The Quick Read: It adds no more than it does on a stronger profile, because FHA mortgage insurance is not priced by credit score. HUD sets the premium from the loan term, the base loan amount and the loan-to-value ratio. A thinner profile changes whether you qualify, how the file is underwritten and how much cash the ratios can support. It does not change the insurance schedule. On a cash-out, which tops out at 80% LTV, the upfront premium is 1.75% of the base loan, and the annual premium sits in the lowest-LTV tier. Final terms depend on the lender’s guidelines, the property type, and the borrower’s complete credit picture.
Key Takeaways
- FHA charges two premiums: an upfront one (1.75% of the base loan, usually financed) and an annual one collected monthly.
- Credit score is not an input to either premium. HUD’s premium schedule runs on term, base loan amount and LTV.
- Both premiums apply to the whole new loan, not only the cash you take out. A small cash-out carries a heavier insurance load per dollar of cash.
- At or below 90% LTV, the annual premium ends after eleven years on a thirty-year loan. A cash-out at 80% LTV sits in that group.
- Thin credit shows up elsewhere: qualification, the note pricing a lender charges, and the debt ratios allowed.
What Does “Thinner Credit Profile” Mean Here?
Three different situations get lumped together, and they behave differently in a mortgage file.
A thin file means few accounts or a short history. You have a score, but little behind it.
A low score means plenty of history, but with late payments, collections or high balances.
No score means the bureaus don’t have enough to generate one. Without a score there is no decision score to measure, which matters for the programs described below.
Across the wholesale programs we place FHA files with, the practical dividing line is the decision score. The FHA cash-out we arrange starts at a 580 decision score. HUD itself has a lower tier for purchases, but the lenders we work with don’t reach below 580. A thin file with a score above that line is a workable file. One below it, or with no score at all, is a different conversation, usually about building credit first.
What Are the Two FHA Insurance Charges?
FHA insurance is two separate charges, and both are set by HUD rather than by the lender.
| Charge | Basis | How it’s paid | How long |
|---|---|---|---|
| Upfront premium | 1.75% of the base loan | Usually financed into the loan | One time |
| Annual premium | 0.15%–0.75% of the balance, by term, amount and LTV | Added to the monthly payment | Eleven years at or below 90% LTV; the full term above 90% LTV |
Those percentages come from the structure in HUD Mortgagee Letter 2023-05. Separately, FHA INFO 2023-11 announced a 30-basis-point cut to the annual premium for loans endorsed on or after March 20, 2023, so older tables you may find online can show higher numbers.
Two points trip people up.
First, the upfront premium is a charge on the loan, not a cash fee you have to bring. Most borrowers finance it. That shrinks the cash due at closing, but it raises the balance, and you pay interest on that larger balance.
Second, the annual premium is quoted as a yearly percentage but collected monthly. It shows up in the payment, and your Loan Estimate itemizes it.
Does a Thin Credit Profile Change the Insurance?
No. HUD’s premium table has columns for loan term, base loan amount, LTV, premium and duration. It has no credit-score column.
Credit does matter, just not in the premium. Here is what a thin profile touches and what it leaves alone.
| Item | Affected by thin credit? |
|---|---|
| HUD upfront premium | No |
| HUD annual premium schedule | No |
| Whether you qualify at all | Yes |
| Underwriting path (automated or manual) | Yes |
| Note pricing a lender charges | Yes |
| Debt ratios the file can support | Yes |
| Lender’s own credit floor | Yes |
The note pricing point deserves its own sentence. The cost of the loan itself is separate from FHA insurance, and it can move with credit. That is a lender and market question, not a HUD one, and this article doesn’t quote it. When you compare offers, compare the insurance line and the note line separately on the Loan Estimate so you know which one moved.
How Does the Insurance Scale With the Cash You Take?
The premium applies to the whole new loan, not just the cash portion. That has a consequence people rarely see: the cash-out amount barely changes the insurance percentage, but it changes the insurance burden per dollar of cash dramatically.
Picture three borrowers with the same home value and the same 80% LTV ceiling. Every figure here varies by lender and program — guidelines, property type, leverage, and credit profile all apply.
- Borrower one owes little on the existing mortgage. A cash-out up to the cap puts a lot of cash in hand, and the insurance is spread over a large cash amount.
- Borrower two owes about half the value. The new loan is larger than the old payoff, but the cash is moderate relative to the balance being insured.
- Borrower three owes close to 78% of value. The new loan barely exceeds the payoff. The insurance applies to the entire loan, yet the cash released is small.
