The Quick Read: A final divorce decree can support an FHA cash-out, but the decree alone does not put you on title. The keeping spouse must be on record title, through a recorded deed, before the case number is assigned. The home must also have been owned and occupied for 12 months before that case number, and the new loan tops out at 80% of the appraised value. “Old title” here means a title record that was never updated after the divorce, an inheritance or a death. Subject to lender guidelines and full file review.
Decree, Title and Loan: Three Different Things
A decree decides who gets the house. A deed decides who owns it on the public record. A mortgage decides who owes the money. Each one changes only its own piece.
| Document | What it changes | What it leaves alone |
|---|---|---|
| Final decree | Awards the property between spouses | Record title and the old loan |
| Deed (often a quitclaim) | Moves ownership on the county record | Liability on the mortgage |
| New mortgage | Pays off the old loan, funds any buyout | Nothing, once it records |
A decree does not take an ex-spouse off the loan. The CFPB says you are generally responsible for a debt unless the creditor released you or the loan was refinanced with your name removed. Removing your name from a title does not remove it from the mortgage either. That is why most decrees set a refinance deadline.
What an FHA Cash-Out Looks For
The core tests are short. HUD’s Handbook 4000.1 is the authoritative source for FHA single-family policy. Confirm every rule below against the current handbook and the lender’s file requirements.
- Title: at least one borrower on the new loan holds title before the case number is assigned.
- Occupancy: cash-out is for an owner-occupied principal residence only.
- Seasoning: the home was owned and occupied by at least one borrower for 12 months before the case number.
- Leverage: HUD cut the cash-out cap from 85% to 80% for case numbers assigned on or after September 1, 2019. Across the wholesale programs Lendmire places files with, the FHA cash-out reaches 80% of value.
- Credit and ratios: minimum investment and credit rules start at a 580 decision score on the programs Lendmire works with. Ratios run from 31/43 with no compensating factors up to 40/50 with documented factors at the top tier.
- Qualifying alone: the keeping spouse is reviewed on their own income. Income from a non-occupant co-borrower generally cannot be used on a cash-out.
For the program overview, see Lendmire’s FHA cash-out refinance program. County loan limits apply and change each year.
Is It Really a Cash-Out? The Buyout Question
This is the first decision on the file, and it changes the program. Under HUD’s refinance rules, equity owed to an ex-spouse under a court decree or enforceable settlement is treated as property-related debt. The lender can include it in the new mortgage as a no cash-out (rate-and-term) item. The lender needs the decree or agreement to document the equity awarded.
Cash to you beyond the payoff and the documented buyout is what makes it a cash-out. The line can blur on real files, and lenders read it differently. Check the classification with the lender before you plan around either set of rules. It matters because the rate-and-term FHA refinance on a principal residence occupied for the previous twelve months can reach 97.75%, while the cash-out stops at 80%.
The “Old Title” Problem
The common version: the decree was signed, the court awarded you the house, and nobody ever recorded a deed. The county record still shows both names, or only your ex, or a deceased parent.
The lender orders a title commitment. It shows who holds title, open liens and any name mismatches. The usual items that come back:
- A decree that was never recorded, or no deed from the departing spouse.
- Name differences between the decree, the deed and the loan application.
- Old liens, judgments or an earlier mortgage never released.
- For inherited homes, probate that was never finished.
The cure is on the record side. Do this before the case number is pulled, because FHA measures title and the 12-month clock from that date. Title work that drags on can push the case number, and the rest of the deal moves with it.
If your ex will not sign a deed, ask your attorney whether the decree itself or a court order can be recorded or enforced to carry the transfer. That is a legal question for counsel, not the lender.
Where the Rule Bends: Named Edge Cases
Inheritance. An heir does not have to meet a minimum occupancy period before a cash-out, as long as the home was never treated as an investment property after inheritance. If the heir rented it out, the 12 months of occupancy as a principal residence applies before cash-out.
Awarded in a divorce, under 12 months. The test asks about ownership and occupancy by at least one borrower. If the keeping spouse was already an owner living there, time already served may count. Confirm that reading with the lender in writing before you rely on it.
Decree not final. If the property division is still open, most lenders do not have what they need. Plan the loan after the decree is final and certified.
Existing FHA loan. An FHA Streamline can remove a borrower in cases of divorce, legal separation or death, with conditions. One condition is that the decree awards the property and payment responsibility to the remaining borrower. A streamline has no appraisal and a limited credit review, and it needs a net tangible benefit, but it gives you no cash out. HUD describes this in Mortgagee Letter 2025-09.
Conventional comparison. Fannie Mae’s Selling Guide treats a buyout as a limited cash-out when the property was jointly owned for at least 12 months before disbursement, with an exception when the borrower was legally awarded the property. FHA rules are separate. Do not assume one carries over to the other.
