FHA Refinance Rates 2024: Could You Save?
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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 August, FHA refinance rates averaged around 5.48%, according to Zillow data. This is a five-basis-point decrease from the month before. Rates are trending similarly this month.
You can get a significant discount by getting an FHA refinance over a conventional refinance. FHA refinance rates were substantially 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.
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Types of FHA refinance loans
The three main types of FHA refinance loans include:
- FHA 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.
- FHA 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.
- FHA cash-out refinance: This type of refinance lets you tap into your home’s equity and get cash back at closing.
Why consider an FHA refinance?
Typically, it only makes sense to refinance if it can help you:
- Lower your interest rate. If rates have dropped since you got your current mortgage, you may be able to save by refinancing into a new mortgage. Plus, FHA loans often have lower rates than conventional loans.
- Change your term length. Refinancing into a shorter term will help you pay off your mortgage faster while saving on interest. However, this will likely increase your monthly mortgage payment. You can also refinance into a longer term if you want to lower your monthly payment, but you’ll end up spending more on interest overall.
- Tap into home equity with a cash-out refinance. Funds from a cash-out refinance can be used however you like, including for home renovations or debt consolidation.
Another common reason borrowers refinance is to get rid of mortgage insurance, but you won’t want to refinance into an FHA loan for this, since these mortgages typically require annual mortgage insurance for the life of the loan. If you have an FHA loan and sufficient equity, you’ll want to refinance into a conventional loan to get rid of mortgage insurance.
So when might you consider an FHA refinance over other loan types? It might be 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.
Finding the best FHA refinance rates
Shop multiple FHA-approved lenders
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 three lenders to see which can offer you a low rate.
Consider all your costs
As you get quotes from different lenders, remember that your rate isn’t the only cost you should think about. Every company charges different lender fees, and these costs can make a big different in how much you’ll pay at closing. Some lenders that charge low rates make up for it by charging higher fees.
Don’t forget that all FHA loans come with certain FHA-specific costs as well.
You’ll 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 make monthly payments toward your annual 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 0.15% and 0.75% of the loan amount each year.
Utilize FHA refinance calculators
Use Business Insider’s free mortgage calculator to see how a lower rate could impact your monthly mortgage payment.
Mortgage Calculator
$1,161
Your estimated monthly payment
- 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
There are also refinance-specific calculators online that let you compare the costs and benefits of a refinance to your current mortgage.
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.
FHA refinance rates FAQs
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. Recently, FHA refinance interest rates have been in the mid-5% range, according to Zillow data.
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.
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.
You might like an FHA streamline since it’s a simpler process that enables you to refinance from an FHA loan into another FHA loan.
It typically takes between 30 and 45 takes to close on a mortgage, but it depends on the details of your loan. A streamline refinance may be able to close slightly faster.