In every case the upfront premium is 1.75% of the base loan. Borrower three pays insurance on nearly the full value of the house in debt to net a thin slice of cash. That is the case where a cash-out often fails the sanity test. A simple way to check: divide what you’d pay in insurance and closing costs by the cash you’d actually receive. If that fraction is large, the loan may be costing more than the cash is worth.
How Is the Cash-Out Underwritten, Step by Step?
Here is the order a file typically moves through, and where a thinner profile shows up.
1. Eligibility screen. The home must be your principal residence, owned and occupied for 12 months before the case number is assigned. Across the programs we place, the FHA cash-out reaches 80% LTV. The exact numbers vary by lender and program and follow a full review of property, leverage, and credit.
2. Payment history. HUD’s standard for cash-out is strict. Under HUD Mortgagee Letter 2020-30, the lender must document that the mortgage payments were made within the month due for the previous 12 months, or since you obtained the loan if shorter. A recent late payment can send a file to manual underwriting. That letter is older, so the current Handbook governs.
3. Appraisal. The appraised value is the figure the 80% cap applies to. A lower appraisal means less cash.
4. Maximum loan. The cap is 80% of value, within county loan limits. The new loan has to cover the payoff, the closing costs and the financed upfront premium. What’s left is yours.
5. Underwriting. Most files run through FHA’s automated scorecard. The base ratio pair is 31/43 (housing and total debt to income) with no compensating factors. Documented factors, such as reserves or a strong payment record, can reach 40/50 at the top tier. A thinner file often relies on those factors more heavily.
6. Insurance and disclosure. The premiums are set by the schedule and shown on the Loan Estimate and Closing Disclosure.
One detail the schedule leaves to the lender: how the financed upfront premium counts against the 80% test. That depends on the Handbook’s maximum mortgage rules, and the loan officer should walk you through it on your specific file.
A Worked Example
Take a borrower with a thin file but a decision score above 580, a 12-month history of on-time payments and a home whose value we’ll treat as 100 units for the sake of the math.
- The cap is 80% of the appraised value.
- The existing mortgage balance is 60% of value.
- That leaves a gap of 20% of value, minus closing costs and the financed upfront premium.
- The upfront premium is 1.75% of the base loan, so roughly 1.4% of the home’s value at the cap.
- The annual premium sits in the lowest-LTV tier and runs for eleven years.
Net cash is therefore closer to 17% or 18% of value than 20% once costs and the premium come out. Move the existing balance to 75% of value and the gap shrinks to 5%, with the same insurance load applied to a bigger loan. The cash falls, the insurance doesn’t. That’s the scaling effect in plain numbers.
Where Does the General Rule Break?
The “credit doesn’t change FHA insurance” rule holds across a standard Title II cash-out. A few situations bend it or change the picture.
- A downgrade to manual underwriting. The premium doesn’t change, but the ratio room can shrink, which limits cash.
- Recent delinquency or forbearance. HUD Mortgagee Letter 2020-30 requires at least 12 consecutive payments after a completed forbearance plan for a cash-out. Rules have changed since that letter, so confirm the current standard.
- Credit events. HUD’s waiting periods are two years from a chapter 7 discharge and three years from a foreclosure. Those are HUD’s rules, not a promise from any lender.
- Loan size above HUD’s threshold. Larger base loans fall into a higher annual-premium tier. The threshold is set by HUD and changes, so confirm the current figure before relying on a number you find online.
- Special programs. Native American and Hawaiian Home Lands loans have their own premium and cash-out rules, and they aren’t covered here.
- Existing FHA loans. A cash-out is a full refinance with a full upfront premium. The credit-back rules for earlier premiums matter mostly on streamline and simple refinances.
Why Is the Cap 80%, and Does That Help?
HUD lowered the cash-out cap from 85% to 80% for case numbers on or after September 1, 2019. Its news release says the cut aligns FHA with the maximum cash-out LTV allowed by the government-sponsored enterprises. In other words, FHA no longer lets you borrow more against your equity than conventional programs do. Final terms depend on lender guidelines, property type, leverage, and the borrower’s complete credit picture.
That matters for insurance in one way. Because the cap is 80%, a cash-out lands in the lowest-LTV tier of the annual schedule, with the shortest duration. A purchase with 3.5% down is in a different tier and pays the annual premium for the full term. These specifics are subject to lender guidelines and a full review of property, leverage, and credit.
