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For first-time buyers — or anyone facing financial hurdles — getting an FHA loan can help make homeownership a reality. With insurance from the Federal Housing Administration, lenders can afford to offer loans with a lower down payment, lower closing costs, and less restrictive qualifying credit requirements.

But can you refinance an FHA loan? Yes, FHA loans are available for those looking to refinance an existing mortgage rather than take out a new one — whether or not that existing mortgage is itself an FHA loan. However, there are a variety of different ways to go about refinancing an FHA loan, and which is right for you will depend on your circumstances. Here’s what you need to know.

Understanding FHA Refinancing

Like any FHA loan, FHA refinancing loans are insured by the FHA — and therefore available with easier qualifying requirements and lower costs than other types of conventional loans may be. Refinancing your mortgage with an FHA refinance loan could help you save money on interest over time by scoring a lower rate, lowering your monthly payments, or even accessing cash by leveraging your home’s equity. And yes, you can refinance an FHA loan, or another type of existing home loan with an FHA refinancing loan. However, the specific FHA refinance requirements vary depending on your circumstances.

Types of FHA Loan Refinancing

There are four main options when it comes to FHA loan refinancing: Simple refinancing, Streamline refinancing, cash-out refinancing, and 203(k) refinancing. Which is right for you will depend on what kind of loan you have — and why you’re refinancing in the first place.

FHA Simple Refinance

FHA Simple refinancing is for those whose original home loan is an FHA loan. With an FHA Simple refinance, you’ll simply — as the name implies — refinance your home, using a new FHA loan to pay off the existing one, ideally with a lower monthly payment or interest rate to make it worth your while. You may also be able to switch between fixed and adjustable interest rates.

Unlike some other types of FHA refinancing, you won’t be able to access any cash using this type of refinance, so it’s not a viable option for homeowners attempting to leverage home equity to pay for other expenses. In addition, it has slightly stricter qualification requirements than FHA Streamline refinancing, which requires less credit documentation and underwriting. Although credit score requirements vary by lender, most FHA Simple refinance programs require a minimum credit score of 580.

FHA Streamline Refinance

The FHA Streamline refinancing option also follows the logic of its name: The underwriting and qualification process is less intense than other types of FHA refinancing. In addition, unlike the FHA Simple refinance option, a home appraisal is not required. You can also take out up to $500 in cash against your home equity with an FHA Streamline refinance loan.

To qualify for FHA Streamline refinancing, your original home loan will also need to be FHA insured, and payments must not be delinquent. The FHA also requires that the new loan result in a financial benefit for the borrower. Of course, you wouldn’t be going through the process and expense of refinancing if you had nothing to gain in the bargain.

FHA Cash-Out Refinance

FHA cash-out refinancing allows borrowers to leverage their home equity to take out cash that can be used for any purpose. To make this work, a new, larger loan is taken out, which is used to refinance the existing home loan — which need not be FHA insured — as well as to provide cash value.

Using an FHA cash-out refinance loan, homeowners may be able to lower their payments or interest rates while also accessing lump-sum cash that can be used for just about any purpose under the sun. Again, however, the underwriting and qualification process for FHA cash-out refinance loans may be more intense than Streamline loans — though a cash-out refi is still accessible to most borrowers with a credit score of 580 or higher and a debt-to-income ratio (DTI) of 43% or less.

FHA 203(k) Refinance

Finally, the FHA 203(k) loan, also known as rehabilitation loan, allows homeowners to take out money for the purpose of restoring, rehabilitating, or repairing their home along with purchasing it. FHA 203(k) loans can be used for an original purchase or a refinance, and homeowners with a non-FHA loan can apply for 203(k) refinancing, and may find FHA-insured rates are lower than those of other home improvement loans.


💡 Quick Tip: Lowering your monthly payments with a mortgage refinance from SoFi can help you find money to pay down other debt, build your rainy-day fund, or put more into your 401(k).

Comparing FHA Refinance vs. Conventional Loan Refinance

Why choose to refinance with an FHA loan rather than a conventional one? Or vice versa? There are pros and cons to consider either way you go. For instance, although FHA refinance loans tend to come with more accessible qualification requirements, some types are only available for those with existing FHA loans — and all of them require a mortgage insurance premium (MIP). The important thing is to consider all your options so you can make an informed decision. Let’s take a closer look.

Pros and Cons of Refinancing with an FHA Loan

While there are many benefits to refinancing with an FHA loan, there are some drawbacks to consider, too.

Pros of refinancing with an FHA loan:

•   Lower interest rates and down payments than some conventional refinancing options

•   Easier qualification process

•   Different options available, including cash-out options

Cons of refinancing with an FHA loan:

•   MIP (mortgage insurance premium) required on all FHA loans; conventional refinance loans will not require mortgage insurance if you’ve paid off at least 20% of your home’s value.

•   Some types of FHA refinance loans are only available to those with existing FHA home loans.

Differences in Requirements and Benefits

In addition to the pros and cons of FHA loan refinancing, there are also differences in the requirements and benefits for FHA versus conventional home refinancing loans. For instance, in most cases, FHA loans require a minimum credit score of just 580, whereas conventional loans might have a minimum credit score starting at 620 or higher.

And while FHA loans often come with lower interest rates, they always come with a mortgage insurance requirement — whereas conventional loans may not require private mortgage insurance (PMI), if you already own at least 20% of your home’s equity.

Finally, FHA refinancing loan options may be somewhat limited, depending on your existing home loan and your motivations for refinancing. Some types of FHA refinancing loans are only available to homeowners who already have an FHA-insured mortgage, which may make them inaccessible to other borrowers.

Eligibility and FHA Refinance Requirements

So, what does it take to secure an FHA home loan? While requirements vary by lender, here are some basic rules of thumb:

Qualifying Factors for Refinancing an FHA Loan

As mentioned above, certain types of FHA refinance loans are only available to those who already have an FHA-insured mortgage loan. In addition, only FHA loans that are not delinquent — i.e., you’re up to date on your payments — may qualify for refinancing.

Credit Score Guidelines

While FHA-insured loans tend to have lower minimum credit scores than conventional refinance loans, lenders do still have a minimum. In most cases, it’s 580—though specifics may vary by lender.

