If you have an FHA loan, understanding what it costs to stay in the FHA system versus exiting it through a refinance puts you in a better position to make a decision that serves your finances over the long run. Oftentimes, that means choosing one of four main refinance options: FHA Streamline, FHA Simple, FHA Cash-Out, and FHA-to-Conventional.

Each FHA refinance pathway is unique, with different benefits and eligibility requirements, which is why exploring each one carefully can help you pinpoint which one best aligns with your goals. Whether your aim is to lower your monthly payment, tap into your equity, shorten your term, or exit the FHA system for good, this guide breaks down the key features, pros and cons of each FHA refinance option.

Your FHA refinance options at a glance

Of the four common refinance paths, three keep you inside the FHA system and one moves you into a conventional loan.

Option	Appraisal required	Cash-out	Seasoning	Credit score guidance
FHA Streamline	No, but a lender may require one	$500 max	210 days / 6 payments / 6 months from first payment due date	FHA doesn’t set a minimum score for some Streamline refinances; lender overlays may apply
FHA Simple	Yes	No	None set by HUD; lenders may impose their own waiting periods	Lender minimums vary
FHA Cash-Out	Yes	Up to 80% LTV	Generally, 12 months owner occupancy plus seasoning requirements	Lender minimums vary, but 620+ is common
FHA-to- Conventional	Usually; waiver may be available	Optional	Lender standards apply	Conventional lender standards apply

FHA Streamline
Appraisal required	No, but a lender may require one
Cash-out	$500 max
Seasoning	210 days / 6 payments / 6 months from first payment due date
Credit score guidance	FHA doesn’t set a minimum score for some Streamline refinances; lender overlays may apply
FHA Simple
Appraisal required	Yes
Cash-out	No
Seasoning	None set by HUD; lenders may impose their own waiting periods
Credit score guidance	Lender minimums vary
FHA Cash-Out
Appraisal required	Yes
Cash-out	Up to 80% LTV
Seasoning	Generally, 12 months owner occupancy plus seasoning requirements
Credit score guidance	Lender minimums vary, but 620+ is common
FHA-to- Conventional
Appraisal required	Usually; waiver may be available
Cash-out	Optional
Seasoning	Lender standards apply
Credit score guidance	Conventional lender standards apply

FHA Streamline refinance

The Streamline refinance involves the least paperwork and FHA doesn’t require an appraisal, though your lender might. Its main aim is to help FHA borrowers move into a loan with a better rate using less documentation.

To qualify, you must meet all three of these requirements:

• Make at least six payments on your current FHA loan
• Wait until at least six full months have passed since your first payment due date
• Wait until at least 210 days have passed since your closing date

The FHA Streamline also has to provide what’s called a net tangible benefit, such as a lower combined rate, a move from an ARM to a fixed-rate loan, or another qualifying improvement under FHA rules.

One more note: While some Streamline refinances can be completed on a non-credit-qualifying basis, some require full credit qualification. Availability varies by borrower and lender.

FHA Streamline refinance pros and cons

FHA cash-out refinance

An FHA cash-out refinance may let you replace your existing mortgage with a larger FHA loan and pocket the difference in cash. It can make sense if you have significant equity and need cash for a major purpose, such as home improvements, debt payoff, or a large purchase, but don’t yet have the credit profile to qualify for a conventional cash-out refinance.

The ceiling is 80% loan-to-value (LTV). That means if your home is worth $400,000, the maximum loan amount would be $320,000. If you owe $250,000 on your original mortgage, that leaves up to $70,000 in potential cash before closing costs.

Here’s the catch worth knowing upfront: an FHA cash-out refinance gives you a brand-new FHA loan with a new upfront MIP of 1.75% of your loan balance at closing, plus an ongoing annual MIP. These costs should factor into your breakeven math.

To qualify:

• At least one borrower generally must have owned and occupied the home as a primary residence for the prior 12 months
• The loan must meet FHA’s seasoning and payment-history requirements
• Some lenders may require at least a 620 credit score

How much money can you actually pull out?

Using the above scenario in which your cash-out cap is $70,000, you’d then subtract closing costs, usually 2% to 5% of the new loan amount ($6,400 to $16,000). That would leave around $54,000 to $63,600 in cash. You’ll also owe a new upfront MIP of 1.75%, or $5,600, which you can finance into the loan or pay in cash. If you pay it in cash, your net proceeds would fall to around $48,000 to $58,000.

