How to Refinance an FHA Loan to VA Loan

Refinancing means replacing your current mortgage with a new one — often to secure better terms, lower monthly payments or tap into home equity. While it requires going through the loan process again, the benefits can be well worth it, especially for Veterans.

For some, refinancing can mean a lower interest rate or eliminating mortgage insurance. For others, it’s a way to shorten their loan term, access cash or switch loan types. If you’re a Veteran or service member with an FHA loan, refinancing into a VA loan could open new doors — helping you save money and maximize your hard-earned home loan benefits.

Here’s how the FHA-to-VA refinance process works and why it might be the right move for you.

Eligibility Requirements for an FHA Loan to a VA Refinance

To refinance your FHA loan into a VA mortgage, you’ll first need to meet the VA’s service requirements. These are set lengths of time you must have served in the military based on when you were enlisted.

To be eligible, you will typically need to meet one of the following service requirements:

• 90 consecutive days of active duty during wartime
• 181 days of active duty during peacetime
• Six years in the National Guard or Reserves
• 90 days of service under Title 32 orders, with at least 30 served consecutively

You may still be eligible even if you don’t meet these basic guidelines. You can also qualify if you’re the spouse of a service member who died while serving or died from a service-related disability. If your spouse was a prisoner of war or went missing in action, you also may be eligible.

To prove you meet these requirements, you’ll need a Certificate of Eligibility or COE. Lenders can often obtain this document for you, but you can also request it through the eBenefits portal. You also don’t need to have your COE or even know if you’re eligible to get started.

Beyond service requirements, you will also need to meet some other standards to qualify. First, your property must be your primary residence. It also must meet the VA’s Minimum Property Requirements (MPRs) for safety, and typically, you’ll need at least 10% equity in the home (though the exact requirement depends on your lender).

You may also need to have at least six on-time mortgage payments under your belt and meet other time-related guidelines. This requirement, sometimes called “seasoning," will also depend on your lender.

Pros and Cons of Refinancing From FHA to VA Loan

Refinancing from an FHA loan to a VA loan isn’t the right move for everyone, but for eligible Veterans and service members, it can offer some valuable benefits.

Here’s a closer look at the potential advantages and drawbacks to help you decide if this refinance option is right for you.

Let’s dive deeper into what each of these pros and cons could mean for your refinance decision.

Benefits of VA Refinancing an FHA Loan

One of the biggest benefits of refinancing from an FHA loan to a VA loan is eliminating the FHA Mortgage Insurance Premium (MIP). This annual cost, ranging from 0.45% to 1.05% of your loan amount, is spread across your monthly payments. Removing it can lower your monthly mortgage costs and put more money back in your pocket.

There’s also the potential for lower interest rates. Though both VA and FHA loans have low rates compared to conventional loans, VA loans often have the lowest of all. Based on the most recent HMDA data, the average VA interest rate for 2024 was 6.072% compared to 6.288% for FHA loans.

Depending on your eligibility and how much home equity you have, you may qualify for a higher loan amount with a VA loan than you would on an FHA loan. For instance, the standard VA loan limit for a single-family home is $806,500 in most U.S. counties, whereas the FHA loan limit is $524,225.

You’ll also get access to the VA’s IRRRL refinancing option once you have a VA loan. That means if you want to refinance again in the future, it’s incredibly easy and fast. Some homeowners might be able to refinance without an appraisal or credit check, and your funding fee will be reduced significantly.

Both FHA and VA loans are assumable. A future eligible buyer can take over your low-interest loan instead of securing their own, potentially higher-rate mortgage. This can be a big marketing advantage and potentially help you sell your home more successfully down the line.

Disadvantages of VA Refinancing an FHA Loan

One downside of refinancing is the upfront cost. Just like your FHA loan, a VA refinance comes with closing costs. On top of that, VA loans also require a funding fee, which ranges depending on how many times you’ve used your VA loan benefit.

Using a VA loan will reduce your total VA loan entitlement, which means you may need to make a down payment if you want to use your benefit to buy a home in the future.

Finally, you will need to go through the appraisal process. Only VA-to-VA refinances are allowed to skip the appraisal, so before you can get approved for your new VA loan, your home will need to be evaluated by an approved VA appraiser. It must meet the VA’s MPRs to qualify.

Costs Involved in FHA to VA Refinancing

Refinancing any mortgage is going to come with fees, and generally speaking, you can expect to pay anywhere from 3% to 5% of the loan amount. On a $250,000 loan, that’d be between $7,500 and $12,500 in closing fees.

The exact total you’ll pay will depend on your lender and the cost of various services in your area. VA closing costs vary but might include:

• Origination fees
• Appraisal fees
• Title insurance and fees
• Credit report fees
• Local recording fees
• Attorney/settlement fees
• Escrow fees, including home insurance and property taxes

There is also a VA Funding Fee, which you’ll pay at closing or roll into your loan amount. For VA Cash-Out refinances, the fee costs 2.15% of the loan amount if it’s your first time using your VA loan benefit or 3.3% if you’ve used a VA loan before. Veterans receiving compensation for a service-connected disability, surviving spouses and select others may be exempt from this fee.

Important note: If you take cash out with your refinance, your overall loan amount will increase. This will increase the cost of many of the above fees, as well as your monthly payment and total long-term interest costs.

The FHA Loan to VA Loan Refinance Process

Refinancing your FHA loan into a VA mortgage isn’t too difficult. Here’s a broad overview of the common steps:

Step 1: Assess Your Financial Situation

Check your credit score and weigh it against the minimums set by your lender. While the VA doesn’t have a minimum credit score for the program as a whole, most lenders require at least a 620 credit score to qualify.

You should also look at your debt-to-income ratio — or how much of your monthly income your minimum debt payments take up. The exact threshold depends on your lender, but VA borrowers whose DTI exceeds 41% need to meet additional guidelines for residual income.

Step 2: Compare Lenders and VA Refinance Rates

Only certain lenders are authorized to offer VA loans and VA refinancing, so make sure you shop around. Look at a few VA lenders, like Veterans United, and compare them on interest rates, fees, closing costs and other details. You should also consider customer ratings and reviews and look for any red flags.

Step 3: Gather Documents and Apply

Next, you’ll complete a loan application and submit the necessary documents. Most lenders allow you to apply for a VA refinance online, making the process quick and convenient. You’ll typically need to provide proof of income (such as pay stubs, W-2s and tax returns), bank statements, asset documentation and identification.

Your lender will review this information to determine your eligibility and loan terms. Getting your documents in early can help speed up the process and keep your refinance on track.

Step 4: Order a VA Appraisal

Next, the lender will order a VA appraisal to assess your home’s market value and determine how much equity you have. The appraisal also ensures the property meets the VA’s MPRs, confirming it’s safe to live in and a sound investment.

VA appraisals typically cost between $525 and $1,300, depending on your location. This step usually takes one to two weeks to complete.

Step 5: Underwriting and Loan Approval

During the underwriting stage, the lender carefully reviews your finances, appraisal and other details to ensure you and the property meet the VA’s requirements — and that you’re in a strong position to make your payments on time.

Underwriting typically takes two to four weeks, but you can help keep things moving by submitting documents promptly and responding quickly to any lender requests.

Step 6: Close on Your VA Loan

Finally, you’ll attend your closing appointment. Here, you’ll sign all the necessary paperwork, pay your closing costs and VA Funding Fee (if you’re not rolling it into the loan), settle up any prorated taxes, insurance and other fees and verify that your previous FHA loan balance has been paid off.

From start to finish, the entire VA refinancing process usually takes about 30 to 45 days, depending on your lender and appraiser.