5 good reasons to refinance your home with an FHA mortgage

There are five top reasons that FHA home refinancing might be the most appropriate choice for you. Keep FHA refinances in mind when evaluating home loan options.

  1. Your credit is less than perfect

    Conventional mortgage refinancing is more expensive for those with credit scores of less than 740. Both Fannie Mae and Freddie Mac employ risk-based pricing schemes, which adjust your costs upward for things like not-stellar credit scores, little home equity, loan features like interest-only payments or cash out, and properties like condos or manufactured homes.

  2. You want to improve or rehabilitate your property

    Even with little or no equity, you may be able to finance home improvements with FHA 203(b) refinancing. Your mortgage amount is based on the home's improved value, not its current "as is" value.

  3. You have less than 20 percent home equity

    This triggers a mortgage insurance requirement for conventional refinances. That means you'd have to pass muster with a conventional mortgage insurer, which is extremely hard to do, and pay monthly premiums. FHA loans also come with mortgage insurance, but it comes from the government, often costs less, and is easier to get.

  4. You'd like to have an assumable loan

    One big advantage of FHA mortgages is the potential for assumability by a future buyer. This means that if mortgage rates have increased when you want to sell your home, you'll have an advantage over your competition. Your buyer would be able to assume your loan at its lower rate; this could make your home more desirable and get you a better price down the road.

  5. You have little home equity

    You can refinance from a conventional mortgage to an FHA loan at up to 97.75 percent of your home's value. You can refinance from an FHA loan to a new FHA loan with no appraisal and no credit qualifying (certain qualifications must be met; for example, you can't roll the costs of refinancing into the new loan).

Refinancing with FHA mortgages is popular for a lot of good reasons. If you feel that FHA refinancing is right for you, learn about the different FHA refinance programs and how to refinance into an FHA loan.