The Quick Read: A conventional cash-out in a state like Texas works, but state law sets the rules before any lender does. You can borrow up to 80% of your home’s appraised value, counting every lien on the house. The cash you actually receive is that room minus your payoff and your costs. So the appraisal and the payoff decide the outcome.
Key Takeaways
- State law, not the lender’s label, decides whether a Texas refinance counts as a cash-out.
- The ceiling is 80% of appraised value across all liens. You always keep at least 20% equity.
- The home must be your principal residence. One-unit homes only.
- A mandatory waiting period and a federal right to cancel both come before funds are released.
- Cash in hand equals the 80% ceiling, minus what you owe, minus costs. Costs shrink the check.
What Is a Conventional Cash-Out Refinance?
A cash-out refinance replaces your current mortgage with a new, larger one. You keep the difference as cash. “Conventional” means the loan follows Fannie Mae and Freddie Mac rules rather than FHA or VA rules.
Across the wholesale programs Lendmire places files with, the national ceiling on a one-unit principal residence is 80% loan-to-value. LTV is the loan balance divided by the home’s appraised value. On a two- to four-unit principal residence, a second home or an investment property, the ceiling drops to 75%. Lendmire’s cash-out refinance programs follow that same structure, subject to lender guidelines and full file review.
Two seasoning rules apply nationally. Seasoning is the minimum age of your loan or your time on title. The mortgage you are paying off must be at least 12 months old, counted from note date to note date. At least one borrower must also have been on title for 6 months. There are narrow exceptions for delayed financing after a cash purchase, for inherited homes and for homes awarded in a legal proceeding.
Credit and ratios are the next gate. The wholesale conventional programs start at a 620 decision score. The automated underwriting finding governs most files, and the total debt-to-income ceiling is 50%. Some lenders set stricter floors than that, so the lender you choose matters.
Why Does a High-Cost Closing State Like Texas Change the Loan?
In Texas, state law decides the loan type. If a refinance of a homestead puts extra cash in your pocket beyond reasonable refinance costs, Texas treats it as a home equity loan. The lender’s label doesn’t change that. Lenders and agencies call it a Texas “Section 50(a)(6)” loan after the part of state law that governs it.
That is why the title’s phrase, “high-cost closing state,” needs a careful reading. No public source publishes a Texas closing-cost average, so any single number you see should be treated with suspicion. What you can say with confidence is that Texas adds structure to the transaction. It caps what the lender may charge. Some third-party costs, like the appraisal and title work, sit outside that cap. It also requires a waiting period, an in-person closing and signatures from every owner.
None of this makes the loan impossible. It makes the loan slower to arrange and stricter to document. Some lenders choose not to offer it at all. Lenders carry real compliance exposure on these loans, so whether the lender offers it is a genuine variable.
The 80% ceiling in Texas matches the national agency cap on a one-unit principal residence. Texas is not more generous. It is simply fixed, with no higher-leverage workaround.
How Is a Texas Conventional Cash-Out Underwritten, Step by Step?
The process runs in a set order. Skipping or reordering steps is how loans fail. Here is the sequence.
1. Classify the loan. The lender first decides whether Texas law makes this refinance a cash-out. Freddie Mac’s guide says the lender must determine whether a refinance of a Texas homestead has to be originated under Section 50(a)(6), regardless of the usual cash-out definitions.
2. Application and notice. You apply and receive the required written notice. The Texas waiting period before closing starts only after both happen, according to the Texas Office of Consumer Credit Commissioner.
3. Underwriting. The lender runs automated underwriting and then checks Texas rules separately. Fannie Mae’s guide notes the automated system does not contain the Texas eligibility rules, so an “Eligible” finding doesn’t prove the loan complies. If you are refinancing an existing Texas equity loan, you requalify on income, credit and assets, even with the same servicer.
4. Appraisal. You need a new full appraisal with an interior and exterior inspection. An appraisal waiver doesn’t apply. You also sign a written acknowledgment of fair market value, and the appraisal is attached to it. For applications on or after the date set in Fannie Mae’s announcement SEL-2026-02, lenders may use a desk or field review to fix problems in these appraisals. The review must be obtained before the note date and attached to the acknowledgment.
5. Leverage check. Total debt after closing must stay within 80% of the appraised value. Your maximum new loan is 80% of value minus any other liens.
6. Title and documents. Title insurance uses Texas-specific equity-loan endorsements. These loans generally can’t be delivered as eMortgages, so expect paper at the table.
7. Closing. You sign at the permanent office of a lender, an attorney or a title company. Closing at your kitchen table doesn’t work. Every owner and every owner’s spouse signs.
8. Right to cancel. Federal rules give you a short window to rescind a loan secured by your principal dwelling. Under CFPB Regulation Z, the window runs several business days from the last of closing, the disclosures and the cancellation notice. Cash is generally released after it ends.
