Options and How They Work

Did you know that whether your existing loan was acquired through the FHA program or other means, you may qualify for an FHA refinance?


  • FHA Streamline: If FHA homeowners see the difference in rates and decide to pursue a lower interest rate or a lower monthly payment, it can be accomplished by refinancing into an FHA Streamline Mortgage. This is also a good way to move from an adjustable rate mortgage (ARM loan) into a fixed-rate loan while rates are low.

  • FHA Cash-Out Refinance: As with a conventional refinance, a borrower can access the equity of their home by taking cash out on a refinance to use for debt consolidation, home improvements or maybe a nest egg. There are no restrictions on the use of funds.

  • No Cash-Out Refinance: This option is designed to pay existing liens and may include rate and term refinance or a Streamline Refinance. The only money back on this loan would be in refund form and it cannot exceed $500, so excess would be rolled back into the mortgage.

  • FHA Rehab Refinance: Just as it implies, this is for rehabilitation or repairs, and the loan has specific requirements for the cash out to be used strictly for improving the property.

Whichever FHA refinancing course you choose depends on your needs, financial goals and qualification. Being a federal program, there are of course some rules and regulations involved that a lender can explain further. Briefly, they are:

Time - Naturally, the longer you’ve paid on the mortgage, the more equity you’ll have in the property. However, FHA refinancing can only be applied for after 12 months of owner occupation and payments, and sometimes even less for no-cash-out programs.

Occupancy - Whether it was originally an FHA or non-FHA loan, the property being refinanced through FHA must be the primary residence – no vacation homes or rentals. 

Changing or Removing Mortgage-Holders - An FHA refinance is a viable tool to buy out or change a person on the mortgage with proper legal documentation and equity agreement, such as a divorce decree or settlement.

Unpaid Creditors - Any federal tax or non-tax debt needs to be resolved before refinancing. This can mean setting up a payment plan that is satisfactory to the creditor. It may apply to non-federal debts like student loans or medical bills, but a lender can determine arrangement requirements if necessary.

Our team at EnTrust Funding (ETF) has years of experience and knowledge in all areas of mortgages, including FHA refinancing. We can determine which plan is best for you and the valuable asset that is your home. Give us a call today for a complimentary consultation.

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