Your existing lender has to agree to do a short-refi, but if they do then it is certainly possible with a new FHA mortgage. Requirements are explained in detail at http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/fi
however the bullet points are:
1. Your new loan amount needs to be within FHA loan limits - which for Scott County, MN is $365k.
2. The homeowner must be current on the existing mortgage to be refinanced
3. The existing first lien holder must write off at least 10 percent of the unpaid principal balance
4. The refinanced FHA-insured first mortgage must have a loan-to-value ratio of no more than 97.75 percent (so if your home appraises for $373,402 then you could get a new FHA loan amount of $365k)
One item to note, is that the program allows for a 2nd mortgage up to 115% of the home's value (called combined loan-to-value, or CLTV for short). So the current mortgage lender can convert the portion of your loan over the amount needed for FHA financing into a 2nd mortgage, and it's permissible per the loan program.
Not a lot of lenders offer it though, so it is a tough find.
FHA's regular refinance program will do the same - it will have all of the 4 requirements above except for #3, and you cannot put a 2nd mortgage on the home over 97.75% doing what you'd be doing. See http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/fi
for those requirements on maximum CLTV when you are refinancing with FHA. Many lenders are doing that, including us.
However if you are on an interest only loan, what type of monthly payment would you find affordable? What is your payment now? What is your interest rate now? How much is owed on your mortgage? How much is your home's value? Those (among other important information) will help determine if:
1. Refinancing would even help out your payment
2. What the new refinance terms could be