9. First payment. Your first payment must come due soon after closing, within the limit the Fannie Mae guide sets.
The Texas waiting period and the federal cancellation window are two different rights. One comes from the state, the other from federal law. They are not the same clock, and the waiting period comes first. Plan your cash needs around both.
Rules at a Glance
| Rule | What it means | Effect on your cash |
|---|---|---|
| Equity ceiling | Total liens capped at 80% of value | You keep 20%+ equity |
| Occupancy | One-unit principal residence | No rentals or second homes |
| Fee cap | Limits what the lender charges | Some third-party costs sit outside it |
| Waiting period | Gap between notice and closing | Funds arrive later |
| Closing location | Lender, attorney or title office | No signing at home |
| Signers | All owners and spouses | Everyone attends |
| One equity loan | Only one at a time | Limits follow-on borrowing |
| Seasoning | 12-month loan, 6-month title | Recent buyers may wait |
How Much Cash Will You Actually Walk Away With?
Start with the ceiling and subtract. The formula is simple: 80% of appraised value, minus your existing mortgage payoff, minus any other liens, minus your costs.
Run the numbers on percentages. Say your appraisal comes in at 100% of value and you owe 50% of that on your current mortgage. The ceiling lets total debt reach 80%, so your gross room is 30% of the home’s value. Now subtract closing costs, which vary by lender and by property, so they are described here only in general terms. What is left is your check.
Now change one input. Suppose the appraisal comes in lower than you hoped. The ceiling drops with it, and the cash drops by 80% of the shortfall. A weak appraisal hurts more than most borrowers expect.
Next, suppose you owe only 30% of value. Your gross room is 50%. Costs take a smaller bite relative to the cash, so the cost-to-benefit picture improves. The lower your existing balance, the more clearly a cash-out pays for itself.
Costs break into three groups. Lender charges are limited by the Texas cap. Third-party charges, like the appraisal and title work, sit outside that cap. Pricing adjustments are built into your loan terms. Cash-out refinances carry loan-level price adjustments tied to your credit score and LTV. Higher scores and lower LTV generally cost less. Lendmire’s brokers see the largest difference from credit score, because the score and the LTV together set the pricing tier.
Can you roll costs into the loan? Financed costs count toward the ceiling. Every dollar you finance reduces the cash you can take.
What Structures and Variations Exist?
Fixed rate versus adjustable. Both agencies allow fixed-rate loans on Texas homesteads. They also allow certain listed adjustable-rate plans. Plans not on the agencies’ lists are out. Temporary buydowns are not eligible on these loans.
Rate-and-term as the exempt option. A refinance that only pays off your existing first mortgage, closing costs and a purchase-money second lien, with only incidental cash back, is a different transaction. On a one-unit principal residence, the wholesale programs allow up to 95% LTV on that type of refinance, with mortgage insurance above 80%. In Texas, whether a given refinance escapes the equity-loan rules depends on the facts, and the lender must make that call. These specifics are subject to lender guidelines and a full review of property, leverage, and credit.
Use of cash. Fannie Mae places no restriction on what you spend the proceeds on, with one exception. You can’t use the cash to buy or improve the homestead if a different Texas loan provision could cover that purpose. Renovation loans may therefore take another route.
Trusts and property types. A revocable living trust can be a borrower if it qualifies under both Texas law and Fannie Mae’s criteria. Eligible property types include detached homes, attached homes, PUD units and condos. The homestead also can’t exceed the state’s acreage limit. A borrower who owns adjacent land needs evidence, such as a survey, that the homestead is a separate parcel.
Where Does the General Rule Break?
These are the named edge cases where the national playbook stops working.
The higher-leverage lane. Outside Texas, a wholesale lane reaches 89.99% LTV with no mortgage insurance. It requires a 680 score, a 50% ratio, a thirty-year fixed rate, a primary residence and a conforming balance. That lane isn’t written on a Texas homestead. The state ceiling stops it at 80%. Terms depend on the lender’s guidelines, the property type, the leverage, and a full review of the credit profile.
Mortgage insurance. Insurance is required above 80% LTV. Because a Texas cash-out can’t go past 80%, it normally doesn’t apply to this loan. On other loans, you may request cancellation at 80% of original value, and the servicer must end it automatically at 78%.
Refinancing an existing Texas equity loan. A Texas equity loan generally can’t be refinanced into another one within a year. A route to a non-equity loan exists, with conditions: a one-year limit, no extra cash beyond costs, an 80% leverage limit and a required disclosure. Lenders must make the call, and some will not.
One lien at a time. Only one Texas equity loan may sit on the home at a time. A HELOC added later is a separate question. Lendmire’s piece Can a High-Closing-Cost Texas Owner Hold a HELOC and Cash-Out Lien? covers how that interacts.
Special-purpose cash-out. Freddie Mac bars special-purpose cash-out refinances under this Texas rule.
