To convert a mortgage to an FHA loan, the borrower must first qualify for FHA eligibility, which includes meeting credit score requirements (typically 580+), providing proof of stable income, and satisfying property standards. They then submit a refinance application to an FHA-approved lender, who underwrites the loan, appraises the property, and handles closing. Key steps include: 1) Contacting lenders to compare rates and terms, 2) Submitting documentation (pay stubs, tax returns, W-2s), 3) Underwriting approval, 4) Completing the appraisal and title search, and 5) Finalizing the refinance with closing costs.

FHA loans offer advantages like lower down payments (as low as 3.5% for qualified buyers) and flexible eligibility, making them popular for refinancing. According to the U.S. Department of Housing and Urban Development (HUD), over 4.3 million FHA loans were originated in 2022, with 68% of refinances going to borrowers with credit scores below 720. However, refinancing costs (average $5,000–$8,000) and mortgage insurance premiums (0.85%–1.45% of the loan amount annually) must be factored in. The Federal Housing Administration’s 2023 guidelines also expanded income limits to $155,500 in high-cost areas, enabling more borrowers to qualify. Lenders may require a loan-to-value ratio below 97% for streamline refinances, reducing risks for underwriters. This process remains viable for homeowners seeking lower rates or shorter terms, though timing market conditions and comparing total costs are critical to maximizing savings.