When people hear FHA, they typically think of a low-downpayment mortgage for first-time home buyers, which it is.

But this loan also offers refinance help for near-underwater homeowners, even those who don’t have an FHA loan currently.

Another loan type, the Home Affordable Refinance Program, or HARP, offers refinance loans to homeowners with little or no equity. But the current loan must be owned by Fannie Mae or Freddie Mac.

Standard FHA refinances impose no such rule. Any underlying loan type can be refinanced, and barely any equity is needed to do so.

Mortgage rates today are enticing homeowners to reduce their rate and payment. But a low-equity position is locking them out of a refinance.

The FHA refinance is a powerful -- but very little know -- solution for homeowners. This is the loan with which households with little equity could finally take advantage of current mortgage rates.

Click to see today's rates (Jun 15th, 2016)

What Is A “Standard” FHA Refinance?

FHA offers a variety of refinance types.

By far, the most popular is the FHA streamline refinance. This loan allows homeowners to exchange their higher rate for a lower one when rates drop.

FHA streamline applicants don’t need an appraisal or even income documentation like W2s and pay stubs. The refinance process is streamlined and quick, hence the name.

But these loans are only available to homeowners who already have an FHA loan. They do nothing for homeowners who originally purchased with another loan type but now have little equity. Such loan types are as follows.

  • Option ARMs
  • Bank “portfolio” loans
  • Alt-A loans
  • 80-20 loans

Loans originally opened under programs other than FHA, Fannie Mae, Freddie Mac, or the Veterans Administration are typically not eligible for a refinance without 10-20% equity.

The standard, non-streamline FHA refinance, however, can pay off any type of loan.