FHA vs. Conventional Insurance for This Borrower
| Factor | FHA cash-out | Conventional cash-out |
|---|---|---|
| Insurance on 80% LTV | Upfront 1.75% plus annual | Generally none at 80% LTV |
| Credit sensitivity of premium | None in the HUD schedule | Typically priced by credit |
| Credit floor | 580 decision score on our programs | Often higher, set by lender |
| Duration | Eleven years at or below 90% LTV | Not applicable at 80% |
The tradeoff is real. FHA’s strength for a thinner file is that qualification can be easier and the premium doesn’t punish a lower score. Its cost is that you pay insurance that a conventional loan at the same LTV may not charge. If your score clears the conventional floor, compare both. If it doesn’t, FHA may be the only practical option.
Wait, Thicken or Proceed?
Here is a way to sort the decision.
- Proceed if you’re above the 580 decision score, your last 12 months of mortgage payments are clean, and the cash is large relative to the insurance and closing costs.
- Wait if you have a recent late payment, a score near the floor, or a cash amount so small that costs would eat most of it.
- Thicken if the issue is file depth rather than history. Adding on-time tradelines or paying down revolving balances can improve the score and the ratios. It rarely changes the premium, but it can improve qualification and the pricing on the note.
One more caution. The CFPB notes that paying non-mortgage debts with mortgage debt can raise foreclosure risk. Scores often jump after a cash-out pays off cards, then drift back down if balances rebuild. A cash-out that clears credit cards works best when the spending that created them has changed.
Key Terms Defined
Upfront premium (UFMIP): a one-time insurance charge equal to 1.75% of the base loan, usually financed into the balance.
Annual premium (MIP): an insurance charge set as a percentage of the balance, collected in monthly installments.
Base loan amount: the loan before the financed upfront premium is added.
Loan-to-value (LTV): the new loan divided by the appraised value of the home.
Decision score: the credit score a lender uses to underwrite the file.
Thin file: a credit history with few accounts or a short track record.
Manual underwriting: a lender’s hands-on review when the automated system doesn’t return an approval-level finding.
Frequently Asked Questions
Does a lower credit score raise my FHA mortgage insurance?
No. HUD’s schedule sets both premiums from the term, base loan amount and LTV. What a lower score can change is the note pricing, the ratios you can support and whether the file reaches approval at all.
How long do I pay the annual premium on a cash-out?
Eleven years on a thirty-year loan at or below 90% LTV, which includes a cash-out capped at 80%. Above 90% LTV, it runs for the full term. A new cash-out resets the clock because it is a new loan. Terms depend on the lender’s guidelines, the property type, the leverage, and a full review of the credit profile.
Is the upfront premium paid in cash?
It can be, but most borrowers finance it into the loan. That reduces cash due at closing and raises the balance. You pay interest on the larger amount, so financing it costs more over time.
Can I get a cash-out with no credit score?
Generally not through the programs Lendmire places. Those start at a 580 decision score, and a file with no score has no decision score to measure against that line. The usual path is to build a score first, then revisit the cash-out. A loan officer can confirm where your file stands.
Is FHA cash-out better than a home equity loan?
It depends on what you need. A cash-out replaces your first mortgage and resets the term, and it carries FHA insurance. A home equity loan leaves your first mortgage in place. If your current mortgage terms are favorable, leaving them alone may be the stronger choice.
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, starting with the FHA cash-out refinance program. Tax treatment can depend on your situation; borrowers should speak with a qualified tax professional before relying on any deduction or credit. All program figures are subject to lender guidelines and full file review, and nothing here is a commitment to lend.
For your own numbers, request a scenario review with Lendmire.
For current guidelines and terms, see Lendmire’s FHA loan programs page.
About Lendmire
Lendmire is a mortgage brokerage (NMLS# 2371349) licensed for consumer mortgage lending in 16 states, arranging FHA, VA, conventional and jumbo purchase and refinance loans through a wholesale lending network. Eligibility is determined by the lender on each file. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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References
1. HUD Mortgagee Letter 2023-05
3. HUD Mortgagee Letter 2020-30
5. CFPB
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: Is an FHA Cash-Out Worth It on a Thinner Credit Profile? · Can a Thinner Credit Profile and High DTI Still Get an FHA Cash-Out? · How Much FHA Cash-Out Costs With a Lower Credit Score vs Conventional
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Important disclosures. Lendmire (NMLS# 2371349) is a licensed mortgage brokerage. Lendmire is not a direct lender, depository institution, or financial advisor. All loan inquiries are subject to lender underwriting; this article does not constitute a commitment to lend. Rates, terms, and program guidelines are subject to change without notice and vary by borrower profile, property type, and state. Information in this article is general in nature and is not financial, legal, or tax advice. Equal Housing Opportunity. NMLS Consumer Access: nmlsconsumeraccess.org.