The Quick Read: On a Texas homestead, the state’s borrowing rules often decide the outcome before FHA pricing comes into play. A fair comparison puts the upfront costs, the monthly insurance layer and the time you will hold the loan side by side. Whether an FHA-insured cash-out fits your specific homestead is something to settle with a broker or lender before you spend on an appraisal.
Key Takeaways
- Texas treats a cash-out against a homestead as its own category, with limits written into the state constitution.
- FHA cash-out reaches 80% of the home’s value on a home you have owned and lived in for 12 months before the case number, subject to lender guidelines.
- FHA mortgage insurance is the largest line in the comparison: an upfront premium of 1.75% plus an annual premium.
- Compare Loan Estimates, not advertised rates. Look at cash to close, the monthly insurance line, and cost over the years you expect to keep the loan.
- A more affordable loan on day one is not always a more affordable loan after ten years.
Texas FHA cash-out estimate
Seeded with an example value, a balance to match, and a round cash request; change any field.
Editable benchmark: 7.40% as of October 15, 2026 · Freddie Mac 30-year average via FRED®. A conventional market reference, not an FHA cash-out refinance quote.
Illustrative starting assumptions: a $285,000 home value, a $157,000 current balance, the FHA cap on a principal residence with the upfront premium financed, a thirty-year term at the current Freddie Mac benchmark, and property taxes and insurance estimated at typical rates for Texas. Every field is editable.
An illustration, not a Loan Estimate, an approval, a quote, or a commitment to lend. The rate shown is the weekly Freddie Mac thirty-year conventional benchmark, used as a market reference; an FHA cash-out is priced by the lender at lock, and this is not an FHA cash-out refinance quote. HUD’s cap limits the base loan; the upfront premium is financed inside the Texas homestead cap; the monthly premium for the first year follows the snapshot’s schedule. Cash available means the base loan the cap permits less the balances retired, before closing costs, which this calculator leaves out. The line figure applies the line program’s combined loan-to-value ceiling to the same value and balance. Taxes and insurance are estimates you can edit. Licensed in sixteen states for consumer mortgages. On a Texas homestead the state constitution caps the whole loan, financed premium included, at the FHA figure and adds a waiting period, a prescribed closing location, and a fee cap.
What Does “Total Cost” Mean for a Cash-Out?
Total cost is everything you pay to borrow against your home, not just the payment. That includes closing costs, financed insurance premiums, monthly insurance and the interest on a larger balance. It also includes what you give up by replacing the loan you have.
This article is about borrowing cost. It is not about homestead property-tax exemptions or what it costs to build a house, which are different topics.
An FHA cash-out replaces your current mortgage with a new FHA-insured loan that is larger than what you owe. The difference comes to you as cash. Across the wholesale programs Lendmire places files with, the FHA cash-out reaches 80% loan-to-value on a home you have owned and occupied as your primary residence for 12 months before the case number is assigned. You can read how the program works in Lendmire’s FHA cash-out refinance program overview.
That 80% is a ceiling, not a target. The appraisal sets the home’s value, and the value sets the maximum loan. Every dollar you borrow above what you owe is a dollar you pay interest on, and it also raises the premium base.
How the Loan Is Underwritten, Step by Step
A lender reviews an FHA cash-out in a set order. Each step can shrink the loan or stop the file.
1. Occupancy and ownership. The home must be your principal residence. It must have been owned and occupied for 12 months before the case number.
2. Payment history. Lenders review how you paid your current mortgage. Recent late payments can limit options, and some lenders set tighter limits than the program minimum.
3. Credit. The wholesale programs Lendmire works with start at a decision score of 580. Some lenders set a higher floor.
4. Appraisal. An appraiser values the home. That value, multiplied by the loan-to-value limit, gives the largest loan the program allows.
5. Ratios. The base pair is 31/43, meaning housing cost over income and total debt over income. With documented compensating factors, the pair can reach 40/50 at the top tier. The automated finding governs most files.
6. Loan limits. County loan limits apply. They change every year, so ask for the current limit for your county.
Texas adds a layer on top of this list. The next section covers it.
How Do Texas Homestead Rules Change the Math?
Texas homestead cash-out loans fall under Section 50(a)(6) of Article XVI of the Texas Constitution. In practice, the state sets limits that apply no matter which loan program you choose. The state publishes a borrower notice, and the Texas Office of Consumer Credit Commissioner hosts the same notice. It explains several of these rules in plain language.
| Texas rule | Plain meaning | Effect on total cost |
|---|---|---|
| Cap on total debt | All debt secured by the home counts, not just the new loan | Can shrink cash out |
| Fee limit | Certain lender charges are capped | Changes what appears in origination costs |
| Waiting period | A required gap between application and closing | Affects timing and closing plans |
| Rescission window | You may cancel after signing | Funds arrive after the window ends |
| One-year limit | A new loan of this type is restricted for a period | Limits repeat cash-outs |
| One at a time | Only one such loan can secure the home | A second lien may have to be paid off |
Most Texas cash-out guidance describes the first two rows with specific percentages. This article leaves those out on purpose. Confirm the exact caps with your lender against the current Texas rules.
