The Quick Read: It depends on the home, the income and the paperwork, not on your marital status. A pending divorce does not bar the loan. FHA tests how long someone has owned and lived in the home, whether the remaining borrower can carry the new loan alone, and how any equity buyout is documented. “First-time borrower” is not a test at all.
What Does “First-Time Borrower” Mean Here?
FHA has no first-time-borrower test for a cash-out refinance. The program asks about ownership and occupancy history instead.
So read the phrase the way most people mean it. You have never refinanced before, or you have never carried a mortgage by yourself. Neither one blocks the loan. What matters is the 12-month history on the home and your solo numbers.
If you are new to FHA, that is fine too. Nothing in the cash-out rules rewards or penalizes prior FHA experience.
What Does a Lender Mean by “Pending”?
“Pending” means a case is open, but no final decree exists yet. A lender sorts what you have into three buckets: temporary orders from the court, a signed settlement or separation agreement, and a final decree.
Each bucket gives the underwriter something different to work with. Temporary orders show who pays what for now. A signed settlement shows who keeps the home and what the other spouse is owed. A final decree settles both.
The more specific the paperwork, the easier the file. A vague agreement is a common reason a pending-divorce file stalls.
Lendmire arranges the FHA cash-out refinance program through wholesale lenders. The program reaches 80% of the home’s value, and the home must have been owned and occupied for 12 months before the case number is assigned. Those two facts drive most pending-divorce answers. Every figure here is subject to lender guidelines and full file review, and none of it is a commitment to lend.
The Four Gates, in Order
Four gates stand between you and a closed loan: the occupancy test, the court and your spouse, your solo income and debts, and the appraisal. They come in roughly that order. Clear the first before spending energy on the last.
Gate 1: Ownership and occupancy
The standard FHA cash-out refinance is limited to a principal residence. HUD Handbook 4000.1 requires that at least one borrower owned and lived in the home for the 12 months before the case number.
Read that again: at least one borrower. Only one spouse needs the full history. If you stayed in the home while your spouse moved out, you can still meet the test.
Here is the catch. If nobody meets the 12 months, a standard cash-out is off the table. Lendmire knows of no divorce exception to that FHA test, so do not count on one. Conventional loans work differently. Fannie Mae and Freddie Mac both waive their title-seasoning requirement for a home legally awarded in a divorce. That waiver does not carry over to FHA.
Gate 2: The court and your spouse
A refinance pays off the joint loan, and a new deed takes the departing spouse off title. Both steps need cooperation. If your spouse is on title, they usually have to sign.
Some divorce attorneys prefer that you wait until the decree is final, because a refinance can change how the equity is divided. That is a judgment call for you and your attorney. Ask before you apply, not after.
Community property states add another layer. Property and title rules vary by state, so your attorney should confirm how yours treats the home.
Gate 3: Your income and debts, alone
Whoever stays on the new loan must show enough income, credit and assets to carry it without help. FHA’s base ratios are 31/43 (housing cost and total debt as a percentage of income) with no compensating factors. Documented compensating factors can stretch that up to 40/50 at the top tier, and the automated finding governs most files.
Court-ordered obligations count against you. Alimony and child support you pay are added to your monthly debts. Support you receive can count as income only if it is documented and likely to continue for a period of years. Temporary support that has not been ordered yet is often left out.
Expect the lender to ask for the signed decree, separation agreement or other legal order. Recent pay stubs help show whether wages are being garnished.
Gate 4: The appraisal and the cap
The new first mortgage, plus any other liens that stay, cannot exceed 80% of the appraised value. Financed closing costs count toward that cap too. That ceiling is the number that decides how much is left for the buyout.
Pending, Final or Not Yet Filed: The Timing Table
Timing changes what a lender can work with. This table compares the three stages.
| Stage | Upside | Downside |
|---|---|---|
| Before filing | Simple paperwork, one clear title | No decree, no buyout terms |
| Case pending | Signed settlement can support the file | Temporary orders may not be enough |
| After decree | Complete documents, clear obligations | Decree may set a refinance deadline |
Many decrees set a deadline to refinance or sell. Coordinate that date with your attorney before you pick a stage.
A Worked Example (Hypothetical, in Percentages)
These numbers are illustrative only. Suppose the home appraises at 100% of its value, and the existing loan balance is 55% of that value. Equity is 45%. Say the settlement gives your spouse half of it: 22.5%.
The new loan would need to cover the 55% payoff plus the 22.5% buyout, or 77.5% of value. The cap is 80%. That leaves 2.5% of value for financed costs and anything else that counts.
Thin room. Add a lien that stays, a higher payoff or a lower appraisal, and the buyout shrinks. This is why the spouse being bought out sometimes receives less than expected.
Is a Buyout the Same as Cash-Out?
Not always. An FHA cash-out has no limit on how you use the money. A no-cash-out refinance limits proceeds to paying off the existing loan and certain costs.
When a new loan pays a title holder for their share of the equity, FHA treats the documented equity as property-related debt. The lender can include it in the new loan calculation if a decree or settlement agreement spells out the equity awarded. HUD’s older Handbook 4155.1, Chapter 3, Section B set out this buyout rule, and the current HUD Handbook 4000.1 carries it forward in its refinance sections.
