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Check out the latest FHA refinance rates to see if you could save some money by refinancing your FHA mortgage.
What are today's FHA refinance rates?
FHA mortgages offer some of the lowest mortgage rates on the market, and FHA refinance rates may be even lower. One of the benefits of getting a government-backed loan like an FHA mortgage is that many borrowers pay less for these loans even when compared to conventional loans with shorter terms, like a 15-year mortgage refinance.
In December, FHA refinance rates averaged around 5.69%, according to Zillow data. This is an 81-point decrease from the previous month. Rates have been holding relatively steady so far this month.
You can get a significant discount by getting an FHA refinance over a conventional refinance. FHA refinance rates were close to a full percentage point lower than conventional 30-year refinance rates last month.
Compare current FHA refinance rates
See how today's FHA refinance rates compare to other types of refinance loans.
| Mortgage type | Average rate today |
This information has been provided by Zillow. See more mortgage rates on Zillow
Types of FHA refinance loans
The three main types of FHA refinance loans include:
- Rate-and-term or simple refinance: This is a standard refinance that allows you to lower your rate or change your term length. If you're refinancing from a conventional mortgage into an FHA mortgage, it's called a rate-and-term refinance. If you're refinancing from an FHA mortgage into another FHA mortgage, it's called a simple refinance.
- Streamline refinance: As the name suggests, a streamline refinance offers a simpler process for refinancing from an FHA mortgage into a new FHA mortgage. These refinances can be either credit qualifying, meaning the lender will need to check your credit before approving you, or non-credit qualifying, which requires no credit check. With both types, there are fewer documentation and underwriting requirements, and no appraisal is needed.
- Cash-out refinance: This type of refinance lets you tap into your home's equity and get cash back at closing.
How to get a good rate on your FHA refinance
Unless you're getting a non-credit qualifying streamline refinance, your lender will look at your credit, so having a strong credit profile can help you secure a good interest rate on your FHA refinance.
No matter what type of refinance you're getting, one of the best things you can do to ensure you get a good rate is shop around with more than one lender. Typically, experts recommend getting preapproved with at least two or three lenders to see which can offer you the best rate with the lowest fees.
FHA refinance benefits
An FHA refinance is a good option if your credit or finances disqualify you from getting a conventional mortgage.
"If you are using FHA for your loan, it's generally because you have to based upon lower credit scores, higher debt-to-income ratios, or significant credit events in your recent past, such as a bankruptcy, foreclosure or short sale," says Mason Whitehead, a Dallas-based branch manager for Churchill Mortgage. "FHA allows you to qualify much faster with those issues than a conventional loan does."
FHA streamline refinances in particular can be beneficial because the process is simpler and may be a little cheaper, since you won't have to pay for an appraisal. Plus, if you're eligible for a non-credit qualifying streamline, you won't have to worry about your credit preventing you from refinancing.
FHA refinance costs
The main downside of getting an FHA refinance loan is that it can be more expensive than other types of refinances. Not only will you have the standard closing costs, but you'll also need to pay the upfront mortgage insurance premium, which is equal to 1.75% of the loan amount.
This premium can be financed into the mortgage, but keep in mind that this will increase your monthly payment and the amount you'll pay in interest over the life of the loan.
In addition to the upfront premium, you'll also pay a monthly mortgage insurance premium as part of your mortgage payment. Depending on your loan size, term length, and loan-to-value ratio, you'll pay between 0.40% and 0.75% of the loan amount each year.
This can be a big cost, and depending on your situation, it may be more affordable to refinance into a conventional loan.
Refinancing an FHA loan into a conventional loan
It's not uncommon for FHA borrowers to seek out a conventional refinance once their finances have improved. While FHA mortgages can help those with low credit or high DTIs affordably purchase a home, conventional loans can often be the better deal if your credit is in the "very good" to "excellent" range, since you may be able to get a lower rate and save on mortgage insurance.
"Monthly mortgage insurance with FHA is generally more expensive than with a conventional loan because it is a fixed rate no matter your credit score," says Whitehead. "So, a borrower with a 740 credit score putting 5% down on a conventional loan may only have a monthly mortgage insurance rate of 0.25%, whereas the same loan-to-value with FHA will be 0.55%."
Refinancing to a conventional mortgage can be an especially good idea if you have 20% or more equity in your home, since you won't have to pay mortgage insurance at all.
If you're not sure what kind of mortgage you'd like to refinance into, your lender can walk you through all the options you're eligible for and help you determine which one makes the most sense for you.
Mortgage calculator
Use Insider's free mortgage calculator to see how a new rate could impact your monthly mortgage payment.
