The Quick Read: It depends, and the building usually decides before the loan terms do. Both programs cap cash-out on a primary home at 80% of value, so FHA no longer lets you borrow more. What separates them is whether your building passes each program’s condo review, how mortgage insurance affects your monthly cost, and how much flexibility your credit and debt load need. Check the building first. Then compare cost and qualifying room.
Why the Building Comes First
Start with the building, not the loan. A condo loan is really two approvals: you and the project. A borrower can be perfect on paper and still stall because the association’s finances, insurance, or rental mix fail the review.
Here is the catch most borrowers miss. A building can pass one program and fail the other. FHA is often flexible on the borrower but strict on the project. Conventional rewards strong credit and equity, but its project rules have their own gates. Nobody can tell you which program fits until someone checks the building.
Across the files Lendmire arranges, condo deals that stall rarely stall on the borrower. They stall on association paperwork: a questionnaire sitting on a management company’s desk, or a project status that changed since the last time anyone looked. Ask early.
How Does FHA Review a Condo?
FHA insures a condo loan only if the unit sits in an FHA-approved project or qualifies under a one-unit exception called Single-Unit Approval. Per HUD’s FHA Connection help page, a project generally must be approved before HUD can process insurance on an individual unit. The lender checks for an approved project ID, which comes from a HUD review or a lender review.
If the building is not on the approved list, the lender can submit a loan-level questionnaire, Form HUD-9991, asking whether the single unit qualifies. The association or its management company fills in parts of it. The same page says the answers must come from fresh sources and that a streamline refinance of an existing FHA loan skips the questionnaire. A streamline is not cash-out, so that exemption does not help you get cash.
What does FHA look at in the building? HUD’s published condo rule summary covers these tests:
- A minimum share of units occupied by owners.
- A limit on how much of the project FHA insures.
- A limit on commercial or non-residential space.
- Insurance, financial condition, title, pending legal action, and physical condition.
HUD’s own release said only a small share of condo projects were FHA-approved at the time. That figure is old, so treat it as a reminder, not a statistic: plenty of buildings are not on the list. Single-Unit Approval has its own size and concentration limits, so it does not rescue every building.
How Does Conventional Review a Condo?
Conventional loans that get sold to Fannie Mae run the project through that agency’s condo review system. The lender picks a review type, or the loan fits a waiver of review. Per Fannie Mae’s Selling Guide, some transactions skip project review, such as detached condo units with no shared walls, ceilings, or floors. Even then, the project cannot carry an “Unavailable” status and insurance rules still apply.
The waiver for limited cash-out refinances applies only to loans Fannie Mae already owns. A full cash-out refinance does not qualify for it. Condo review rules on the conventional side have also been tightening, so the review type your lender used last year may not be the one used today. Ask which review applies to your building and your application.
FHA vs. Conventional Cash-Out on a Condo
Here is the side-by-side, with condo-specific rows. FHA figures reflect the wholesale programs Lendmire places loans with, subject to lender guidelines and full file review.
| Factor | FHA Cash-Out | Conventional Cash-Out |
|---|---|---|
| Maximum financing | 80% LTV | Same ceiling on a one-unit primary home |
| Building check | FHA-approved project or single-unit approval | Project review or waiver; not “Unavailable” |
| Ownership and occupancy | Owned and occupied 12 months before case number | Own seasoning rules; ask your lender |
| Mortgage insurance | Upfront 1.75% plus annual premium | Generally none at 80% LTV or below |
| Credit and ratios | Often more room; 31/43 base, up to 40/50 | Rewards strong credit and equity |
| Occupancy type | Principal residence only | Lower ceilings on second homes |
Two notes on the table. LTV, or loan-to-value, is the loan balance divided by the home’s appraised value. And the conventional mortgage insurance row is a general pattern, not a promise. Pricing adjustments on conventional loans can offset some of the insurance savings, so the cheaper option is not automatic.
What Does FHA Mortgage Insurance Actually Do to the Math?
FHA cash-out carries two kinds of mortgage insurance. The upfront premium is 1.75% of the base loan, and most borrowers finance it into the balance. The annual premium runs between 0.15% and 0.75% of the balance, depending on term, loan amount, and LTV. These are program mechanics, not prices.
Duration matters more than the percentage for most owners. On a thirty-year loan above 90% LTV, the annual premium lasts for the full term. At or below 90% LTV it ends after eleven years. A cash-out at 80% LTV sits below that line, so the annual premium on a thirty-year FHA loan ends after eleven years.