Loan-to-Value Ratio (LTV)

A home’s loan-to-value (LTV) ratio refers to what percentage of the home’s current market value you’re taking out a loan for. Ideally, those who are refinancing their homes have a lower loan-to-value ratio — meaning they owe less of their home’s total value than they did when it was first purchased. Still, the LTV is one factor lenders look at when qualifying borrowers for an FHA refinance loan; the lower your LTV, the better.

Employment and Income Verification

Lenders have a vested interest in making sure you’ll be able to repay your loan, so a lender will verify your employment situation and income before qualifying you for a new loan, whether you’re taking out an original mortgage or refinancing.

Debt-to-Income Ratio (DTI)

Your debt-to-income, or DTI, ratio refers to the proportion of your available income each month that goes toward existing debts. While FHA loans have a higher maximum DTI than other types — borrowers with DTIs as high as 57% may still qualify — some lenders may choose not to qualify borrowers with a DTI of 43% or more.


💡 Quick Tip: Your parents or grandparents probably got mortgages for 30 years. But these days, you can get them for 20, 15, or 10 years — and pay less interest over the life of the loan.

Specific Requirements for Streamline Refinance

For the FHA’s Streamline refinance program, certain specific requirements apply, including:

•   The existing mortgage must also be FHA-insured.

•   The refinance must result in a “net tangible benefit” to the borrower.

•   Only up to $500 may be taken out of the loan in cash.

•   In most cases, investment properties are ineligible.

Criteria for Cash-Out Refinance

In order to qualify for an FHA cash-out refinance, you’ll need:

•   To have lived in your home for at least 12 months

•   To own at least 20% of your home’s equity

•   A minimum credit score of 580

•   A debt-to-income (DTI) ratio of 43% or lower

Benefits of Refinancing an FHA Loan

What are the specific benefits of refinancing with an FHA loan? Here are just a few of the reasons people choose to take this route when refinancing a mortgage.

Lower Interest Rate and Monthly Payment

For most homeowners, the primary motivator for refinancing is to save money — either over the long term, by scoring a lower interest rate, or on a monthly basis by choosing a loan with a lower minimum monthly payment. In some instances, you may be able to achieve both goals with the same refinancing loan, particularly if your credit history has appreciably improved since you originally took out your mortgage.

New Loan Terms

Some borrowers refinance to give themselves more time to pay off their home loan with a longer term — or to accelerate their repayment process with a shorter term.

Equity Access with a Cash-Out Refinance

For most consumers, a home is the single most valuable asset they’ll ever purchase. Being able to access the value of that equity with a cash-out refinance option is another important motivator for those seeking to refinance, and FHA refinance loans can make that goal a reality whether or not your original loan is FHA-insured.

Avoid Private Mortgage Insurance (PMI)

For borrowers looking to avoid private mortgage insurance (PMI), take heed: Although FHA loans don’t require PMI, they do require mortgage insurance. The FHA-loan version is called MIP (mortgage insurance premium), and is required on all FHA loans.

Improve Financial Stability

For some borrowers, refinancing can improve overall financial stability by achieving any of the goals listed above — for example, freeing up more discretionary income each month with a lower monthly payment.

Steps to Refinance an FHA Loan

Seriously considering an FHA refinance loan? Here are the steps it takes to turn your ideation into reality.

1. Review Your Current FHA Loan

The first step in shopping for a new loan should always be to review your existing mortgage. After all, that’s the best way to understand what factors would make a new mortgage more favorable for your finances. If your original loan is not FHA-insured, note that you may not qualify for certain types of FHA refinancing loans.

2. Shop for Lenders and Offers

Next up: The actual shopping part. In order to ensure you get the best deal available, it’s worth asking several lenders for refinancing quotes, including a full amortization schedule. That way, you’ll understand exactly how much money you stand to save — or not — by choosing a specific lender.

3. Submit an Application and Required Documentation

Once you’ve settled on a lender, you’ll submit your application, including any required documentation (such as ID and income verification, including bank statements and tax forms). In most cases, this process can be done entirely online.

4. Go Through the Appraisal and Underwriting Process

As part of most refinancing processes, you’ll need to have your home appraised so the lender understands its current market value — and can use that value to calculate important aspects of your application, like the LTV. An underwriter will assess your holistic financial profile to determine whether or not you qualify for the refinance loan.

5. Close the Refinance

Finally, if the terms are favorable and you are approved, you’ll close the refinance loan. The new lender will repay your existing loan, and your new payments will be directed toward this new lender, using the new terms you’ve agreed to.

Tips and Considerations for FHA Loan Refinancing

Want to get the very best out of your FHA loan refinancing process? Here are some tips to help you get the most bang for your buck.

Evaluate Your Financial Situation

Refinancing isn’t right for everyone. In fact, in most cases, the FHA won’t even allow you to refinance with one of its loans unless it results in a net financial benefit for you, the borrower. You can take a few first steps to determine whether or not it will help before you ever get a lender involved.

Using a mortgage calculator, you can determine how much a lower interest rate would save you over time or how much a longer loan term would reduce your monthly payment. Keep in mind that refinancing isn’t free, so unless the savings are substantial enough to eclipse your closing costs, it may make more financial sense to keep your original loan.

Understand Closing Costs and Fees

Loans come with a variety of closing costs and fees, such as application fees, the cost of the appraisal, attorney fees, and more. These costs can add up to about 6% of your overall loan value, and though some of them may be able to be financed as part of your loan, they still have the potential to eat into any savings your refinancing loan might offer.

Time Your Refinance Strategically

When it comes to refinancing your mortgage, timing matters. For example, if interest rates are higher than when you took out your original loan, the timing might not be right. The same could be said if you’re planning on moving out of your home in the near future, in which case, you may not have enough time in the home left to break even on your closing costs.

Common Mistakes in FHA Loan Refinancing

Here are some common errors borrowers make when undergoing the FHA loan refinancing process.

Misunderstanding the Eligibility Criteria

Although FHA loans come with more accessible eligibility criteria than many conventional loans, they do still have standards. If your credit score is less than 580 or your payments are delinquent, you’re unlikely to qualify for an FHA refinancing loan.

Ignoring Closing Costs and Fees

As mentioned, closing costs and fees can really add up — so if you don’t take them into account when you’re considering a refinance, you may wind up with an unpleasant case of sticker shock.

