The Quick Read: On a Texas homestead, a true FHA cash-out refinance is generally not available in practice, so the plan to close one usually has to change before it starts. Texas treats cash-out against a home you live in as a special home-equity loan with its own fee limits. FHA’s mortgage insurance eats most of that fee room. Your real choices are usually a no-cash-out FHA refinance, a conventional Texas home-equity loan, or keeping the loan you have.
Why the Title Needs a Reality Check
Plenty of homeowners search for this exact thing. They have an FHA loan, they have equity, and they want cash for a remodel, a payoff, or a cushion. The expected answer is “yes, here is the paperwork.” The honest answer is more complicated.
Texas law is not what blocks it, at least not in plain words. The constitutional text cited below does not name FHA insurance or ban it. The trouble is cost. Texas caps what a lender may charge in connection with these loans, and FHA’s upfront insurance premium is large against that cap. Lenders looked at the math and mostly walked away.
So avoid any source that says “Texas law bans FHA cash-out.” That overstates it. A more accurate statement is that lenders do not make these loans, so the combination is effectively unavailable to a borrower shopping today.
Lendmire arranges FHA loans through wholesale lenders in Texas and 15 other states. Its FHA cash-out refinance program works the way FHA cash-out works in most states. Texas homestead rules are the exception, and they are the subject of this article. Program details are subject to lender guidelines and full file review, and nothing here is a commitment to lend.
What Is a Texas Home-Equity Loan?
Texas has its own rulebook for pulling cash out of a home you live in. The rules sit in Article XVI, Section 50 of the Texas Constitution. A cash-out refinance on your homestead falls under subsection (a)(6), so lenders call it a “50(a)(6) loan” or a “Texas A6.”
The main features, as the state text lays them out:
- The total of all loans against the home cannot go above 80% of its fair market value. The Texas Attorney General’s opinion KP-0183 quotes this limit. That opinion is about VA cash-out, so do not carry its conclusions over to FHA. The 80% figure itself is the point here.
- The lender must give you a separate written notice, and the loan cannot close before the 12th day after you receive it. The notice language appears in the Texas Constitution, Art. XVI, §50.
- The loan has no personal liability for the borrower beyond the home itself, and it can be repaid without a penalty.
- Only one of these loans can sit on the home at a time.
- Fees the lender charges are capped as a percentage of the loan.
Compare that with how FHA works elsewhere. An FHA cash-out typically stops at 80% of value, too, so the leverage ceilings line up. The friction is not the 80%. It is the fee cap meeting the insurance premium.
How FHA Cash-Out Normally Works
Start with what the program looks like in the other states. This is the baseline you are comparing against.
Across the wholesale programs Lendmire places FHA files with, an FHA cash-out reaches 80% loan-to-value. LTV is the loan balance divided by the home’s appraised value. The home must be your principal residence, and you must have owned and lived in it for 12 months before the case number is assigned. The lender documents your payment history on the existing mortgage, and a full appraisal is required.
FHA’s rulebook, HUD Handbook 4000.1, lowered the cash-out cap to 80% in its 2019 update. Some older web pages still show the earlier 85% figure. Ignore them.
On a typical file, the lender looks at these things:
1. Your score. The wholesale programs Lendmire works with start at a 580 decision score.
2. Your ratios. The base pair is 31/43, meaning housing costs and total debts as a share of income. Documented compensating factors can stretch to 40/50 at the top tier. The automated underwriting finding governs most files.
3. Mortgage insurance. FHA charges an upfront premium of 1.75% of the base loan, usually financed into the balance. It also charges an annual premium that runs between 0.15% and 0.75% of the balance, depending on term, loan amount and LTV.
4. County loan limits. These apply, change every year, and are not quoted here.
Outside Texas homesteads, that is a clean path. On a Texas homestead, the (a)(6) overlay changes the pricing test, and that is where the file stalls.
Where the Two Rulebooks Collide
Here is the collision in plain words. Texas treats insurance charges as part of the lender’s capped fees. FHA requires its upfront premium on every standard loan. The premium takes up a large share of the fee room Texas allows. Once you add the lender charges that count toward the cap, there is very little room left.
An existing FHA borrower has one possible offset. If you refinance FHA-to-FHA within a limited window after the original loan, part of the upfront premium you already paid can be credited against the new one. The credit is a reduction in the new premium. It is not cash back, and it fades as the original loan ages. Check the exact schedule with a lender before leaning on it.
Even so, the sources that say “unavailable” are describing market behavior, not a statute. Hence the confusion. One page says it is possible, another says it is banned, and a third says it needs a special lender. They are mixing three different things: what the law permits, what FHA requires, and what lenders choose to offer.
This is a genuine toss-up for anyone hoping to be the exception. A rare lender might offer it. But if the economics do not work for most lenders, they will probably not work for you.