Think about it as a break-even question, with no dollars needed:
1. FHA charges you something extra up front (the financed 1.75%) and something extra every month for eleven years.
2. Conventional at 80% LTV or below generally skips both.
3. If you plan to keep the loan past the eleven-year mark, FHA’s extra cost shows up for a limited stretch, then stops.
4. If you will sell or refinance within a few years, you pay the upfront piece and some monthly insurance for a short window.
So the question is whether FHA’s flexibility is worth that cost to you. If your credit and debt load qualify you for conventional at a fair price, conventional usually costs less each month. If conventional would push your ratios past what a lender allows, or would price your credit poorly, FHA’s insurance is what you pay for room.
HOA Dues and Your Debt Ratios
Condo dues count toward your monthly obligations on both programs. A lender adds them to the housing payment when it checks your ratios. FHA’s base pair is 31/43, meaning housing costs at 31% of income and total debts at 43%. Documented compensating factors can reach 40/50 at the top tier, and the automated underwriting finding governs most files.
Dues change the math in a plain way. A condo with high dues leaves less room under the ratio caps than a house with the same loan balance. Since FHA tolerates higher ratios than most conventional files, a high-dues building can tilt the choice toward FHA, if the building passes. Ask for the current dues, and ask whether a special assessment is planned. Neither is something to guess at.
Which Condo Owner Are You?
Pick the profile closest to yours.
Strong credit, plenty of equity, building clears both reviews. Lean conventional. At 80% LTV or below you generally avoid mortgage insurance, and the ceiling is the same as FHA’s. Get a quote on both anyway.
Credit has dings, or your debt load is heavy. Lean FHA, if the building passes. The wholesale programs Lendmire places FHA loans with start at a 580 decision score, and the ratio ceiling is higher with compensating factors.
Building is on neither list. Neither program works until the building’s status changes or a different review route opens. Ask the association what changed.
Detached or small condo project. Conventional may skip project review entirely. FHA’s single-unit route has size limits, so small projects can face hurdles there.
You already hold an FHA loan on the condo. You have a stay-or-switch decision, and the insurance clock and double closing costs matter.
What FHA Cash-Out Requires of You
Cash-out under the FHA cash-out refinance program is for owner-occupied principal residences only. You must have owned the home and lived in it as your principal residence for 12 months before the case number is assigned. A non-occupant co-borrower’s income cannot be used to qualify on a cash-out, and the lender documents occupancy.
That 12-month rule trips up a few people:
- Inherited condos. If you rent it out after inheriting, the clock starts only when you live there.
- Second homes. Not eligible for FHA cash-out. Conventional cash-out on a second home carries a lower leverage ceiling, so occupancy decides your limit.
- A recently purchased unit. You cannot cash out until the 12 months are done.
The appraisal sets the value, and the 80% ceiling applies to the appraised, or adjusted, value, not your purchase price or a listing. Every lien that stays on the property counts against the limit, including a home equity line of credit. County loan limits apply to FHA loans, and they change every year, so ask your lender for the current figure in your county.
If Your Building Fails Review
You have a few paths. None are guaranteed, and each depends on lender guidelines and full file review.
1. Try the other program. A building that fails FHA’s project tests may pass conventional review, and the reverse can happen too.
2. Ask what failed. Sometimes it is a fixable item: stale paperwork, an insurance gap, a pending project recertification. Approvals can expire, so a once-approved project may now need single-unit approval.
3. Look at a different product. If the building is “Unavailable” for conventional and off the FHA list, a cash-out refinance on this unit may simply not be available right now.
4. Wait and recheck. Litigation settles, repairs get funded, and owner-occupancy ratios move.
Honestly, sometimes neither loan works, and the straight answer is better than a month of paperwork.
Is Cash-Out the Right Move at All?
Cash-out converts equity into new mortgage debt. The CFPB’s cash-out research found that paying off other bills or debts was among the most common reasons borrowers cash out. It also warns that moving non-mortgage debt into mortgage debt can put your home at risk of foreclosure, while defaulting on unsecured debt is unlikely to cost you the home.
Use the cash for something that holds or builds value, such as repairs, or a debt payoff you will not run back up. If you plan to sell soon, a cash-out loan with a financed upfront premium may cost more than it returns. Tax treatment can depend on your situation; borrowers should speak with a qualified tax professional before relying on any deduction or credit.
The Order That Saves Time and Frustration
1. Confirm the building. Ask the lender to check FHA project status and the conventional review path. Ask the association for current dues, insurance details, and any special assessment plans.