Not Considering Long-Term Financial Goals

Refinancing your home, when done best, is all about saving money over time, which means having enough time for those savings to accrue. If you’re planning on selling your house and moving in three to five years, refinancing may actually end up being more expensive than staying with a higher-rate original loan. Additionally, if you’re refinancing primarily to lower your monthly payment and make ends easier to meet, don’t forget to keep your long-term finances in mind. It may not be worth the extra monthly money to pay thousands more in interest overall.

The Takeaway

FHA refinance loans are available for homeowners whose original loans are FHA-insured—as well as for those who have a conventional original mortgage. FHA loan requirements vary depending on which type of loan you’re considering, and may not be right for everyone. But if you can meet the qualifications and derive a solid financial benefit from an FHA refinance, it may be worthwhile to embark on the process.

Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.

SoFi Mortgages: simple, smart, and so affordable.

FAQ

Can you refinance an FHA loan without an appraisal?

Yes — but only if you qualify for an FHA Streamline loan, which requires your original loan also be an FHA-insured loan.

What happens if your home’s value has decreased?

Even if your home’s value has decreased, you may still be eligible for a refinance loan through the FHA Streamline program. It all depends on how much you owe on your home and your other qualifying factors. (Keep in mind, too, that this program requires that your original home loan also be an FHA one.)

Can you refinance an FHA loan if you’re behind on payments?

No. All FHA loan refinance programs require borrowers to be up-to-date on their loan payments, with most including provisions that there must not have been any payments more than 30 days late within the last six months.

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Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility-criteria for more information.

*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

^¹FHA loans are subject to unique terms and conditions established by FHA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. FHA loans require an Upfront Mortgage Insurance Premium (UFMIP), which may be financed or paid at closing, in addition to monthly Mortgage Insurance Premiums (MIP). Maximum loan amounts vary by county. The minimum FHA mortgage down payment is 3.5% for those who qualify financially for a primary purchase. SoFi is not affiliated with any government agency.
Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

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What can you do if you’re buying or living in a home that’s considered “high risk” because of its location or other factors, and you can’t find the insurance protection you need? In some states, including Florida and California, where insurers are limiting their coverage or exiting the market altogether, it can be challenging to find a renters or homeowners policy. You may even find the insurer you’ve had for years is no longer willing to provide coverage.

There’s no need to panic just yet, or give up on your efforts to get the policy you want or need. There may be options you haven’t thought about that are just a few computer taps away.

What Makes a Home, Area, or State High Risk?

There are a few different factors that can make a home, neighborhood, region, or state high risk when it comes to getting insurance coverage. Some of these factors may affect homeowners only, while others can affect both homeowners and renters.

Sometimes a home is determined to be high risk because it’s fallen into a state of disrepair. The insurance company may say, for example, that the home needs a new roof, the foundation is unsafe, or the plumbing or electricity needs updating. If that’s the case, following through on those repairs may make it easier to keep or qualify for a traditional homeowners policy.

It’s also possible that the way the home is constructed — with certain types of building materials or a roof style that doesn’t meet the insurer’s underwriting standards — is making it harder to get insurance. Or it could be that the home is in an area that makes it more vulnerable to certain crimes, such as burglary or vandalism. Sometimes, a person’s own history (a criminal background, bankruptcy, or too many past claims) could lead an insurer to cancel a policy or say no to a new one.

Increasingly, it’s the propensity for serious, damaging weather that can cause an entire region or state to be considered high-risk. In California, wildfires are one reason insurers cite for pulling out. In Louisiana, it’s flooding. And in Florida, insurers are leaving the state because of the expensive damage hurricanes and tropical storms can cause.


💡 Quick Tip: A basic homeowners insurance plan doesn’t cover floods, earthquakes, or sinkholes. If you live in an area prone to natural disasters, you may want to look into supplemental coverage.

What Can You Do If You’re Denied Coverage?

Though homeowners and renters insurance policies aren’t mandated by any state or federal laws, mortgage lenders and landlords can and often do require a certain amount of coverage. Even if yours doesn’t, you may find it makes sense to get a policy to protect yourself, your home, and/or your belongings.

It can be frustrating and scary to find out you’ve been denied the insurance you want or need, or that the policy you have is being canceled. Here are a few things you can do to find protection:

Shop Around

There are many insurance companies out there, so don’t feel as though you have to give up just because the carrier you wanted won’t cover you. You may be able to find a similar or better policy online, or you could search the old-fashioned way and call around. While you’re looking, try not to limit your options based on brand names or because you have car insurance or another type of policy through a certain company.

If you’re buying homeowners insurance: Before you start shopping, consider how much and what types of coverage you need and what your lender requires. Depending on where you live, you may need to buy additional protection for flooding, earthquakes, sinkholes, etc. This coverage is usually not a part of a basic homeowners policy.

If you’re buying a home, you may want to ask the current homeowners or your new neighbors what coverage they think is necessary.

If you’re buying renters insurance: Keep in mind that even though your landlord might have insurance that covers the building you’re living in, that policy won’t cover your possessions should they be damaged or stolen. And the landlord’s policy probably won’t pay for additional living expenses if you need to move out while your unit undergoes repairs.

As you shop renters policies, it’s important to compare apples to apples, and to be sure you’re getting the renters insurance coverage you might need in a worst-case scenario. Remember: Most renters policies won’t cover damage from flooding. To be sure you’re protected, you’ll likely need to purchase a separate renters policy from the National Flood Insurance Program, which is managed by FEMA.

Use a Broker or Independent Insurance Agent

If you don’t have the time to shop for a policy yourself, you may want to hire an insurance broker or independent insurance agent to get quotes from multiple insurers for you. Before you get started in this process, it’s a good idea to be clear on how your insurance professional will be paid (fee, commission, or both), and how broad or limited the policy search will be.

Contact Your State Department of Insurance

The consumer division of your state insurance department can provide you with a list of insurers that are writing policies in your area. And they may be able to help you work with your current provider regarding a nonrenewal — that is, if the company isn’t pulling out of the state altogether.

Ask Your Current Insurance Professional for Advice

If your current insurance company is leaving your region or state and you need to change your homeowners insurance, your representative — who is familiar with your policy needs — may have suggestions for which companies you could try next.

