Best Candidates

• Current homeowners who financed a property using FHA as their loan vehicle are the best candidates for an FHA refinance. The second best candidates for refinancing a loan using the FHA program are VA loan holders.
  
  

Credit Requirements

• The credit requirements for obtaining approval on an FHA refinance loan are easier than conventional loan requirements. The minimum credit score needed is 620, and the consumer cannot have any late pays or collection accounts for two years prior to the loan application.
  
  

Interest Rates

• The interest rates for an FHA refinance are based on market rates. These are typically lower than rates for conventional loan refinancing.
  
  

Loan Term

• FHA loans can be refinanced for a term of 15 or 30 years on a fixed rate or adjustable rate basis. The money gained from the equity in the refinance can be used for large expenses, such as college tuition or home remodeling.
  
  

Closing Costs

• There are closing costs associated with refinancing an FHA loan. Closing costs can range between 3 percent and 5 percent of the total and is expected at closing if the homeowner doesn't add the closing costs onto the loan amount.
  
  

Additional Costs

• Additional costs involved in obtaining an FHA refinanced loan are services such as appraisals that must be paid by the homeowner outside of closing. Most appraisals can be done for $300, as of 2009, but could be more for a home over 3,000 square feet.