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Got an FHA home loan you’d like to move on from? Most FHA refinance options require at least 6 months of payments and 210 days since closing before you can refinance. Depending on the option you choose—such as an FHA-to-conventional refinance, streamline, or cash-out refi—additional factors like debt-to-income ratio, home equity, and credit score may also apply.
Whichever one you’re considering, two vital questions arise: how soon can you refinance an FHA loan, and what are the qualification requirements for those options?
Highlights
- Refinancing an FHA loan requires meeting specific criteria, including seasoning, payment history, home equity position, debt-to-income ratio, and credit score requirements.
- Multiple FHA refinance options exist, such as FHA-to-conventional, streamline, rate-and-term, simple, cash-out, 203(k), and FHA-to-short refinance.
- Before refinancing, consider factors like closing costs, credit history, interest rate trends, loan term implications, breakeven points, and potential prepayment penalties.
Eligibility Rules For An FHA Refinance
Because there are several ways to refi your current FHA loan, it’s helpful to break down what’s needed for each option. This includes several factors:
- Seasoning requirements: Often, a minimum length of time must pass from the initial closing date before you can move on from your current loan.
- Payment history: This is the minimum number of payments on your current loan required before you can refinance (which is another form of seasoning requirement).
- Home equity position: This is the amount of equity you’ve accrued, often expressed by the loan-to-value (LTV) ratio; your LTV reflects the proportion of the loan amount you want to borrow compared to the property’s appraised value/equity. Lenders assess the LTV to gauge risk level; a higher LTV indicates greater risk, which means you have less equity in the property. If you have an LTV of 80%, you’ve accrued at least 20% equity.
- Debt-to-income (DTI) ratio: Your DTI compares your monthly debt payments to your income, helping lenders determine if you can handle more debt when refinancing a mortgage. A lower DTI means you have more income relative to your debt, making you less risky, while a higher DTI suggests you might be stretched thin and could struggle with new payments. Lenders typically prefer a DTI below 43% for refinancing.
- Credit score: Your three-digit credit score, ranging from 300 to 850, shows how well you handle debt based on your payment history and credit use. When refinancing a mortgage, lenders look at your score to decide how risky it is to lend to you. A higher score means you’re a safer bet, which can help you get lower interest rates and better loan terms. If your score is lower, you might face higher rates or struggle to get approved. Generally, scores above 700 are considered good, while those below 620 can make refinancing tougher.
Now, let’s dig deeper into what’s required for each FHA refi option. First, a quick snapshot of what is commonly needed. Keep in mind that individual lenders may have their own requirements, and factors like market conditions, your credit profile, or your property’s appraised value can affect your eligibility and loan terms.
Min. Seasoning | Min. Mo. Payments | Max LTV | Max DTI | Min. Credit Score | |
FHA-to-Conventional | 6 mo. / 210 days* | 6 consecutive | 97% | 43-45% | 620 |
FHA Streamline | 6 mo. / 210 days* | 6 consecutive | 97.75% | None | None |
FHA Rate-and-Term | 6 mo. / 210 days* | 6 consecutive | 97.75% | 43-45% | 580 |
FHA Simple | 6 mo. / 210 days* | 6 consecutive | 85-97.75% | 43% | 580 |
FHA Cash-Out | 12 months of owning the home | 6 consecutive | 80% | 43% | 600+ |
FHA 203(k) | 6 mo. / 210 days* | 6 consecutive | None | 43% | 580 |
Short Refinance | None | None | 97.75% | 43% | 620 |
FHA-to-Conventional Refinance
Curious how soon you can refinance an FHA loan to a conventional loan? Here’s what is commonly needed:
- Minimum seasoning: 6 months since your first mortgage payment / 210 days from the closing date of your current loan
- Minimum monthly payments: 6 consecutive
- Max LTV: 97%
- Max DTI: 43-45%
- Minimum credit score: 620
“Typically, for an FHA loan to conventional refinance, you must have at least 20% equity in your home to avoid paying private mortgage insurance,” Dennis Shirshikov, an economics and finance professor at City University of New York/Queens College, says, “although you can have as little as 3% equity to qualify.”
» MORE: See today’s refinance rates
FHA Streamline Refinance
The FHA streamline refinance is a quick and easy option for homeowners with existing FHA loans, offering a simplified process without needing a new appraisal, extensive credit checks, or proof of income in most cases. It provides a faster alternative to traditional refinancing, and even those who may not qualify for other refinancing options—such as unemployed borrowers, lack sufficient income history, have limited home equity, or face credit challenges—might still be eligible.
Here’s what’s required for an FHA Streamline refi:
- Minimum seasoning: 6 months since your first mortgage payment / 210 days from the closing date of your current loan
- Minimum monthly payments: 6 consecutive
- Max LTV: 97.75%
- Max DTI: None
- Minimum credit score: None
“This program is designed to be a fast, minimal-documentation refinancing option. There is no minimum credit score requirement, and the DTI ratio is not typically a barrier,” Shirshikov notes. “Also, the maximum LTV is not a concern with this program, as it does not involve a home appraisal.”
