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Your purchase loan comes with an FHA requirement for a 580 FICO score if you want the lowest down payment. And when it comes time to refinance a home loan, our advice is to treat the process exactly the same as you did when you applied for your first mortgage.

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FHA.com is a privately owned website, is not a government agency, and does not make loans.

Do You Qualify for an FHA Home Loan or Refinance Loan?

January 26, 2022

Do You Qualify for an FHA Home Loan or Refinance Loan?
Do you qualify for an FHA home loan or a refinance loan? These options feature similar requirements for your FICO scores, credit history, and responsible credit use.

Your purchase loan comes with an FHA requirement for a 580 FICO score if you want the lowest down payment. And when it comes time to refinance a home loan, our advice is to treat the process exactly the same as you did when you applied for your first mortgage.
It is a good idea to give yourself as much time as possible to work on your credit, save money for closing costs, etc. Unfortunately, not all borrowers have the luxury of taking a year or more to plan and save the way others do. Why?

Circumstances.

Some need to apply for a loan to refinance because their homes have been damaged or destroyed in a natural disaster. Others may need a new place to live because of a job relocation. Others may have a family that is getting bigger than the current home can support.

And what kinds of loans do these people need? Purchase loans and refinance options may be choices for you depending on circumstances.

For example, when you have an increase in family size, do you apply for a purchase loan or a refinance option instead? How could refinancing possibly help the person who needs a bigger home with more living space?

Knowing the FHA loan policy for occupancy and the fact that in general, the FHA prefers one loan per borrower, it would be easy to assume you won’t qualify for a new FHA loan to buy the larger home if you have an FHA mortgage already.

But that may not be true if you apply for the right loan; the FHA provides an exception for “qualifying circumstances” such as a job move or anticipation of a bigger family. You could apply for a new purchase loan if your lender agrees that you qualify for one of those exceptions.

But refinancing could help too--you could choose instead to renovate a home and add more living space instead of buying a new one. Ask your lender about applying for an FHA 203(k) Rehabilitation Refinance to get that work done. These rehab loans are offered as both purchase and refinance loans.

The refinance option is, obviously, not a choice you can make if you need to relocate because of a job move, but the exceptions can help you find an affordable new home.

Another type of FHA refinance loan offered only to certain people? The FHA Streamline Refinance loan. This option has no FHA-required credit check or appraisal. It also cannot be used as a cash-out refinance. 

It is for people who want a benefit such as a lower monthly payment or interest rate. The limitation comes in that FHA Streamlines are for existing FHA mortgages only. Non-FHA loans cannot be refinanced in this way.

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Learn About the Path to Homeownership
Take the guesswork out of buying and owning a home. Once you know where you want to go, we'll get you there in 9 steps.

Step 1: How Much Can You Afford?
Step 2: Know Your Homebuyer Rights
Step 3: Basic Mortgage Terminology
Step 4: Shopping for a Mortgage
Step 5: Shopping for Your Home
Step 6: Making an Offer to the Seller
Step 7: Getting a Home Inspection
Step 8: Homeowner's Insurance
Step 9: What to Expect at Closing

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