R Ojeh, yup refinancing from an FHA loan into a new FHA loan is done all of the time. It's usually done with an FHA Streamline Refinance.
An FHA Streamline Refinance can be done with or without an appraisal. The benefits of doing it with an appraisal is that the new loan amount can go up to 97.75% of the appraised value for the purpose of including the refinance closing costs & the initial funds for the escrow account. The negative is that it costs money for that appraisal & the process is a little longer (perhaps a week). The benefit of doing it without an appraisal is that there is no appraisal fee & the process is a little quicker, but you cannot include the closing costs/initial escrow account funds into your new loan amount - they either have to be paid out of pocket or for a little higher interest rate your lender or mortgage broker can give you a "closing cost credit" that can help pay for those costs. FHA streamline refinances require that the principal/interest/mortgage insurance (P&I + MI) portion of your payment needs to decrease by at least 5% - it's called the "net tangible benefit test".
You can also refinance an FHA loan into a new FHA loan without doing a streamline refinance, for example if you wanted to take cash out of up & beyond the amount of the closing costs/initial funds for the escrow account - however for a cash out refinance it's limited to 85% of the appraised value. If the streamline refinance doesn't create a 5% decrease in the P&I + MI portion, then you can still refinance doing a regular FHA "rate & term" refinance, which is also limited to 97.75% of the home's appraised value (there isn't a "no appraisal" option on an FHA rate & term refinance).
Finally, if you think you may have some equity in your home (5%), then you may consider refinancing into a conventional loan as amount of mortgage insurance on a conventional loan is cheaper than FHA's mortgage insurance. It'd be wise to compare both conventional & FHA refinance options when you begin your refinancing endeavor.
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