FHA Rate-and-Term Refinance
Desire a simple FHA rate-and-term refi? Follow these numbers:
- Minimum seasoning: 6 months since your first mortgage payment / 210 days from the closing date of your current loan
- Minimum monthly payments: 6 consecutive
- Max LTV: 97.75%
- Max DTI: 43-45%
- Minimum credit score: 580
“A rate-and-term refinance is great for lowering your rate or changing your loan’s terms without cashing out,” explains Andrew Lokenauth, a personal finance expert and founder of TheFinanceNewsletter.com.
FHA Simple Refinance
An FHA Simple Refinance lets homeowners replace their current FHA loan with a new one to cover the existing loan and transaction costs without taking cash out of their home equity. The benefits include potentially lower interest rates, which can reduce monthly payments, and the ability to switch from an adjustable-rate to a fixed-rate mortgage. Since the homeowner already has an FHA loan, the refinancing process tends to be quicker and easier, and closing costs may be rolled into the new loan.
The requirements are as follows:
- Minimum seasoning: 6 months since your first mortgage payment / 210 days from the closing date of your current loan
- Minimum monthly payments: 6 consecutive
- Max LTV: 85-97.75%
- Max DTI: 43%
- Minimum credit score: 580
» MORE: Getting ready to buy or refinance a home? We’ll find you a highly rated lender in just a few minutes
FHA Cash-Out Refinance
If you seek to tap home equity and pocket extra cash at closing with an FHA cash-out refinance, abide by these numbers:
- Minimum seasoning: 12 months of owning the home
- Minimum monthly payments: 6 consecutive
- Max LTV: 80%
- Max DTI: 43%
- Minimum credit score: 600+
FHA 203(k) Refinance
An FHA 203(k) loan, also known as an FHA rehab loan, allows you to include the cost of home repairs and renovations in your refinance. There are two types: the Standard 203(k) for projects over $75,000 and the Limited 203(k) for those under that amount (up from $35,000 starting November 4, 2024). Eligible projects include structural repairs, cosmetic updates, accessibility improvements, energy efficiency upgrades, and the removal of hazards like mold or asbestos.
Here’s what is needed:
- Minimum seasoning: 6 months since your first mortgage payment / 210 days from the closing date of your current loan
- Minimum monthly payments: 6 consecutive
- Max LTV: None
- Max DTI: 43%
- Minimum credit score: 580
FHA-to-Short Refinance
A short refinance enables you to swap your current mortgage for a new loan that’s less than what you owe, reducing your monthly payments and helping you steer clear of foreclosure. As long as you make timely payments on the new loan, you can remain in your home. Lenders might consider this option if you are experiencing financial difficulties or are at risk of default. To be eligible, you usually need to demonstrate financial hardship and have a mortgage balance that exceeds your home’s appraised value.
For a short refi, you’ll want to match or improve upon these metrics:
- Minimum seasoning: None
- Minimum monthly payments: None
- Max LTV: 97.75%
- Max DTI: 43%
- Minimum credit score: 620
Other Considerations Before Refinancing Your FHA Loan
Just because enough time has passed and you can qualify for a refinance doesn’t necessarily mean you should pull the trigger. Before committing to an FHA refinance, it’s smart to carefully consider the various factors involved, including:
- Closing costs: “Closing costs for an FHA refinance generally range from 2% to 6% of the loan amount, which can add up. It’s crucial to ensure you can cover these costs upfront or roll them into the new loan – depending on what type of refinance you choose,” suggests Shirshikov.
- Credit history: “Lenders will carefully assess your creditworthiness, so maintaining a solid payment record can help you qualify for better rates,” says Carl Holman with A&D Mortgage.
- Interest rate timing: “Market conditions matter here. Don’t chase small rate drops – time your rate lock carefully,” advises Lokenauth.
- Remaining loan term: “Shortening your loan term with a refinance can save money on interest but may result in higher monthly payments,” Shirshikov adds. “On the other hand, extending the loan term reduces payments but increases overall interest paid.”
- Breakeven point: “Your breakeven point is very important. This is how long it will take for the savings from the new loan to offset the costs of refinancing. Typically, this is 2 to 5 years, which means you should plan on remaining in your home for at least that time,” Holman notes.
- Prepayment penalties: Learn if paying off your existing loan to refinance to a new one will incur any fees or penalties from your lender. “This could seriously negate the savings of refinancing,” Holman adds.
Lokenauth also recommends asking yourself crucial questions to help determine whether now is the right time for that refi.
“How long will you stay in the home? Will you truly save money over time? What is your current financial health? Are rates likely to improve soon? Is an FHA loan still your best option? And if not, how soon can you refinance out of an FHA loan?” he asks.