Run your own numbers to see if the math will work in your favor.

FHA-to-conventional refinance

This option uses a standard conventional refinance to pay off an FHA loan. A common reason people use this option is to become unburdened by MIP. Unlike other programs, there is no automatic cancellation date or milestone that removes these mandatory insurance payments from FHA loans originated on or after June 3, 2013 with an original LTV above 90%. (FHA loans originated before June 3, 2013 may have already had MIP fall off automatically.)

If you move into a conventional loan, you may have Private Mortgage Insurance (PMI) payments at first. You can request cancellation once your principal balance reaches 80% of the home’s original value, provided you meet other requirements. If you’re current on the loan, your servicer generally must cancel PMI automatically when the balance is scheduled to reach 78% of the home’s original value.

When does FHA-to-conventional make sense?

FHA-to-conventional tends to make the most sense when three things line up:

1. You have enough equity to qualify for a conventional loan
2. Your credit is strong enough to garner competitive rate offers
3. The rate difference between your current FHA loan and today’s conventional rates isn’t so large that it wipes out the savings from eliminating MIP

Keep in mind that if your current FHA rate is significantly lower than the conventional rate you qualify for today, the MIP savings may not offset a dramatically higher rate for many years. For example, refinancing from a 3.5% FHA loan to a 7% conventional loan to avoid MIP could still result in a much higher monthly payment. That’s why it’s crucial to run a breakeven calculation before refinancing.

What equity do you need?

Some conventional refinance programs allow as little as 3% to 5% equity to qualify, but requirements vary by program and lender. However, if you have at least 20% equity, you can avoid PMI on the conventional loan entirely. Otherwise, with less than 20% equity, you may trade FHA’s MIP for conventional PMI until you become eligible to cancel it.

FHA Simple refinance

The FHA Simple refinance, despite its name, is actually not the simplest option. Rather, it’s a no-cash-out refinance of an existing FHA-insured mortgage. It is usually the backup plan for those who can’t qualify for the Streamline and aren’t looking for cash out.

FHA Simple candidates may include those:

• With a forbearance or payment history that disqualifies them from the non-credit-qualifying Streamline path
• Who need to remove a borrower from the loan but don’t meet the requirements to do so through a Streamline refinance
• Who are working with a lender whose overlays require full underwriting

FHA Simple requires a full appraisal, credit review, and income verification. And it’s only available for owner-occupied principal residences and HUD-approved secondary residences.

While there is no seasoning requirement for the Simple refinance, lenders may impose their own waiting periods.

The maximum LTV is 97.75% for principal residences and 85% for HUD-approved secondary residences. You can roll eligible closing costs into the new loan balance, but you can receive no more than $500 cash back at closing.

FHA refinance requirements

Before moving forward, review the eligibility details for each program to determine which qualifications you can meet.

Requirement	FHA Streamline	FHA Simple	FHA Cash-Out	FHA-to-
Must have existing FHA loan	Yes	Yes	No, open to all borrowers	Yes
FHA credit score guidance	None set	500/580 (depending on equity)	500	N/A, conventional standard applies
Typical lender overlay	620	620	620	620+
Appraisal	Not required by FHA, but a lender may require one	Required	Required	Usually; waiver may be available
Seasoning	210 days/6 payments	None set by HUD; lenders may impose their own waiting periods	12 months ownership + seasoning requirements	Lender standards apply
Income verification	Non-credit qualifying: no; credit-qualifying: yes	Yes	Yes	Yes
Cash-out allowed	Max $500	Max $500	Up to 80% LTV	Depends on new conventional loan
New upfront MIP (UFMIP)	1.75%; can be financed	1.75%; can be financed	1.75%; can be financed	None