2. Run both options. Get a Loan Estimate for each program and compare the full terms side by side.
3. Order the appraisal. It sets the value and the 80% ceiling.
4. Gather the association’s paperwork. Both paths lean on the association’s cooperation, so start that early.
5. Review the Closing Disclosure. Check the loan balance, mortgage insurance, and cash to you before you sign.
Key Terms Defined
Cash-out refinance: a new, larger mortgage that pays off the old one and hands you the difference in cash.
LTV (loan-to-value): the loan balance divided by the home’s appraised value.
Single-Unit Approval: an FHA route that lets one unit qualify when its building is not on the approved project list.
Warrantable condo: a building that meets a lender’s or agency’s project standards for owner-occupancy, finances, insurance, and condition.
Mortgage insurance: coverage the borrower pays for that protects the lender if the loan defaults; on FHA it has an upfront and an annual part.
Adjusted value: the appraised figure FHA uses to apply its leverage cap.
Frequently Asked Questions
Can I get an FHA cash-out on a condo that is not on the FHA approved list?
Sometimes. If the building is not approved, the lender may submit a single-unit questionnaire, and the unit has to meet FHA’s size, concentration, owner-occupancy, and condition limits. Whether Single-Unit Approval applies to your specific refinance is a point the lender should confirm in HUD’s guidelines before you pay for an appraisal.
Is conventional cash-out always cheaper because it skips mortgage insurance?
Not always. At 80% LTV or below conventional generally carries no mortgage insurance, but pricing adjustments tied to credit and loan details can offset part of that savings. Compare the full Loan Estimates, not just the insurance line.
How long do I have to own my condo before an FHA cash-out?
You must have owned and lived in it as your principal residence for 12 months before the case number is assigned. Renting it out first, as with an inherited unit, means the clock starts when you move in.
Does a streamline refinance get me cash from my condo?
No. The FHA Streamline refinances an existing FHA loan with limited credit review and a net tangible benefit, and the mortgage insurance premium continues. It does not pay out equity, and it skips the condo questionnaire for that reason.
How much does the 1.75% upfront premium matter if I plan to move in a few years?
It matters more the shorter you stay. You pay the financed premium once and the annual premium for as long as it applies to your loan, so a short hold spreads that cost over fewer years of benefit. If you expect to keep the loan well past eleven years, the annual premium on an 80% LTV loan will have ended by then. Final terms depend on lender guidelines, property type, leverage, and the borrower’s complete credit picture.
Where This Leaves You
For a condo owner the order is simple: building, then monthly cost, then flexibility. Confirm the project passes FHA, conventional, or both. Then weigh FHA’s insurance against conventional’s stricter credit expectations. 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, subject to lender guidelines and full file review. This is not a commitment to lend.
For your own numbers, request a scenario review with Lendmire.
About Lendmire
Lendmire, NMLS# 2371349, is a mortgage brokerage with consumer lending licenses in 16 states. FHA, VA, conventional and jumbo purchase and refinance loans are arranged through wholesale lending partners, and each application is reviewed individually by the lender. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
Get Started
Ready to find the right loan for you?
In about 30 seconds you can review financing options available for your home or investment property. No commitment required.
Informational only. Not a Loan Estimate, approval, or commitment to lend. Program availability and eligibility are subject to lender guidelines, credit approval, property review, and underwriting.
References
1. HUD – FHA Connection Condominiums Help
2. HUD Archives – FHA New Condominium Approval Rule
3. Fannie Mae Selling Guide – Waiver of Project Review
4. CFPB – Cash-Out Refinances and Paydown Behavior of Non-Mortgage Debt Balances
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: Should a Current FHA Borrower Use FHA Cash-Out or Conventional? · FHA Cash-Out vs Conventional Requirements With an Existing FHA Loan · Should You Choose FHA Cash-Out Over Conventional With Lower Credit?
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
- Mortgage Loan Originator · NMLS# 1129696 · Verify on NMLS Consumer Access
- North Carolina Real Estate Broker · License# 343312 · Verify on NCREC
- North Carolina Insurance Producer · License# 19053198 · Property, Casualty, Life, Health · Verify on NAIC SBS
- Lendmire LLC · Firm NMLS# 2371349 · Verify firm licensure
Legal disclosures. Lendmire (NMLS# 2371349) is a state-licensed mortgage brokerage that arranges financing through wholesale lender relationships. Lendmire is not a direct lender, depository institution, or registered financial advisor. The discussion above is general informational content about real estate financing — it is not financial, legal, or tax advice, and readers should consult licensed professionals for guidance on their individual circumstances. Loan inquiries are subject to lender underwriting; this article does not represent a commitment to lend. Loan terms, rates, and qualification standards vary by borrower, property, and state, and are subject to change at any time. Equal Housing Opportunity. NMLS Consumer Access: nmlsconsumeraccess.org.