The classification matters because the leverage cap differs. The FHA rate-and-term refinance reaches 97.75% on a principal residence occupied for the previous twelve months. The cash-out stops at 80%. Whether your buyout lands in one box or the other is something to confirm with the lender before you plan the numbers. (Treat any single online answer, including this one, as a starting point.)
What the Lender Looks For, by Stage
Gather these early.
- Ownership proof: the deed, the current mortgage statement and the occupancy history.
- Legal documents: temporary orders, a signed settlement or the final decree, whichever exists, with the equity award spelled out.
- Income proof: pay stubs, tax documents and any documented support you receive.
- Debt list: every court-ordered payment you owe, plus your usual credit obligations.
- Credit: FHA wholesale programs Lendmire places loans with start at a 580 decision score. HUD’s lower tier is not reached by those lenders.
Common Myths That Cost People Time
“The decree takes my ex off the mortgage.” It does not. The CFPB says you generally stay responsible for a joint debt unless the creditor releases you or the loan is refinanced.
“A quitclaim deed removes my name from the loan.” It changes title only. The loan stays as it was.
“A pending divorce disqualifies me.” Lenders cannot deny credit because of marital status, the CFPB says. They can still require documents and count your debts.
“FHA cash-out goes to 85%.” Old pages say that. The current cap is 80%.
“Alimony I receive always counts.” It needs documentation and a track record of continuing.
Your Options Side by Side
A cash-out is one path. Compare it with the others before committing.
| Option | Cash for buyout? | Best when |
|---|---|---|
| FHA cash-out | Yes, up to 80% LTV | You meet the 12-month test |
| FHA streamline | No | You only need a name removed |
| Assumption | No | Existing loan terms are worth keeping |
| Home equity loan | Yes, as a second loan | Current first loan stays |
| Sell the home | Yes, from sale proceeds | One income cannot carry it |
The streamline applies only to an existing FHA loan. It skips the appraisal and allows no cash back, though it needs a net tangible benefit.
Costs, Risks and When It Won’t Work
A cash-out raises your balance, and your monthly budget now rests on one income. Mortgage insurance applies to the whole new loan, not just the cash. FHA charges an upfront premium of 1.75% of the base loan, which can be financed. The annual premium runs between 0.15% and 0.75% of the balance, depending on term, loan amount and LTV. On a thirty-year loan at or below 90% LTV, it ends after eleven years. Above 90% LTV, it lasts the term.
The loan can fail in a few predictable places:
- No borrower has the 12-month history.
- The agreement lacks the language the lender needs.
- Your solo ratios do not fit once court-ordered payments are counted.
- The appraisal comes in low and the 80% cap squeezes out the buyout.
- Your spouse will not sign the deed.
If the departing spouse stays on the loan, they remain liable, and a missed payment hurts both credit reports. Tax treatment can depend on your situation; borrowers should speak with a qualified tax professional before relying on any deduction or credit.
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.
Key Terms Defined
Cash-out refinance: A new mortgage larger than your current one, with the difference paid to you in cash.
LTV (loan-to-value): The loan balance divided by the home’s appraised value, shown as a percentage.
Case number: The FHA identifier assigned to your file; the 12-month occupancy count runs back from it.
Property-related indebtedness: Documented equity owed to a title holder that a lender may fold into the new loan.
Net tangible benefit: A measurable gain to the borrower that the FHA streamline requires.
Compensating factors: Strengths, such as reserves or strong credit, that let a file carry higher debt ratios.
Frequently Asked Questions
Can I refinance before the divorce is final?
Sometimes. Lenders want a signed settlement, separation agreement or other legal order that spells out who keeps the home and what is owed. A final decree makes the file cleaner. Check with your attorney first, because a refinance can affect how equity is divided.
Does my spouse have to be on the new loan?
No. Only the people who will repay it need to qualify, and a spouse who is leaving typically comes off. The remaining borrower must show enough income, credit and assets alone. A departing spouse who is on title usually has to sign the deed.
Will a quitclaim deed take my ex off the mortgage?
No. It changes who owns the home, not who owes the loan. The CFPB says release comes from the creditor or from a refinance that pays off the joint loan.
What if my spouse refuses to cooperate?
That closes some paths. A refinance needs the title holder’s signature, so a refusal usually calls for your attorney to seek a court order. Without one, you may be limited to options that do not change title, like leaving the loan as is.
Can I count alimony I receive as income?
Only if it is documented. The lender wants the order or agreement, proof of receipt and evidence it will continue for a period of years. Support that is temporary or not yet ordered is often excluded.
For your own numbers, request a scenario review with Lendmire.
About Lendmire
Lendmire — NMLS# 2371349 — is a mortgage broker that arranges FHA, VA, conventional and jumbo home purchase and refinance financing in 16 states through wholesale lenders. Every option is subject to the lender’s guidelines and full underwriting. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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References
1. HUD Handbook 4000.1 Update 18
2. Fannie Mae Selling Guide B2-1.3-03
4. HUD Handbook 4155.1, Chapter 3, Section B
6. CFPB: Marital status and mortgage applications
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 Get an FHA Cash-Out in Texas With a Locked-in First Mortgage · How to Get Your First FHA Cash-Out After a Quitclaim Deed · How to Time an FHA Cash-Out Within a Year of Buying
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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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.