Must have existing FHA loan
FHA Streamline	Yes
FHA Simple	Yes
FHA Cash-Out	No, open to all borrowers
FHA-to-	Yes
FHA credit score guidance
FHA Streamline	None set
FHA Simple	500/580 (depending on equity)
FHA Cash-Out	500
FHA-to-	N/A, conventional standard applies
Typical lender overlay
FHA Streamline	620
FHA Simple	620
FHA Cash-Out	620
FHA-to-	620+
Appraisal
FHA Streamline	Not required by FHA, but a lender may require one
FHA Simple	Required
FHA Cash-Out	Required
FHA-to-	Usually; waiver may be available
Seasoning
FHA Streamline	210 days/6 payments
FHA Simple	None set by HUD; lenders may impose their own waiting periods
FHA Cash-Out	12 months ownership + seasoning requirements
FHA-to-	Lender standards apply
Income verification
FHA Streamline	Non-credit qualifying: no; credit-qualifying: yes
FHA Simple	Yes
FHA Cash-Out	Yes
FHA-to-	Yes
Cash-out allowed
FHA Streamline	Max $500
FHA Simple	Max $500
FHA Cash-Out	Up to 80% LTV
FHA-to-	Depends on new conventional loan
New upfront MIP (UFMIP)
FHA Streamline	1.75%; can be financed
FHA Simple	1.75%; can be financed
FHA Cash-Out	1.75%; can be financed
FHA-to-	None

How much does it cost to refinance an FHA loan?

An FHA refinance does not come cheap once you factor in closing costs and other fees.

• Closing costs: Expect to pay around 2% to 5% of your new loan amount. To figure out your breakeven point, divide your total closing costs by your monthly payment savings. If you’re saving $150 a month and you spent $6,000 to refinance, your breakeven is 40 months, or about 3.3 years. Note that because FHA doesn’t require an appraisal for an FHA Streamline refinance, you may save on appraisal costs.
• Upfront MIP: If your new loan keeps you in the FHA system, you’ll owe a new upfront MIP of 1.75% of your loan balance, which can be financed into your new loan.

FHA refinance rates

FHA refinance rates tend to move with the broader mortgage market and are often slightly lower than conventional rates. However, your personal rate will depend on lender pricing, risk factors, and mortgage-backed securities markets.

Also, remember to factor in the MIP since it has the potential to make your total monthly cost higher than a comparable conventional loan with a higher rate.

Is an FHA refinance right for you?

To decide if an FHA refinance makes financial sense for you, start by identifying your goals and then see if they align with any of the four options.

• If your goal is a lower monthly payment: The Streamline is usually the lowest-friction move available, while the Simple may get you to the same place with more paperwork.
• If you need cash and can’t qualify for a conventional cash-out refinance: The FHA cash-out gives you access to equity while staying inside the FHA system. Factor in the new upfront MIP before you commit, though, since it affects your net proceeds and your breakeven timeline.
• If you’ve built meaningful equity and strong credit: A conventional refinance comes with closing costs but can help you exit the FHA program and eliminate monthly MIP. This could produce meaningful savings if the new rate and closing costs make sense.
• If you’re an eligible veteran: Ask your lender about VA loan options, which may offer more favorable terms, before assuming one of these four FHA paths.

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The takeaway

Refinancing an FHA loan is a two-step decision: First, should you do it? Second, which loan type is best for you?

To help with your final decision, look at your current rate, current MIP payment, home value, and credit score. Once you have those four data points, they can point you toward the mortgage option that is both accessible and most beneficial to you.

Frequently asked questions

What are the different types of FHA refinances?

Common FHA refinance options include an FHA Streamline, an FHA Simple refinance, and an FHA cash-out refinance. Other specialized FHA refinance programs may also be available. Homeowners can also opt to move from an FHA loan into a conventional home loan.

Should you refinance out of an FHA loan?

Refinancing from an FHA loan to a conventional or VA loan could provide financial benefits, such as removing mortgage insurance premium (MIP) payments, but everyone’s situation is unique. Work with a lender to see which refinance options you may be eligible for and run the numbers to determine your potential savings and how long it will take you to break even after paying closing costs.

Can you refinance an FHA with bad credit?

The various types of FHA refinance programs generally have lower credit score requirements than conventional refinances (as low as 500 in some cases), but you’ll have to meet other eligibility criteria. For example, your recent mortgage payment history can play a large role in whether a lender approves you.

Is there any way to stop paying MIP besides a refinance?

For FHA loans taken out on or after June 3, 2013, how long you pay mortgage insurance premiums depends on the loan’s original LTV. If the original LTV was 90% or less, MIP ends after 11 years. If it was above 90%, MIP lasts for the life of the loan unless you refinance into a non-FHA loan.

Do all lenders offer FHA refinances?

Not all lenders offer FHA refinances, including some that offer FHA loans. When shopping lenders, be sure to confirm that they offer the types of FHA refinance loans you are considering.