Consider a FAIR Plan

Many states have Fair Access to Insurance Requirements (FAIR) plans available for homeowners who can’t get a traditional homeowners policy. FAIR insurance coverage is different for each state, but generally, these are bare-bones policies provided by a pool of insurance companies. They often do not include personal liability coverage, and you may have to make upgrades to your property to get or keep your policy.

A FAIR plan may be your last resort if you can’t get a policy anywhere else. Still, it’s important to be clear on what you are getting — and what your premium will be — before moving forward.

Look into Beach and Windstorm Plans

If you live in a coastal state that is prone to wind and hail damage, you may want to look into getting a beach and windstorm insurance plan. These plans are similar to FAIR plans and can provide coverage to homeowners in areas that aren’t insured through the voluntary insurance market.

Recommended: Renters and Homeowners Insurance Definitions

Can You Go Without Insurance If You Can’t Get Coverage?

Although you aren’t legally required to purchase a renters or homeowners policy, you may not have a choice. If you’re renting, your landlord might say it’s a must. And if you’re buying or still owe money on your home, your mortgage company will let you know how much homeowners insurance you need.

If you can’t get a policy, or if the coverage is deemed insufficient, your mortgage company might buy “force-placed” insurance for your home. With force-placed insurance, the lender typically pays upfront for the insurance, then adds the premium cost to your monthly mortgage payment. You won’t have control over the type of coverage you get, or the policy limits, and it might be more expensive than the policy you would purchase for yourself.

You also may be required to have homeowners insurance if you live in a condominium or co-op.

Recommended: Is Homeowners Insurance Required to Buy a Home?

What Are the Downsides of Going Without Coverage?

Even if you don’t have to get insurance, you may want to seriously consider the downsides of going without coverage. You might discover that the security a policy can offer is worth the extra effort or cost involved with finding coverage.

If you’re a homeowner: It’s quite likely your home is your biggest asset, and insurance can help you protect that investment and your overall financial wellness. Your homeowners policy doesn’t just cover the structure you live in; it also insures your belongings and provides liability protection in case of an injury or property damage.

If you’re a renter: Your personal property (furniture, electronics, clothes, jewelry, etc.) may be worth more than you think, and renters insurance can help you pay to replace belongings that are damaged or stolen. Renters insurance also typically includes coverage for property damage, or if a guest is accidentally hurt, or if your pet bites someone.

Worried about how much renters insurance costs and if it’s worth it? Usually, renters insurance is much less expensive than homeowners insurance, so you may want to at least check the price before passing on coverage.


💡 Quick Tip: Next time you review your budget, consider making room for additional insurance coverage. Think of it as an investment that can help protect you from a major financial loss.

The Takeaway

It can be frustrating and stressful to learn that you can’t get the insurance coverage you need for your home and belongings, or that you’re losing the coverage you thought you could count on. But just because one company won’t offer you a policy doesn’t mean you don’t have other options. You may have to spend a little extra time searching for the right policy, though, or get a little help finding the appropriate amount of coverage at an affordable price.

When the unexpected happens, it’s good to know you have a plan to protect your loved ones and your finances. SoFi has teamed up with some of the best insurance companies in the industry to provide members with fast, easy, and reliable insurance.

Find affordable auto, life, homeowners, and renters insurance with SoFi Protect.

FAQ

Is homeowners insurance required to buy a home?

While homeowners insurance isn’t required by state or federal laws, if you’re financing the home, your mortgage lender will likely require that you have a certain amount of coverage.

Is renters insurance required?

Renters insurance isn’t required by law, but your landlord or property management company may require that you purchase a renters policy.

How much renters insurance do I need?

To determine how much renters insurance you should purchase, you may want to do a quick inventory of what you own, including clothing, jewelry, electronics, artwork, furniture, etc. Then, using receipts if you have them, estimate how much it’s all worth.

How much homeowners insurance do I need?

If you’re financing your home, your mortgage lender will likely require a certain amount of insurance coverage. But you may want to purchase additional coverage based on your assets and the types of protection you want. Your insurance company can help you determine the appropriate amount of coverage.

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Photo credit: iStock/svetikd

Auto Insurance: Must have a valid driver’s license. Not available in all states.
Home and Renters Insurance: Insurance not available in all states.
Experian is a registered trademark of Experian.
SoFi Insurance Agency, LLC. (“”SoFi””) is compensated by Experian for each customer who purchases a policy through the SoFi-Experian partnership.

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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While it is possible to take out a Federal Housing Authority (FHA) loan to purchase a second home, it’s only allowed in a handful of specific scenarios. Many first-time homebuyers choose an Federal Housing Authority (FHA) loan because of its lower credit score and down payment requirements, so when they need to purchase a second home the natural instinct is to look at financing with a second FHA loan. Read on for more details on how FHA loans work and the few exceptions that allow borrowers to qualify for more than one at a time.

What Is an FHA Loan?

An FHA loan is a type of mortgage that’s insured by the federal government and issued by a lender. FHA loans were created in 1934 at the height of the Great Depression to make homeownership more accessible. Since the FHA assumes the risk in case of default, lenders are able to offer more favorable loan terms to borrowers who might not otherwise qualify for conventional home mortgage loans.

With an FHA loan, borrowers with credit scores of 580 or more may qualify for a down payment of 3.5% of the home purchase price. (Borrowers with credit scores between 500 and 579 will be required to put 10% down.) These FHA loan requirements are helpful for first-time homebuyers who haven’t built up their credit or borrowers with less savings to put toward a down payment. FHA loans are one of several options for low-income home loans so consider all your options, whether you are thinking about taking out a first or second FHA loan.

Borrowers must also get mortgage insurance with an FHA loan. FHA mortgage insurance involves an upfront premium and an annual payment that’s added to monthly mortgage payments. The upfront premium is equivalent to 1.75% of the loan, while the annual payment is calculated based on the loan-to-value ratio and loan terms.

Besides the purchase of a home, FHA-insured loans are also available for home renovations and refinancing an existing FHA loan.

Recommended: How Do FHA 203k Loans Work?

How You Can Get an FHA Loan for a Second Home?

It’s possible to get an FHA loan more than once. For instance, if you’ve sold a prior home and haven’t owned a home for three or more years, you’d qualify as a first-time homebuyer and be eligible for an FHA loan. (And if you have a conventional mortgage on your first home, you may be able to get an FHA loan for a second home provided your credit score is adequate and your budget can handle the cost of a second mortgage; you would also have to occupy the second home as your primary residence.)