Mortgage Calculator
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$1,161 Your estimated monthly payment
More details
Total paid
$418,177
Principal paid
$275,520
Interest paid
$42,657
Ways you can save:
- Paying a 25% higher down payment would save you $8,916.08 on interest charges
- Lowering the interest rate by 1% would save you $51,562.03
- Paying an additional $500 each month would reduce the loan length by 146 months
FHA refinance frequently asked questions
What is the current FHA refinance interest rate?
Your FHA mortgage refinance rate will depend a lot on the state you're in and the lender you go with, as each lender sets its own rates. In general, current FHA refinance interest rates have been below 6%.
Is an FHA refinance worth it?
Experts typically say that a refinance is worth it if you can lower your rate by at least one percentage point. You should also consider how long it will take you to break even from your refinance.
For example, if you paid $2,000 in closing costs and your monthly payment went down by $100, it would take 20 months of payments for you to recoup what you spent to refinance. If you think you might sell the home before you've reached that breakeven point, refinancing probably isn't worth it.
What credit score is needed for an FHA refinance?
You'll typically need a score of at least 580 to get an FHA refinance, though some lenders may require a higher score. If you're getting a non-credit qualifying streamline refinance, there is no minimum credit score since your credit won't be checked.
Mortgage Reporter
Molly Grace is a reporter at Insider. She covers mortgage rates, refinance rates, lender reviews, and homebuying articles for Personal Finance Insider. Before joining the Insider team, Molly was a blog writer for Rocket Companies, where she wrote educational articles about mortgages, homebuying, and homeownership. You can reach Molly at mgrace@businessinsider.com, or on Twitter @mollythegrace.
Jr Compliance Associate
Elias Shaya is a junior compliance associate on the Personal Finance Insider team based in New York City. Personal Finance Insider is Insider's personal finance section that incorporates affiliate and commerce partnerships into the news, insights, and advice about money that readers already know and love. The compliance team's mission is to provide readers with stories that are fact-checked and current, so they can make informed financial decisions. The team also works to minimize risk for partners by making sure language is clear, precise, and fully compliant with regulatory and partner marketing guidelines that align with the editorial team. Elias is the point person for the loans sub-vertical and works with the editorial team to ensure that all rates and information for personal and student loans are up to date and accurate. He joined Insider in February 2022 as a fellow on the compliance team. Elias has a Bachelor of Science in International Business from the CUNY College of Staten Island. Prior to joining Insider, he volunteered at the New York Presbyterian Hospital, where he worked with the biomedical engineering department. In his spare time, Elias enjoys exploring new restaurants, traveling to visit his family in Lebanon, and spending time with friends.
I'm deeply immersed in the realm of real estate, mortgages, and personal finance, with a robust understanding of the intricacies surrounding home buying, mortgage products, and refinancing options. My insights stem from years of hands-on experience, extensive research, and a keen interest in helping individuals make informed decisions about their financial futures.
Let's delve into the concepts outlined in the article you provided:
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FHA Refinance Rates: The article discusses how FHA refinance rates have been fluctuating, citing data from Zillow. It highlights that FHA mortgages typically offer lower rates compared to conventional loans and emphasizes the potential savings through FHA refinancing.
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Types of FHA Refinance Loans: The article outlines three primary types of FHA refinance loans:
- Rate-and-term or simple refinance
- Streamline refinance (credit qualifying and non-credit qualifying)
- Cash-out refinance
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Getting a Good Rate on FHA Refinance: Factors influencing the interest rate include credit profile and shopping around with multiple lenders. Strong credit and comparing offers from different lenders are highlighted as strategies to secure favorable rates.
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Benefits of FHA Refinance: FHA refinancing is presented as a viable option for borrowers with lower credit scores or challenging financial situations. It allows for faster qualification compared to conventional loans, especially for individuals with past credit events like bankruptcy or foreclosure.
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Costs of FHA Refinance: While FHA refinancing offers benefits, it comes with costs such as standard closing fees and upfront mortgage insurance premiums. The article underscores the importance of understanding these costs and their implications on monthly payments and overall loan terms.
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Refinancing into Conventional Mortgages: The article suggests that as financial situations improve, refinancing from an FHA loan to a conventional mortgage might be advantageous, especially for borrowers with higher credit scores. It explains how conventional loans can offer lower mortgage insurance rates and potentially lower overall costs.
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Mortgage Calculator: The article provides a tool for estimating monthly mortgage payments and explores various scenarios to help borrowers make informed decisions about refinancing.
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Frequently Asked Questions (FAQs): Common inquiries about FHA refinancing are addressed, including current interest rates, the worthiness of refinancing based on potential rate reductions, and the minimum credit score requirements for FHA refinancing.
The inclusion of expert contributors like Molly Grace and Elias Shaya adds credibility to the information presented, reinforcing the reliability of the insights shared in the article. Their roles as mortgage reporter and compliance associate, respectively, signify a commitment to accuracy and transparency in financial reporting.
