Best FHA Refinance Lenders: What You Need to Know
If you have a lower credit score or less equity in your home, an FHA refinance may be worth exploring. This guide explains how FHA refinancing works, who typically qualifies, and which lenders offer this loan type so you can make a more informed decision.
Educational disclaimer: This content is for informational purposes only. Wirly is not a lender or mortgage broker. Mortgage decisions have significant financial consequences. Always consult a licensed mortgage professional before making any borrowing decisions.
What Is an FHA Refinance and How Does It Work?
An FHA refinance replaces your existing mortgage with a new loan backed by the Federal Housing Administration (FHA), a division of the U.S. Department of Housing and Urban Development (HUD). Because the government insures these loans, lenders take on less risk – which often allows them to offer financing to borrowers who may not qualify for conventional loans.
There are two main types of FHA refinance options:
- FHA Streamline Refinance – Designed for homeowners who already have an FHA loan. It requires less paperwork and often skips a full appraisal, making the process faster and simpler.
- FHA Rate-and-Term Refinance – Allows borrowers to change their interest rate, loan term, or both. This option is available to those refinancing from a non-FHA loan into an FHA loan.
Like any refinance, you will pay closing costs, which typically range from 2% to 5% of the loan amount, according to the Consumer Financial Protection Bureau (CFPB).
Who Qualifies for an FHA Refinance?
FHA refinance requirements are generally more flexible than conventional loan standards. Here are the typical eligibility guidelines based on FHA program rules:
- Credit score: Most lenders require a minimum score of 580, though some set their own minimums at 620
- Debt-to-income (DTI) ratio: Generally 43% or lower, though some lenders allow higher with compensating factors
- Loan-to-value (LTV) ratio: Typically up to 97.75% for rate-and-term refinances
- FHA mortgage insurance: All FHA loans require an upfront mortgage insurance premium (MIP) of 1.75% of the loan amount, plus an annual MIP paid monthly
- Primary residence: The property must be your primary home
FHA Refinance Lenders to Compare
The following lenders offer FHA refinance loans. Each has different strengths depending on your situation:
- Rocket Mortgage – A fully online experience with a minimum credit score of 580, making it one of the more accessible options for borrowers with lower scores
- LendingTree – A marketplace that lets you compare multiple lender offers at once, also starting at a 580 minimum credit score
- Better – Known for low fees and a digital-first process, with a minimum credit score of 620
- Guaranteed Rate – Offers a wide selection of loan types including FHA, with a 620 minimum credit score
- loanDepot – May be a good fit for repeat customers, with a 620 minimum credit score
- PennyMac – Worth considering if you already have a PennyMac loan, minimum credit score of 620
- Chase – May offer relationship benefits for existing Chase customers, minimum credit score of 620
- Wells Fargo – Offers in-person service at branch locations for borrowers who prefer face-to-face help, minimum credit score of 620
Pros and Cons of FHA Refinancing
- Pro: Lower credit score requirements than most conventional loans
- Pro: Higher allowable LTV ratios, useful if you have limited home equity
- Pro: FHA Streamline option can simplify the process for existing FHA borrowers
- Con: Mortgage insurance is required for the life of the loan if your down payment was less than 10%
- Con: Upfront MIP adds to your loan balance or closing costs
- Con: FHA loan limits may restrict options for higher-priced homes
Tips for Getting the Best FHA Refinance Deal
- Compare at least three lenders. Rates and fees vary significantly between lenders. Getting multiple quotes is one of the most effective ways to save money, according to the CFPB.
- Check your credit before applying. Even a small improvement in your credit score can lead to better rate offers.
- Ask about total loan costs, not just the rate. A lower rate with high fees may cost more over time than a slightly higher rate with minimal fees.
- Calculate your break-even point. Divide your closing costs by your monthly savings to find out how long it takes to recoup the cost of refinancing.
- Ask about MIP removal options. If you refinance into a conventional loan later, you may be able to eliminate mortgage insurance once you reach 20% equity.
Run the Numbers Before You Decide
Comparing lenders is an important first step, but knowing whether refinancing actually saves you money is just as important. Use Wirly’s free refinance calculator to estimate your potential monthly savings, new loan costs, and break-even timeline based on your specific situation.