Meanwhile, qualifying for a second FHA loan is more complicated. For one, the purchased property must become the primary residence for at least one borrower. This includes a requirement to occupy the property within 60 days and have it be their primary residence for at least one year. These occupancy requirements mean that an FHA loan can’t be used to buy vacation homes or rental properties.

Here are details on the exceptions that permit borrowers to get an FHA loan on a second home:

•   Relocation: If moving for employment-related reasons, borrowers who financed their current home with an FHA loan may qualify for a second FHA loan on a new home before or without selling their first property. However, to qualify, the job must be performed on-site and the new home must be located at least 100 miles away from the primary residence that was previously purchased with FHA-backed financing.

•   Increase in Family Size: Borrowers may qualify for a second FHA loan to purchase a larger home to accommodate their growing family. This is evaluated on a case-by-case basis but typically requires proof of an increase in legal dependents and having at least 25% equity in the home.

•   Vacating a Jointly Owned Property: Borrowers who are getting divorced or permanently vacating a home they inhabited with a co-borrower may qualify for a second FHA loan.

•   Cosigning: A borrower who cosigned an FHA loan but didn’t live in the property could qualify for another FHA loan to buy their own home.

Recommended: FHA Loan Mortgage Calculator

FHA Second-Home Requirements

For borrowers who can satisfy one of the exceptions outlined above, the next step is meeting financial eligibility requirements for a second FHA loan. With any loan, and especially a second mortgage, lenders will consider the borrower’s ability to afford monthly payments when determining if they qualify. FHA loans can allow a debt-to-income (DTI) ratio of up to 50%, meaning that half of a borrower’s income is going to debt payments. Lenders, however, may look for a lower DTI of 43%, accounting for the cost of both mortgages, to approve a second FHA loan.

Borrowers will need to meet FHA loan credit score criteria to determine whether they’ll need to put 3.5% or 10% down. Besides the down payment, lenders also factor in savings for covering closing costs and monthly payments.

Pros and Cons of Multiple FHA Loans

There are advantages and drawbacks to having FHA loans for borrowers to keep in mind.

Pros

•   A smaller down payment

•   No income limits

•   Lower credit score requirements

•   Can be used to purchase duplexes, triplexes, quadplexes, or condominiums

•   May have lower mortgage insurance premiums than private mortgage insurance

Cons

•   Loan limits of $472,030 to $1,089,300 for a single-family home, depending on the cost of living by state

•   May require an inspection and higher property standards

•   Can only be used for buying a primary residence

•   May require mortgage insurance for the life of the loan

Tips if You’re Considering Multiple FHA Loans

Consider these tips to be prepared to apply for a second FHA loan: To lower your DTI, you’ll either need to increase your income or lower your debt. Using your first home for rental income can demonstrate to lenders that you can afford having two mortgages. When evaluating debt, remember that established credit that’s in good standing is viewed more favorably than newer credit accounts.

Building more equity in the home you currently own is another option to help qualify for a second FHA loan. If possible, aim for at least 25% equity before applying for a second FHA loan, as this is the minimum required if you are citing an increase in family size as the exception.

The Takeaway

Can you get an FHA loan if you already have an FHA loan? Yes, but there are specific exceptions you’ll need to meet in order to qualify, and the new property must be used as a primary residence for at least one year. Not able to take out two FHA loans at once? Don’t worry. There are other options for borrowing that may suit your needs.

Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.

SoFi Mortgages: simple, smart, and so affordable.

FAQ

What will disqualify you from an FHA loan?

Borrowers could be disqualified from an FHA loan based on a high debt-to-income ratio, poor credit, or insufficient funds to cover the down payment, closing costs, and monthly mortgage payment.

Can you qualify for FHA twice?

Yes, you can get a second FHA loan if you are relocating for a new job, move at least 100 miles away, have an increase in family size, or vacate a jointly owned property. Borrowers who previously co-signed on someone else’s FHA loan may also qualify for FHA twice.

What is the 100 mile rule for FHA loans?

The 100-mile rule allows borrowers to get a second FHA loan without having to sell an existing property with a FHA-backed mortgage if they’re moving for employment-related reasons or buying a new primary residence that’s at least 100 miles away.

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Photo credit: iStock/nazar_ab

*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.

^¹FHA loans are subject to unique terms and conditions established by FHA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. FHA loans require an Upfront Mortgage Insurance Premium (UFMIP), which may be financed or paid at closing, in addition to monthly Mortgage Insurance Premiums (MIP). Maximum loan amounts vary by county. The minimum FHA mortgage down payment is 3.5% for those who qualify financially for a primary purchase. SoFi is not affiliated with any government agency.
SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility-criteria for more information.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

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A home inspection is an examination of the home’s structure and mechanical systems. It’s typically performed during the escrow period of a real estate transaction so that buyers can gather information about the condition of the property. This information can help them decide if they want to complete the transaction or cancel the contract.

Many real estate professionals advise homebuyers to purchase a home inspection to protect their money and investment. While a home inspection can reveal many pitfalls associated with buying a particular piece of property, it also has limitations buyers should be aware of.

Note: SoFi does not offer home inspections at this time. However, SoFi does offer conventional mortgage loan options.

What Is a Home Inspection?

A home inspection is a visual assessment of a property’s condition, including the major mechanical, structural, and visual elements of a home. This includes things like the electrical, plumbing, foundation, walls, ceiling, heating and cooling systems, leaks, mold, and structural elements.

Getting a home inspection is one way that borrowers can protect their money when taking on a home mortgage loan. Because home inspection reports can reveal potentially expensive problems with a home, homebuyers may be able to renegotiate the contract, ask home sellers to fix problems, or withdraw from the contract entirely.

What Does a Home Inspection Include?

If you’ve been looking at properties, you probably already know some basics of what to look for when buying a house. But a home inspection delves more deeply than you could in your initial examination. It includes information about the home’s condition, including mechanical systems such as the HVAC, roof, electrical, plumbing, walls, ceiling, floor, windows, doors, foundation, and other structural components.

It’s important to note that inspectors have some limitations. If the electricity isn’t on, they can’t do an inspection of it. There are other systems that are not usually included in a standard home inspection, such as an inspection of a well or septic system.