There is one more point to settle early. Whether an FHA-insured cash-out can be made under Section 50(a)(6) depends on how the lender structures the loan and on program mechanics, so do not assume it is available. Ask the broker or lender, in writing, whether an FHA cash-out is available for your Texas homestead and which structure it would use. Do that before you order an appraisal or pay any fee.
What Does FHA Mortgage Insurance Add?
FHA mortgage insurance is the biggest cost layer specific to FHA. HUD explains that most FHA programs charge an upfront premium at closing and an annual premium collected in monthly installments.
Here is how the pieces fit, using the program figures the wholesale network follows:
- Upfront premium: 1.75% of the base loan. Most borrowers finance it, which raises the balance and the interest paid on that balance.
- Annual premium: between 0.15% and 0.75% of the balance, depending on term, loan amount and LTV. It shows up in the monthly payment as its own line.
- How long it lasts: On a thirty-year loan above 90% LTV, the annual premium lasts for the term. At or below 90%, it ends after eleven years. An FHA cash-out tops out at 80%, so a thirty-year cash-out generally falls in the second group, subject to lender guidelines.
The duration matters for how long you plan to stay. A borrower who sells or refinances in five years pays the premium for those five years. A borrower who keeps the loan for twenty years pays it for the eleven-year stretch, not the whole twenty, on the thirty-year structure just described. HUD sets the full schedule in Mortgagee Letter 2023-05, so ask for the premium table that applies to your term and balance.
Existing FHA borrowers have one more variable. A partial credit of the upfront premium may apply when one FHA loan replaces another, calculated by HUD. Ask the lender whether it applies to you.
How Do You Compare the Offers Side by Side?
Put each option on the same footing. A comparison fails when one offer assumes a different loan amount, term or closing date than the other.
Step 1: Request comparable Loan Estimates. Ask for one for each structure, such as FHA cash-out, conventional cash-out and no cash-out. Use the same loan purpose and the same assumptions. The CFPB’s guide to the Loan Estimate and Closing Disclosure shows how these forms are built to compare offers.
Step 2: Line up the same sections. Compare Loan Costs, Other Costs, Lender Credits and Cash to Close. Then read the Projected Payments table. It lists principal and interest, mortgage insurance and escrow separately. That split lets you isolate the FHA premium from any private mortgage insurance on the other loan.
Step 3: Isolate the insurance. Put the FHA upfront premium and the monthly premium next to the alternative’s insurance, if it has any. Each hits a different line, so do not blend them.
Step 4: Add the Texas timing and fee limits. The waiting period and rescission window apply to every Section 50(a)(6) loan. Fee limits shape what the origination section can hold. If two offers show very different origination charges, ask what each one counts.
Step 5: Look past the closing table. The CFPB’s blank Closing Disclosure defines several measures of total cost over the loan term. The CFPB’s blank Loan Estimate also notes that APR measures costs over the term and is not the interest rate. A low rate does not by itself mean a low cost.
Step 6: Match the cost to your holding period. Ask three questions. How long will you keep this loan? Will you sell, or refinance again? Do you need cash, or a lower payment? A borrower who expects to move in a few years weighs upfront cost heavily. A borrower who plans to stay weighs the monthly insurance line and total interest more.
Step 7: Read the final numbers. Lenders deliver the Closing Disclosure ahead of closing, with a required review window. The CFPB explains the form and why you should compare it with your Loan Estimate line by line. Do this before you sign.
For a broader look at other loan products, Lendmire’s piece How to Compare an FHA Cash-Out With Alternatives on Total Cost runs the same method against other structures.
Where the General Rule Breaks
The steps above work for most files. A few situations change them.
Cash-out versus no cash-out. A cash-out refinance has proceeds that are not limited to specific purposes. A no-cash-out refinance only pays off existing debt and the cost of the transaction. In Texas, market sources say a loan that falls under Section 50(a)(6) stays in that category on later refinances. That claim comes from secondary sources, so ask your lender to confirm how your existing loan is classified. If you can meet your goal without taking cash out, the cost picture changes. The FHA rate-and-term refinance with an appraisal reaches 97.75% on a principal residence occupied for the previous twelve months.
An existing FHA loan. The FHA Streamline refinances an existing FHA loan with no appraisal, a limited credit review and a net tangible benefit. It does not produce cash out. If lowering the payment is your goal, it may be the lower-cost route.
