How To Refinance An FHA Home Loan: FHA Mortgage Refinance

Getting mortgage refinance is quite a complex process. Here is a general overview of the steps you need to take.

1. Find out if you are eligible

There are two types of FHA refinance loans – simplified or cash. Everyone has different requirements.

For refinancing made easy, all you need is an existing FHA mortgage that is in good standing and is at least six months old. It is much easier to qualify, but you will not be able to withdraw any money.

The other type is a cash refinance, where you borrow more than what you owe on your existing mortgage and keep the extra money. For an FHA withdrawal refinance, you will need to:

  • Prove that the house is your primary residence and that you have lived there for at least 12 months.
  • Have a 12-month one-time payment history or own the home with full deductibility.
  • Have a loan to value ratio (LTV) of 80% or less. Your LTV ratio is the amount you owe on your home over the appraised value of your home.
  • Have a minimum credit score of 500 and a debt to income ratio of 50% or less.

2. Get pre-approved by lenders

Note that “lenders” is plural. Not all lenders will offer you the same rates, fees, and terms, so it’s important to shop around. A pre-approval is a firm commitment to lend money. You will need to fill in some credentials to get pre-approved. But you’ll also get an accurate picture of the interest rates and other costs you’ll have to pay. Start with a few of our favorite lenders for FHA loans and compare their offers.

3. Decide on the best loan option and apply.

Once you’ve gotten the rates from several different lenders, apply to the one that’s right for you. Be prepared to download documentation, especially if you plan on withdrawing money.

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