💡 Quick Tip: A major home purchase may mean a jumbo loan, but it doesn’t have to mean a jumbo down payment. Apply for a jumbo mortgage with SoFi, and you could put as little as 10% down.

When Should You Get a Home Inspection?

Whether you’re a first-time homebuyer or have bought multiple properties, if you’re in a real estate transaction, you should get a home inspection when you want to feel more comfortable with your purchase. You’ll want to make an appointment with the home inspector as soon as your contract is signed. (A seller might also want to get an inspection before putting a home on the market, so that any big issues can be fixed before they hurt the home appraisal value.)

Home Inspection Checklist

Not quite sure what is checked on a home inspection? It’s helpful to know what the home inspection may include in a home inspection checklist.

Grounds

•   Is there proper grading and drainage away from the home or is standing water visible?

•   Are the walkways, yard, trees, and landscaping in good condition? Do branches or trees hang over the house?

•   Is there evidence of termite or water damage on exterior structures?

•   Are the railings secure and stable?

Structure

•   Are the sides of the house straight, without sagging or bowing?

•   Do windows and door frames appear square?

•   Do the roof ridge and fascia (the lower beam supporting the gutters) appear straight?

•   Is the foundation straight with no major cracks?

Exterior surfaces

•   Is the siding or stucco in good condition?

•   Do masonry veneers have cracks or flakes?

•   Is there any wood in contact with the ground?

•   Is the paint peeling or chipping?

•   Are there any vines covering the exterior surfaces of the home?

•   Are there stains on exterior surfaces?

Windows, door, and trim

•   Are door frames cracked or rotting?

•   Are windows in working order with no breaks?

•   Are the joints of windows and doors caulked?

Roof

•   Are shingles cracked, rotting, missing, or curling? Are there more than two layers?

•   Are there obvious patches, cracks, splits, or wrinkling on a flat roof?

•   Are the flashing and soffit in good shape?

•   Is there exterior venting for eave areas?

•   Are the gutters in good shape?

•   Are the chimneys straight, properly flashed, with no evidence of cracked joints?

Attic

•   Are there stains on the underside of the roof?

•   Is there damage or rot to the structure?

•   Is there sufficient insulation and ventilation?

•   Is there plumbing, exhaust or plumbing terminating in the attic?

•   Are there open electrical splices?

Interior rooms

•   Do floors, walls, and ceilings seem plumb and level?

•   Are there stains or cracks in the walls or ceiling?

•   Are the paint or wall covering, flooring, and trim in good condition?

•   Do the lights and switches operate correctly?

•   Are there enough electrical outlets? Do they work properly?

•   Is there heating and cooling in each room?

•   Is there cracked or broken masonry around the fireplace? Is there evidence of backdrafting? Does the damper operate properly?

Kitchen

•   Is there a working exhaust fan venting to the outside?

•   Are there GFCI outlets within 6 feet of the sink?

•   Does the dishwasher operate and drain properly?

•   Are there leaks in the pipes under the sink?

•   Does the floor under the sink have evidence of water?

•   Is the water flow adequate?

•   Are the cabinets in good condition?

•   Do built-in appliances operate properly?

Bathrooms

•   Is there a working exhaust fan that doesn’t terminate in the attic?

•   Is there adequate pressure and flow at all fixtures?

•   Is the toilet stable and working properly?

•   Are metal elements free of rust?

•   Is the caulking on the tub, toilet, and shower in good condition?

•   Are there stains or evidence of past leaking?

Basement or mechanical room

•   Is there evidence of moisture?

•   Are there stains or cracks on exposed foundation?

•   Is there visible sagging, stains, or damage from insects in exposed wood elements?

•   Is there insulation at rim/band joists?

Crawl space

•   Is the crawl space adequately vented to the exterior?

•   Is there insulation on exposed water supply, waste, and vent lines?

•   Is there insulation between the crawl space and the heated areas of the home?

•   Is there evidence of moisture or pest damage?

Plumbing

•   Is there evidence of leaking or cracked pipes?

•   Are there signs of rust on the water heater? Is it vented properly? Is it the correct size to produce enough water for the home?

•   Does the water pump short cycle?

•   Do the galvanized pipes restrict water flow?

•   Is the well water test acceptable?

•   Is the hot water temperature between 118 and 125 degrees Fahrenheit?

Electrical

•   Are there exposed splices? Knob and tube wiring?

•   Does the service panel have adequate capacity?

•   Is there aluminum cable for branch circuits?

Heating and cooling systems

•   Is there good air flow from all vents?

•   Are there open seams in the flues?

•   Is there rust around the cooling unit?

•   Is there a combustion gas odor?

•   Is the air filter clean?

•   Is the ductwork in good condition?

•   Is there asbestos on the components?

•   Are there separate flues for oil/gas/propane and wood/coal?

Miscellaneous

•   Are smoke and carbon monoxide detectors in place?

•   Are stair risers and treads in good shape?

•   Are stair handrails in good condition?

•   Does the garage door opener work properly?

Recommended: The Cost of Living by State

What Are Problems That May Fail a Home Inspection?

The most common problem areas that cause a home inspection to fail (meaning, the buyer pulls out of the transaction because of the severity of the issues) include:

•   Faulty roof or foundation

•   Pests

•   Low water pressure

•   Failing windows

•   Electrical issues

•   Drainage issues

•   Failing heating system

•   Wood rot

•   Leaks

•   Mold

•   Building code violations

•   Toxic building materials (like asbestos or lead-based paint)

What Happens if a House Fails Inspection?

If there’s an issue that’s too big to ignore, you have options.

1.    Ask the seller to make repairs. Sellers may be able to make the necessary repairs to get the property up to par.

2.    Ask for a credit from the seller at closing. If you’d rather have money to fix the problem yourself, you can negotiate for a credit from the seller.

3.    Resubmit a counteroffer with a lower price. You can submit an addendum to the contract that lowers the purchase price to reflect the condition of the property and remediation cost.

4.    Abandon ship. If the problems are too big and it doesn’t make financial sense to buy the property, you may just want to walk away.

5.    Buy it anyway. In a competitive real estate market, you may need to decide if the problems found during the inspection are worth bringing up. Sellers often have multiple offers or can sell the property “as is,” meaning, the property may be able to sell even with the problems found. This is dependent on the lender, of course, because lenders may not fund your mortgage if the problems found are severe. (Lenders find out this information in the home appraisal, not the home inspection. The home inspection is for you.)

