FHA refinancing may be an appealing option for homeowners looking to take advantage of rate changes or a change in their credit profile. FHA refinancing comes with more flexible qualification criteria, and a more streamlined approval process.
FHA refinancing is a tool that homeowners with existing conventional or FHA loans can use to refinance when their financial situation changes or to take advantage of better rates.
If you’re thinking about refinancing your FHA loan, the best FHA refinance rates you qualify for will depend on which lender you choose, your credit profile and the pertinent details of your loan, like the loan term and amount. Unlike many other refinance options, most FHA loans don’t require an appraisal or income verification and are more straightforward on the paperwork.
Current FHA refinance rates
8 best FHA refinance rates of 2020
- PennyMac: Best for 30-year FHA refinance
- US Bank: Best for 15-year FHA loans
- Bank of America: Best for current customers
- Guaranteed Rate: Best for helpful tools
- Better.com: Best for low rates
- Loan Depot: Best for no lender fees
- Quicken Loans: Best for customer service
- PNC Bank: Best for high LTV
PennyMac — Best for 30-year FHA refinance
People looking to refinance to a 30-year or 15-year FHA loan have an option to be serviced through PennyMac. In business since 2008, this lender has served over 2 million customers. Rates on 15-year streamline FHA refinances start at 4.250% APR. Rates on longer 30-year streamline options are actually lower, with a starting APR of 2.500%. Those homeowners looking to get lower payments by extending their mortgage terms may be able to do so through PennyMac without a massive increase in interest costs. If you live in New York, PennyMac is not currently licensed to offer purchase or refinance loans in your state.
U.S. Bank — Best for 15-year FHA loans
FHA loans can be refinanced through U.S. Bank for competitive rates by homeowners who live in one the 27 states serviced by the company. Current APR on 15-year FHA loans is 3.114%, making it a good option for those looking to refinance to a shorter repayment period.
Bank of America — Best for current customers
Bank of America’s loan refinancing process is streamlined and offers nice discounts in a lot of cases. Unfortunately, Bank of America FHA refinance loans are only available to existing bank loan clients. While this is not ideal for outside clients, it’s an easy process to navigate for existing customers. Additionally, the bank may offer discounts on origination fees ($200 to $600) and lower rates based on your rewards status with the bank. Current APRs for FHA refinance loans start at 3.389%.
Guaranteed Rate — Best for helpful tools
You may not be familiar with Guaranteed Rate, but you have likely heard of Rate.com, which is the home of the lender Guaranteed Rate. This technologically forward company offers FHA refinances for 30 years, starting at an APR of 3.553%. It’s clear the company cares about leveraging technology to make your refinancing experience as smooth as possible. The Intuitive Loan Finder technology allows homeowners to answer a series of questions to find the best loan possible through the company.
Better.com — Best for low rates
Prospective refinancers looking for the best rates will want to check out what Better.com has to offer. Currently, rates on 30-year FHA refinancing start at about 3.125% APR to 3.141% APR, depending on your particulars. Compared to the rest of the industry, this is excellent. To sweeten the deal more, the company has a better price guarantee. If you find a better rate, the company will give you $1,000 and beat the rate.
Loan Depot — Best for no lender fees
In order to get your personalized FHA refinance rates from Loan Depot, you will need to contact the company online or by phone. The company does have extensive experience in the loan industry, with over $165 billion in loans written since 2010. Loan Depot also works hard to gain customers for life by offering a few perks. Once you sign a new loan or refinance with the company, you’ll no longer pay lender fees again should you take out a new loan or refinance. If you choose to refinance again down the road, all fees will be waived. Additionally, if you should ever refinance to a different type of loan, you will get a refund on your appraisal cost. However, you will need a minimum FICO score of 580 to qualify for a 3.5% down payment. If your credit score is between 500 and 579, you will have to make a down payment of 10%.
Quicken Loans — Best for customer service
Borrowers who are looking for a face to face refinancing process won’t be interested in Quicken Loans as the company is 100% online. That being said, the company clearly knows how to deliver a quality experience, as is evident by the customer service rankings. Quicken Loans is a BBB accredited business, one of Fortune 100s best companies to work for and received the highest marks in J.D. Power’s 2019 U.S. Primary Mortgage Origination Satisfaction Study. The rates for 30-year FHA refinancing loans at Quicken Loans currently start at about 3.383%.
PNC Bank — Best for high LTV
FHA refinance loans are available through PNC Bank online, in person or over the phone. One of the most attractive qualities of PNC Bank’s offerings is the bank is willing to work with high loan to value ratios as high as 97.75%. Rates are not publicly posted, however, so you must contact the bank or use the online refinance calculator to see what your individual rate will be. Keep in mind that fees can range from 3% to 5% for a FHA refinance.
Compare 8 best FHA refinance rates of 2020
|APRs starting at 2.500%
|APRs starting at 3.114%
|Bank of America
|Only available to Bank of America clients
|Intuitive loan finder technology
|Rates starting at 3.125%
|Loan Depot lifetime guarantee
|High marks in customer service
|Up to 97.75% LTV
What is a FHA refinance?
FHA refinancing is the process of replacing your existing loan with an FHA loan, which is a mortgage loan issued by an FHA-approved lender and insured by the Federal Housing Association. This type of loan is unique because it has more flexible lending parameters than conventional loans, and people who wouldn’t normally qualify for a conventional loan or refinance can often qualify for an FHA loan or refi.
With an FHA refinance loan, your initial mortgage loan is paid off completely. The FHA refinance process is complete and you are no longer bound by its terms. You’ll only make payments on your new FHA loan. FHA refinance loans come in a couple of different types — streamline and simple.
FHA refinance vs. other alternatives
FHA refinance vs. conventional refinance
Homeowners who have built up at least 20% equity in their homes may want to consider a conventional refinance along with an FHA refinance. By doing so, they can get away from having to pay the extra monthly mortgage insurance premium that comes standard with FHA loans. However, getting approval for a conventional refinance can be more challenging, and will depend on your credit profile and the terms of your existing loan.
FHA simple refinance vs. FHA streamline refinance
The simple version of FHA refinancing refers to a no cash-out option. With simple FHA refinances, all proceeds are used to pay the existing mortgage loan and the homeowner doesn’t get to take advantage of the equity they’ve built in their home. With this option, all of the typical loan requirements (credit checks, financial documents, etc.) and an appraisal of your home are required. The upside to this type of loan is that the new loan can roll all of your closing costs and prepaid items in the loan amount, as long as it adds up to less than 97.75 percent loan-to-value.
The streamline refinance option, on the other hand, is a refinance of an existing FHA mortgage and does not require a home appraisal or extensive paperwork. A streamline refinance doesn’t require as much work, but in order to take advantage of it, the home that you are refinancing must already be FHA insured and mortgage must be current.
FHA refinance vs. VA refinance
There are some significant differences between FHA refinances and VA refinances. First, VA loans are only offered to eligible veterans and military members who qualify, and the restrictions are quite limited. FHA loans are open to anyone who qualifies — no military affiliation required.
VA loans can often be taken out with no money down and they don’t require any extra mortgage insurance no matter how much (or little) of a down payment is made. If you’re below the 20% equity threshold, you might pay the mortgage insurance premium with an FHA refinanced loan.
There is no minimum credit score required for a VA loan, though requirements will vary from lender to lender. FHA loans may not have interest rates that are as low as VA loans.