The Federal Housing Administration (FHA) offers mortgages insured by the federal government. They are easier to get approved for because you can qualify if your credit score is less than 750. They offer flexible loan terms such as low loan down payment, low closing costs, and low-interest rates, making them very popular among homeowners. The FHA offers several great refinancing options as well, even if you were not previously an FHA borrower. Each has different features and requirements.
A Streamline Refinance is a quicker and easier option available for existing FHA borrowers. This option provides lower credit and underwriting requirements, no income or employment verification, no appraisal, and no closing costs.
Simple Refinance is also for exiting FHA borrowers that takes into account the closing cost in the loan amount. It requires credit qualification, full documentation of income and employment as well as a home appraisal. With this option, co-borrowers can be removed from the original mortgage. The resulting term and payment of the loan can be higher. You can also refinance regardless of how long you have had your mortgage.
In a Rate and Term Refinance all proceeds are used to pay any mortgage liens that are on the property being financed as well as any costs connected with the refinance. There is a Cash-Out Refinance option for new and existing FHA borrowers as well as conventional loan borrowers who desire to convert their loan to an FHA loan. With this option, you refinance your existing loan and received the remaining equity in the form of cash.
If you are an FHA borrower, you’re not limited to only refinancing into another FHA loan. You can also refinance out of an FHA loan and into a conventional loan if the value of your home has gone up. Conventional loans have slightly higher rates, however, most of them have lower mortgages insurance payments that are not permanent. Likewise, you can refinance a conventional loan into an FHA loan if you do not have the best credit score to qualify for a conventional refinance.