What Are Home Inspectors Not Allowed to Do?

Home inspectors have some limits. The inspection may not include a close look at:

•   Outbuildings or fences

•   Pests

•   Mold

•   Sprinkler systems

•   Wells

•   Septic systems

•   Ducting

•   Vegetation and drainage

•   Swimming pools

Additionally, home inspectors may not climb on the roof, advise on the cost of repairs, or advise on the purchase of the property.

How Much Does a Home Inspection Cost?

According to the U.S. Department of Housing and Urban Development, the typical home inspection costs between $300 and $500. This will vary, of course, depending on the size of the home, region, age of the home, and other optional services you may want to opt for.

How to Find a Reputable Home Inspector

A good home inspector is invaluable and they’re not all created equal. If you want someone that will take a good look at your home, take these steps:

•   Ask for recommendations from family and friends. If someone you know had a great experience with a home inspector, get their number.

•   Ask your real estate agent for ideas. They’re in the business and likely have a good idea of which home inspectors are thorough and knowledgeable when it comes to a home inspection.

•   Read reviews. There are many sites that offer to connect service professionals with homeowners, and they usually have reviews of past work that you can see.

Pros and Cons of a Home Inspection

When it comes to a home inspection, there are a few pros and cons you’ll want to consider.

Pros

•   A trained professional can find issues you cannot. Even if you’re experienced in home construction, a professional has the advantage when it comes to thousands of potential issues the home could have.

•   It helps protect your money. A home inspection can help you determine if purchasing a certain property is right for you or not and can help you ensure that the home is fairly priced.

•   The report can be used as a negotiation tool. A home inspection that reveals an issue can be used to negotiate repairs, price reduction, or money to repair the issue.

Cons

•   It’s possible to miss major issues. Getting a home inspection doesn’t guarantee that there’s nothing wrong with the home you’re buying. The inspector can’t open up walls. And if the home doesn’t have all of its systems operational, the home inspector cannot inspect them.

•   You may need additional inspectors for specialized systems. If the property you’re buying has a well or a septic system, for example, you’ll likely need an additional inspection from someone qualified to inspect those systems.

💡 Quick Tip: If you refinance your mortgage and shorten your loan term, you could save a substantial amount in interest over the lifetime of the loan.

Do the Homebuyers Have to Be There?

Home inspectors generally do not require potential purchasers to be present when they complete the home inspection. However, it can be very helpful if the buyers make time to be there. The inspector can point out issues, address the severity of them, or make recommendations that are hard to express in a report.

How Long Does a Home Inspection Take?

On the day of the home inspection, how long a home inspection takes depends on the size of the home. Generally, the home inspection takes between two and four hours. After the inspection is complete, the report is usually sent within 24 to 48 hours.

Home Inspection Tips

After you receive your home inspection, you may see some unexpected things. These tips can help.

•   Don’t panic. Every house has something wrong with it. Most things are fixable and you just need to find out what it costs to fix.

•   Get estimates. The home inspection is usually just a starting point. You’ll need to find professionals to determine how much it will cost to fix.

•   Negotiate for fixes. Your real estate agent can ask the seller to fix items found in the home inspection. The estimates you get can come in handy.

•   Make a decision by the deadline. In your contract, you’ll likely have a date that you need to cancel to ensure you don’t lose your deposit. If something in the home inspection is upsetting enough for you to cancel the contract, you need to do it by the deadline.

The Takeaway

Home inspections are recommended because they can help buyers make an informed decision when it comes to purchasing property. When there’s a sizable amount of money at stake, it’s usually worth it to pay a few hundred dollars to uncover potential problems.

However, sometimes even a home inspection doesn’t catch everything wrong with a property. Keep in mind that once your home inspection is finished, you may need to hire a specialist to get to the root of the problem identified by the home inspector. With better information in your hands, you can be prepared to commit your money to a mortgage.

Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.

SoFi Mortgages: simple, smart, and so affordable.

FAQ

What things are big red flags in a home inspection?

Some big red flags to look for in a home inspection are potential issues related to the safety and strength of its construction and systems, such as foundation issues, electrical hazards, drainage issues, and leaks.

What is the importance of an inspection?

A home inspection can reveal potential problems or defects in a property. It can help buyers make better decisions and help protect their money.

What does an inspection agreement typically include?

If you see a home inspection agreement, it may include the scope of work, exclusions, date and fee for the inspection, extras that can be performed for a fee, dispute resolution process, limitations of liability, and statement of no guarantee or warranty of the inspection.

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Photo credit: iStock/LSOphoto

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility-criteria for more information.

*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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Refinancing student loans involves taking out a new student loan (ideally with better rates and terms) and using it to pay off your existing loans. Generally, the reason why people refinance student loans is to save money, although there are some additional benefits that come along with refinancing.

Refinancing private student loans can be an easy decision if your income and credit score can qualify for a lower rate than you got originally. You can also refinance federal student loans with a private lender, potentially at a lower rate. But doing so means giving up federal benefits and protections, so it’s important to weigh the benefits against the risks.

Here’s what you need to know about refinancing student loans so you can decide if this option is right for you.

Benefits of Refinancing Private Student Loans

Refinancing private student loans comes with a number of potential perks. Here are some reasons why you might consider a student loan refinance.

A Lower Interest Rate

One of the main reasons people refinance their existing student loans is because they can find a lower interest rate through a new lender. This can help you save money, potentially thousands over the life of your loan. It can also help you pay off your loan faster, or lower the amount you pay each month.

While student loan interest rates have been on the rise in the last couple of years, you may still be able to do better if your financial situation has considerably improved since you originally took out your student loans.


💡 Quick Tip: Get flexible terms and competitive rates when you refinance your student loan with SoFi.

Reduced Monthly Payments

Another reason why people refinance their private student loans is to lower their monthly payments. You can do this by qualifying for a lower interest rate. Or, you can do this by extending your repayment term. Generally, the longer the loan term, the less you pay each month. Just keep in mind that extending your loan term could cause you to pay more in interest over the life of your loan.