Second homes and rentals. FHA cash-out is for a principal residence, and Texas homestead rules apply to homesteads. Occupancy decides the leverage, so a second home or rental follows a different path.
A recent cash-out. Texas limits repeat loans of this type within a year. FHA looks separately at ownership and occupancy history. Either can delay the plan.
An existing second lien or HELOC. Because all debt secured by the home counts toward the Texas cap, a second lien eats into the cash you can take. Ask whether it must be paid off in the same closing.
Credit events. HUD’s waiting periods are two years from a Chapter 7 discharge and three years from a foreclosure. Those are HUD rules, not a promise of approval.
Other programs. Other loan programs face their own limits on Texas homesteads. A borrower with a VA loan, for instance, should ask its own questions rather than assume FHA answers carry over.
What the Decision Looks Like in Practice
Picture a Texas homeowner with a home worth much more than the balance. They want cash for a roof and some debt payoff. They also have a modest second lien from a past project. No dollar figures are needed to see the shape of the decision.
First, the cap. The second lien counts against total debt, so the cash available is smaller than the home’s equity suggests. Second, the program. FHA reaches 80% of value, but a conventional cash-out may reach a different limit and carry its own insurance. Third, the insurance. The FHA upfront premium is financed and the annual premium runs in the payment. The conventional option may charge monthly insurance depending on leverage. Fourth, the time. The homeowner expects to stay for many years, so the length of the insurance layer matters more than a small difference in closing costs.
A decision table helps:
| If your priority is… | Weigh most heavily |
|---|---|
| Lowest cash to close | Origination costs and the financed premium |
| Lowest monthly payment | The insurance line in Projected Payments |
| Lowest cost over a long hold | Total Interest Percentage and insurance duration |
| Keeping a low current loan | Whether any cash-out beats a second lien |
Pause before replacing a loan you like. Cash-out resets the term and the balance, and the new loan inherits the Texas category. If the cash need is small and temporary, a different tool may fit better. That is a real tradeoff, not a footnote.
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 on the home you live in. Lendmire is a mortgage broker, so the lender reviews the file and sets the final terms. Nothing here is a commitment to lend.
Key Terms Defined
Homestead: The home you live in as your principal residence, which Texas protects with special borrowing limits.
Section 50(a)(6): The part of the Texas Constitution that governs cash-out loans secured by a homestead.
UFMIP: The upfront mortgage insurance premium, 1.75% of the base loan on FHA, usually financed into the balance.
Annual MIP: The yearly FHA premium, paid monthly, that varies by term, loan amount and LTV.
Loan-to-value (LTV): The loan balance divided by the home’s appraised value.
Rescission: Your right to cancel the loan after signing, within a set window.
Loan Estimate: The form that shows your expected costs, so you can compare offers.
Closing Disclosure: The final form that shows your actual costs, delivered ahead of closing.
Frequently Asked Questions
Can I get an FHA cash-out on a Texas homestead?
It depends on how the lender structures the loan under Texas rules. Ask a broker or lender to confirm in writing whether it is available for your home. Do this before you order an appraisal.
How much cash can I take out?
Your cash is limited by the lower of two ceilings: the FHA limit and the Texas cap on total debt against the home. The FHA ceiling is 80% of appraised value on a home owned and occupied for 12 months. Texas counts all debt secured by the home, so a second lien reduces what is left. Each lender applies its own overlays.
Does FHA mortgage insurance ever go away?
Yes, in some cases. On a thirty-year loan at or below 90% LTV, the annual premium ends after eleven years. Above 90%, it lasts for the term. The upfront premium is paid at closing, usually by financing it. HUD sets the schedule, so ask for the one that applies to your loan.
Why compare the Closing Disclosure and not just the rate?
The rate says little about total cost. The Closing Disclosure shows the total cost of the loan over its full term, including insurance and financed costs. Comparing it across offers gives a fuller picture than any single rate.
Does a Texas cash-out affect a future refinance?
Yes, it can. Texas limits a new loan of this type for a period, and market sources say the category carries forward to later refinances. Those points are secondary-sourced, so ask your lender how your loan is classified. If you may refinance again, that classification is worth knowing before you borrow.
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. HUD FHA Answers: Mortgage Insurance Premium structure
3. CFPB’s guide to the Loan Estimate and Closing Disclosure
4. CFPB blank Closing Disclosure
6. CFPB: What is a Closing Disclosure?
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 on Texas Homestead Acreage · Can a Texas Acreage Homestead Be Refinanced After an FHA Cash-Out? · Can a Texas Homestead Move From FHA to Conventional Cash-Out Refinance?
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.