Your Real Options With an Existing FHA Loan
If cash is the goal, here is how the main paths compare.
| Path | Cash to you? | What happens to the FHA loan |
|---|---|---|
| FHA Streamline | No | Replaced by a new FHA loan, no appraisal |
| FHA rate-and-term | No, only costs may roll in | Replaced, with an appraisal |
| Conventional Texas (a)(6) | Yes, up to the 80% total cap | Paid off; you lose FHA insurance |
| Keep the loan, add nothing | No | Stays as is |
Let’s take them one at a time.
FHA Streamline. This refinances an existing FHA loan with no appraisal and a limited credit review. It requires a net tangible benefit, meaning the new loan must measurably help you. The insurance premium continues. It cannot put cash in your hand. If a lender or a website says a Streamline can give you “a little cash back,” treat that as a red flag.
FHA rate-and-term. With an appraisal, this reaches 97.75% LTV on a principal residence you have occupied for the previous 12 months. It resets the loan, can fold in closing costs, and still pays no cash out. It fits if you want a different term or a different balance structure, not if you want cash. Final terms depend on the lender’s guidelines, the property type, and the borrower’s complete credit picture.
Conventional Texas (a)(6). This is the loan most Texas homeowners end up with when they need cash. The new loan pays off your FHA loan, which ends your FHA mortgage insurance. It also removes the FHA premium from the fee-cap math. Conventional loans have their own credit and equity requirements, and some lenders set a higher credit floor than FHA does. You trade FHA’s flexibility on credit for access to the cash.
Keep the FHA loan and add nothing. If your balance is low and your payment fits your budget, leaving it alone is a legitimate answer. Texas also limits what you can do with a second lien. Because only one (a)(6) loan can exist at a time, think hard before taking one on that you may want to replace later.
How Much Cash Could You Actually Get?
Skip the dollar examples. Use the formula.
Take 80% of your home’s appraised value. Subtract every lien that must be paid or stays in place: your FHA payoff, any second loan, and any home-equity line. Subtract the closing costs and the financed premium. What remains is your cash.
Two things pull that number down for an FHA borrower:
- The financed upfront premium. If your new loan is FHA, the 1.75% premium is added to the balance. Your payoff plus that premium comes out of the 80% first.
- Other liens. Any equity line or second mortgage has to be paid off at closing or fit inside the 80% cap.
A larger balance after a cash-out also raises the annual premium base. On a thirty-year loan above 90% LTV, the annual premium lasts for the full term. At or below 90%, it ends after eleven years. Cash-out loans cap at 80%, so the shorter schedule would normally apply, but confirm that on your file.
Are You Eligible? A Checklist
Run through this before you call anyone.
- ☐ The home is your principal residence and a Texas homestead.
- ☐ You have owned and lived in it for 12 months (FHA cash-out).
- ☐ Your mortgage payment history is documented and clean.
- ☐ Total debt against the home, including any second lien, fits inside 80% of value.
- ☐ Your decision score meets the lender’s floor. Pricing and available terms vary by lender, borrower profile, property type, and full underwriting review.
- ☐ Your ratios fit the base 31/43 pair, or you have documented compensating factors that reach toward 40/50.
- ☐ You do not already have a Texas home-equity loan on this home, or you know how the refinance rules treat it.
- ☐ You are past any credit-event waiting period. HUD sets two years from a chapter 7 discharge and three years from a foreclosure. Those are HUD’s rules, not a promise from any one lender.
A recent late payment or a recent purchase can sink a cash-out even when the equity is there. Lenders read payment history closely on this transaction type.
What the Closing Sequence Looks Like (If You Take the Conventional Route)
If you move to a conventional Texas cash-out, here is the order of events. The exact calendar depends on the file.
1. Application. You apply and the lender discloses the loan terms.
2. The separate notice. The lender hands you the written home-equity notice. The state clock starts when you receive it, and processing continues in the background. The wait is a legal cooling-off period, not a processing delay.
3. Appraisal and valuation. You sign a written acknowledgment of the home’s fair market value. Lenders on these loans generally require a full appraisal.
4. Underwriting and conditions. The lender verifies income, assets, payment history and liens, and orders title work.
5. Closing. Texas requires the loan to close at the office of the lender, an attorney or a title company. A home-equity loan does not close at your kitchen table. Everyone who must sign should attend in person. Your title company can confirm who that includes.
6. The right to cancel. After signing, federal rules give you three business days to change your mind on a refinance of your home. The CFPB explains the right of rescission, including that Saturdays count and Sundays and legal public holidays do not.
7. Funding and recording. After the cancellation period ends, the loan funds, the old loan is paid off, and the new lien is recorded.
Do not confuse steps 2 and 6. The first is a Texas rule, and the second is a federal one. They run at different times and do different jobs.