Consolidation of Multiple Loans

If your student loan debt is a messy mix of loans, it can be difficult to stay on top of your payments and track your repayment progress. In this scenario, refinancing can double as a form of debt consolidation and allow you to combine those different loans. Once you refinance, you’ll only have to deal with one loan (and one payment and one due date) each month.

Releasing a Cosigner

When students take out private student loans, they generally need a cosigner. These are usually family members or friends of the student, and they share legal liability for the loan.

If you originally needed a cosigner but are now in a financial position to handle your debt on your own, you might consider refinancing your private student loans. This will give you a new loan and, in the process, release your cosigner from liability for your debt. If you currently have a higher income or credit score than your cosigner, you might even qualify for a better rate.

Factors to Consider Before Refinancing

To determine if refinancing is the right move for you, here are some factors to consider.

Credit Score Requirements

Not every borrower is eligible for refinancing. To get approved, you typically need a credit score of at least 650. A score in the 700s, however, gives you a much better chance of qualifying.

Your credit score also helps determine your new interest rate. Generally, the better your credit score is, the more competitive your interest rate will be. If you can’t qualify for an attractive refinance on your own, you might want to recruit a cosigner who has excellent credit.

Financial Stability

A good credit score is one qualifier for a favorable refinance rate, but that’s not the full story. Lenders will generally look at a wide range of financial factors when determining your interest rate, including your annual income and your debt-to-income ratio (how much of your monthly income you currently spend on debts).

If all three of those financial factors have improved since you’ve taken out your private student loans, it can be worth shopping around for better terms. If, on the other hand, you don’t have consistent earnings and/or have a lot of credit card debt, you’ll likely want to wait until your situation stabilizes before looking into a refinance.

Recommended: Can You Refinance Student Loans More Than Once?

Length of Repayment Term

Refinancing allows you to alter your payment plan. Once you qualify, you can typically choose the new term of your loan, whether it’s five, 10, or 20 years. By setting a new repayment term, you can decide how quickly you want to pay off your loans.

You might choose a shorter repayment term to pay off your loan faster and potentially save on interest. Or, you might opt to go with a longer repayment term to lower your monthly payments. Keep in mind, though, that extending your term may mean paying more in interest over the life of the loan. It will also take you longer to fully pay off your loans.

When Refinancing Might Not Be the Best Option

Refinancing isn’t the right move for every borrower. Here are some scenarios where it may not make sense to refinance your student loans.

You Can’t Get a Lower Interest Rate

Before choosing to refinance, you may want to shop around and see what rates you can potentially qualify for.

Many lenders offer online prequalification where you can enter some information to receive a rate quote without having to submit an actual loan application (which results in a hard credit inquiry). Prequalifying lets you shop around for the personalized rates and terms so you have a better idea of what to expect if you were to refinance, without hurting your credit.

If you can’t get a better rate than you currently have, refinancing might not make sense, at least right now.


💡 Quick Tip: Refinancing could be a great choice for working graduates who have higher-interest graduate PLUS loans, Direct Unsubsidized Loans, and/or private loans.

You Have Federal Loans and Could See a Decline in Income

If you have federal student loans and think your income could drop, or you might lose your job, it’s generally not a good idea to refinance those loans. Doing so means giving up federal student loan relief options, such as deferment and forbearance, as well as government programs like income-driven repayment. These protections could come in handy should you run into any financial hiccups.

Some private lenders offer relief programs but they may not be as generous as what you can get with the federal government.

You Are on an Income-Driven Repayment Plan

Income-driven repayment (IDR) plans are one of the many benefits available to federal student loan borrowers. When you choose one of these plans, the amount you pay each month is tied to the amount of money you make, so you never need to pay more than you can reasonably afford. Generally, your payment amount under an IDR plan is a percentage of your discretionary income (typically 10% to 20%).

Under all IDR plans, any remaining loan balance is forgiven if your federal student loans aren’t fully repaid at the end of the repayment period (either 20 or 25 years).

If you are currently on one of these federal repayment plans and you refinance, your loan becomes a private loan and you lose access to IDR plans.

You’re Working Toward Student Loan Forgiveness

In addition to the loan forgiveness associated with IDR plans, the federal government offers other types of loan forgiveness programs, including Public Service Loan Forgiveness, which is for public-sector workers, as well as a separate program just for teachers. If you think you may benefit from any of these federal relief programs, it’s probably not a good ideal to refinance your federal student loans. Doing so will bar you from getting your federal loans forgiven.

The Takeaway

So should you refinance your student loans? The answer depends on your financial situation and repayment goals. Generally, refinancing your student loans makes sense only if you can qualify for a lower rate than you have now.

Looking to lower your monthly student loan payment? Refinancing may be one way to do it — by extending your loan term, getting a lower interest rate than what you currently have, or both. (Please note that refinancing federal loans makes them ineligible for federal forgiveness and protections. Also, lengthening your loan term may mean paying more in interest over the life of the loan.) SoFi student loan refinancing offers flexible terms that fit your budget.

With SoFi, refinancing is fast, easy, and all online. We offer competitive fixed and variable rates.

FAQ

Why do people refinance their student loans?

Often, people will refinance their student loans to get a lower interest rate, a lower monthly payment, or both. Refinancing can also simplify student loan repayment by replacing multiple loans with a single loan and just one monthly payment.

Why should you avoid refinancing student loans?

Refinancing generally doesn’t make sense if you can’t qualify for a lower rate. You’ll also want to avoid refinancing if you have federal loans and are using (or plan to use) federal benefits like income-driven repayment or student loan forgiveness. Once you refinance a federal student loan, you’ll no longer have access to these federal programs.

Why should private student loan borrowers refinance right now?

You might consider refinancing your student loans now if you are able qualify for a lower rate than you originally got. Refinancing also gives you the opportunity to change the terms of your existing loan, remove a cosigner, and simplify your repayment process by replacing multiple loans with a single loan.

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SoFi Student Loan Refinance
SoFi Student Loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891. (www.nmlsconsumeraccess.org). SoFi Student Loan Refinance Loans are private loans and do not have the same repayment options that the federal loan program offers, or may become available, such as Public Service Loan Forgiveness, Income-Based Repayment, Income-Contingent Repayment, PAYE or SAVE. Additional terms and conditions apply. Lowest rates reserved for the most creditworthy borrowers. For additional product-specific legal and licensing information, see SoFi.com/legal.

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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