Cures and violations. If a lender finds a violation, the loan becomes ineligible for sale to Fannie Mae unless a refinance cures it. That is the lender’s problem, but it is one reason many lenders step away from the product.
Lender overlays. A lender can be stricter than the agencies. Some set a higher credit floor. Some don’t offer Texas cash-out on a primary residence at all. Ask early.
Credit events. After a bankruptcy or foreclosure, you wait. The agencies’ waiting periods are four years from a chapter 7 discharge, seven from a foreclosure, and four from a short sale or deed-in-lieu. Documented extenuating circumstances can shorten them.
Is a Texas Cash-Out Worth It?
Compare the cash you gain with the total cost of getting it. A cash-out replaces your whole loan, not just the new money. Your old loan’s terms disappear, and the new terms apply to the entire balance. That can raise your monthly payment, so look at the full Loan Estimate before you decide.
If you hold a low-cost first mortgage, think hard. Replacing it to reach a modest amount of cash may cost more than it gains. A separate equity product on top of the first loan can leave your existing mortgage alone. The Texas fee cap and the one-lien rule shape that choice, so see Lendmire’s article on the Texas HELOC fee cap for how those limits work.
Then consider future flexibility. In Texas, a loan taken as a cash-out stays a cash-out loan for later refinances, with only narrow exits. That is the “once an equity loan, always an equity loan” idea. Taking the cash today narrows your options tomorrow.
Tax treatment can depend on your situation; borrowers should speak with a qualified tax professional before relying on any deduction or credit.
Does This Apply Beyond Texas?
Yes, as a framework. In any state with strong homestead or closing rules, the pattern repeats. State law may add a fee cap, a waiting period or special closing steps on top of the national rules. Texas is one example, not the national norm. The national figures here, such as the 80% one-unit ceiling and the seasoning rules, hold across the wholesale programs. The state rules do not. Ask your lender which state rules apply to your home before you plan around a number.
Key Terms Defined
Cash-out refinance: a new mortgage that pays off your old one and gives you the leftover equity as cash.
LTV (loan-to-value): your loan balance divided by your home’s appraised value.
Seasoning: the minimum age of your current loan or your time on title before you can refinance.
Appraisal: a professional’s written opinion of your home’s market value.
Right of rescission: your federal right to cancel a loan secured by your home within a short window after closing.
Lien: a legal claim against your home that secures a debt.
Your 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. Programs are subject to lender guidelines and full file review, and nothing here is a commitment to lend.
Frequently Asked Questions
Can I take more than 80% in Texas?
No. The state ceiling is 80% of appraised value across every lien on the home. A higher-leverage lane exists in other states, but it isn’t written on a Texas homestead.
Does automated approval mean my loan is eligible?
Not by itself. The automated system doesn’t carry the Texas rules, so a lender must check them separately. An “Eligible” finding can still fail the state’s requirements.
Is the Texas waiting period the same as the three-day right to cancel?
No. The Texas waiting period comes from state law and runs before closing. The right to cancel comes from federal law and runs after closing. Both come before you receive funds.
Can I do this on a rental or second home?
No. The Texas equity-loan rules cover a one-unit principal-residence homestead. Occupancy decides the leverage everywhere else too, and the cash-out ceiling drops to 75% on other property types.
How long must I own the home first?
At least one borrower must have been on title for 6 months, and the mortgage being paid off must be at least 12 months old. Exceptions exist for delayed financing, inherited homes and legal awards.
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.
For the program’s current guidelines, see conventional loan programs.
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References
1. Freddie Mac Seller/Servicer Guide §4301.7
2. Texas Office of Consumer Credit Commissioner, Regulated Lender Bulletins
3. Fannie Mae Selling Guide B5-4.1-01, Texas Section 50(a)(6) Loans
4. Fannie Mae Announcement SEL-2026-02
5. CFPB Regulation Z §1026.23, Right of Rescission
This article is part of Lendmire’s Conventional Loans series — every loan program’s qualification details, guidelines, and scenarios live on the loan options page.
Related reading: How to Get a Conventional Cash-Out During and After a Divorce · Can You Challenge a Low Appraisal on a Conventional Cash-Out? · Can a Homeowner Take Cash Out With a Conventional Refinance?
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
- Mortgage Loan Originator · NMLS# 1129696 · Verify on NMLS Consumer Access
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- Lendmire LLC · Firm NMLS# 2371349 · Verify firm licensure
Disclosure information. Lendmire is a state-licensed mortgage brokerage under NMLS# 2371349. Lendmire is not a depository institution, direct lender, or financial advisor — all loans referenced are placed through wholesale lender partners and are subject to each lender's underwriting standards. This article is provided for general informational purposes and is not a commitment to lend, nor does it constitute financial, legal, or tax advice. Loan programs, terms, rates, and qualification standards change without notice and depend on borrower profile, property type, and the state in which the subject property is located. Equal Housing Opportunity provider. NMLS Consumer Access: nmlsconsumeraccess.org.