Where Closings Stall
These are the usual friction points for Texas cash-out files:
- Notice timing. If the separate notice goes out late or on the wrong form, the closing date moves with it.
- Wrong closing location. A signing set up outside an approved office has to be redone.
- Lien payoffs. An old equity line that nobody closed out shows up on title and holds up funding.
- Valuation gaps. An appraisal that comes in low shrinks the 80% cap and the cash with it.
- A prior equity loan. Refinancing an existing Texas home-equity loan brings its own conditions, including a written warning that you may be giving up certain protections. Read that notice.
- Assuming FHA will work. Find out early, before you pay for an appraisal, whether any lender on your file will make the loan you want.
After Closing: What Stays With the Loan
A Texas home-equity loan keeps its label. A later refinance of it faces tighter rules than a refinance of an ordinary mortgage. The 2017 constitutional amendment, effective for closings starting in 2018, widened the exit path. Under it, an equity loan can be refinanced into a regular, non-equity loan if the refinance meets certain conditions, including a waiting period from the original closing. A summary of the changes is in the Texas S.J.R. 60 text.
Think of the cash-out as a decision you may live with for a while. Plan the exit before you sign.
Key Terms Defined
Homestead: The home you live in as your principal residence, which Texas law protects with special rules for borrowing against it.
50(a)(6) loan: The Texas home-equity loan that lets you take cash out of a homestead, with limits on value, fees and timing.
LTV (loan-to-value): Your total loan balance divided by the home’s appraised value.
Upfront mortgage insurance premium: The one-time FHA insurance charge, 1.75% of the base loan, usually added to the balance.
Annual mortgage insurance premium: The ongoing FHA insurance charge, paid monthly, that depends on term, loan amount and LTV.
Rescission: Your federal right to cancel a refinance of your home after signing, within a window that depends on the specific transaction and the documents you receive.
Frequently Asked Questions
Can I take cash out of an FHA loan on my Texas home?
Not through a standard FHA cash-out in practice. Texas allows cash-out against a homestead only as a home-equity loan, and lenders generally do not make FHA-insured versions because the premium crowds the fee cap. The usual path to cash is a conventional Texas home-equity loan.
Can an FHA Streamline put money in my pocket?
No. A Streamline refinances an existing FHA loan, usually without an appraisal, and requires a net tangible benefit. It is a no-cash-out transaction. If you want cash, you need a different loan.
Will I get my FHA upfront premium back if I refinance?
Not in cash. If you refinance FHA-to-FHA within a limited window, part of the earlier premium can be credited against the new one. That credit shrinks as the loan ages. Outside that window, or on a switch to conventional, there is no credit.
How much equity do I have to leave in the home?
At least 20%. Both the Texas home-equity cap and the FHA cash-out cap sit at 80% of value, counted across all loans on the home. Your cash is roughly 80% of value, minus your payoff and costs.
Are the 12-day wait and the three-day cancellation the same thing?
No. The 12-day wait is a Texas rule that applies before closing. The three business days are a federal right to cancel that applies after signing. A conventional Texas cash-out has both.
Next Step
If you are weighing a cash-out refinance against keeping the loan you have, Lendmire can help you compare the programs and the equity each one reaches. Start by confirming that your home qualifies as a homestead and that any other liens fit under the 80% line. Texas rules put a ceiling on the loan before the program even enters the picture.
For your own numbers, request a scenario review with Lendmire.
About Lendmire
Lendmire (NMLS# 2371349) is a mortgage broker licensed for consumer lending in 16 states. Lendmire arranges FHA, VA, conventional and jumbo purchase and refinance loans through wholesale lenders; every file is underwritten by the lender under the applicable program guidelines. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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References
1. Texas Attorney General Opinion KP-0183
2. Texas Constitution, Art. XVI, §50
3. HUD Handbook 4000.1 transmittal
5. Texas S.J.R. 60 (85th Legislature)
This article is part of Lendmire’s FHA Loan series — every loan program’s qualification details, guidelines, and scenarios live on the loan options page.
Related reading: How to Compare FHA Cash-Out to Alternatives With an Existing FHA Loan · FHA Cash-Out Annual MIP Rules With an Existing FHA Loan · Texas FHA Cash-Out Requirements for a Homeowner With an Existing FHA Loan
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Compliance and disclosures. Lendmire (NMLS# 2371349) is a licensed mortgage broker and is not a direct lender, depository institution, financial advisor, or tax professional. Content in this article is general market analysis and educational information — not financial, legal, or tax advice for any specific situation. Lendmire does not guarantee loan approval; every transaction is subject to underwriting by the funding lender. Mortgage pricing and loan program guidelines are subject to change at any time without notice and vary by borrower characteristics, property type, and state regulations. Lendmire complies with Equal Housing Opportunity. Licensure verification: NMLS Consumer Access.