FHA Rate-and-Term Refinance: The Full-Underwriting Option

Quick answer

A rate-and-term refinance replaces your current loan with a new FHA loan, without taking significant cash out. Unlike a streamline, it uses full underwriting: credit, income and assets are verified, and a new FHA appraisal is usually required.

Key takeaways

It can suit borrowers with a non-FHA loan who want FHA financing, borrowers who need to remove a co-borrower, or those whose streamline options are limited. Who it fits
The maximum loan-to-value is higher than for cash-out. Loan-to-value
A new upfront MIP applies, with a partial credit if refinancing an FHA loan endorsed within the last three years, and annual MIP continues under current rules. Mortgage insurance

What it is

Who it fits

It can suit borrowers with a non-FHA loan who want FHA financing, borrowers who need to remove a co-borrower, or those whose streamline options are limited.

Loan-to-value

The maximum loan-to-value is higher than for cash-out. Closing costs may be included within program limits, based on the new appraised value.

Mortgage insurance

A new upfront MIP applies, with a partial credit if refinancing an FHA loan endorsed within the last three years, and annual MIP continues under current rules.

Benefit test

When refinancing an FHA loan, FHA expects a net tangible benefit, typically a reduction in the combined rate and MIP or a move from adjustable to fixed.

Compare alternatives

If your equity has grown, a conventional refinance without mortgage insurance might cost less over time. Ask for Loan Estimates for both before choosing.

Documents

Expect pay stubs, W-2s, bank statements, your current mortgage statement and homeowners insurance information. Self-employed borrowers typically provide two years of tax returns.

Sources

Sources reviewed October 23, 2026. General education only; confirm current rules with official sources and a licensed lender.