Purchase versus refinance. FHA’s chain-of-title test is a purchase and resale rule. It is not a refinance title test.
Closing Sequence, Step by Step
Order matters. Recording a deed too early, before the lender has what it needs, can disrupt the file. Recording it too late is worse, because title has to be in place before the case number.
1. Get a certified copy of the final decree from the court, plus any settlement agreement that sets the buyout.
2. Talk to the lender before you record anything. Ask how they want vesting handled and which deed form they want recorded.
3. Clear title. The title company runs the commitment, flags curative items and tells you who must sign what.
4. Get the case number. Title, ownership and the 12-month occupancy clock all measure back to this date.
5. Appraisal. It sets the adjusted value, which sets the 80% ceiling. A low value means less cash or less room for the buyout.
6. Underwriting. You qualify alone. Expect income documents, and occupancy proof such as employment records or utility bills. Support income needs its own paperwork, such as the order and payment history.
7. Closing. The old loan is paid off, the buyout goes to the departing owner as the decree specifies, and the new deed of trust records. Payoff, buyout and costs must fit under the 80% ceiling.
| Sequencing option | Risk |
|---|---|
| Record deed before the case number, then refinance | Required order; deed errors are hard to unwind, so have the lender and title company review the deed first |
| Cooperative ex signs the deed ahead of time | Cleanest path; the deed records before the case number is pulled |
| Ex cannot or will not sign | Title cannot be cured; the file waits until the court order or enforcement route is resolved |
Documents, Grouped by Source
- From the court: certified final decree, settlement agreement.
- From the county recorder: the recorded deed and a current vesting record.
- From the title company: commitment, curative list, payoff letters.
- From you: income and asset documents, proof of occupancy, ID, and any support order if you rely on that income.
- From probate, if inherited: letters or the order showing you as owner.
Certified copies matter. A plain photocopy of a decree usually draws a request for the certified one.
A Scenario in Plain Terms
Picture a homeowner whose decree awards her the house, with a buyout owed to her ex. The deed was never recorded. She has lived there well over 12 months and she was on title as a spouse.
She records the deed first, before the case number is pulled. The lender treats the buyout as a documented equity item and any cash beyond that as cash-out. Her payoff, buyout and costs together must sit under 80% of the appraised value. If the appraisal comes in light, the buyout gets renegotiated, paid in installments, or she looks at a different program. That all gets settled before the closing table, not at it.
Mistakes to Avoid
- Assuming the decree is enough. It is not title.
- Fixing title after the case number is pulled.
- Skipping the certified decree.
- Expecting the buyout rules and the cash-out rules to match.
- Renting the inherited home out, then expecting the inheritance exception to apply.
- Counting on a co-borrower who does not live there to help you qualify.
Key Terms Defined
Final decree: the court order that ends the marriage and divides the property.
Quitclaim deed: a deed that moves one person’s ownership interest to another with no promise about the title’s condition.
Vesting: how title is recorded, meaning who owns the home on paper.
Seasoning: the length of time you must have owned and lived in the home before a loan type is allowed.
Case number: the FHA number assigned to your loan file, which starts the ownership and occupancy measurement.
Deed of trust: the document that secures the new loan against the home.
Frequently Asked Questions
Does a final decree take my ex off the mortgage?
No. It settles who gets the home, not who owes the lender. The old loan stays in both names until it is paid off, assumed with a release or refinanced.
Can I do an FHA cash-out if the deed was never recorded?
Not until title is cured. At least one borrower on the new loan must hold title before the case number is assigned, so record the deed, or finish probate, first.
Does a quitclaim deed release me from the loan?
No. It changes ownership on the record. Your name stays on the mortgage until the debt is refinanced or you are released by the lender.
What if the divorce is not final yet?
Most lenders will not move without the final decree and a settled property division. Wait for the certified decree before you plan the loan.
Is a buyout of my ex always treated as cash-out?
Not always. HUD treats documented equity owed to an ex-spouse under a decree as property-related debt, which can sit in a no cash-out refinance. Cash to you beyond that is cash-out. Confirm the classification with the lender.
Where to Go From Here
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. Program details 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.
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.
For the program’s current guidelines, see FHA loan programs.
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References
2. HUD Handbook 4000.1 information page
3. HUD press release on cash-out LTV
4. HUD Mortgagee Letter 2025-09
5. Fannie Mae Selling Guide B2-1.3-02
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: Can You Get an FHA Cash-Out on a Rural Home With Acreage? · FHA vs Conventional Cash-Out for a Homeowner With No Mortgage · Can a Condo Not on the FHA-Approved List Get an FHA Cash-Out?
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Required disclosures. Lendmire (NMLS# 2371349) operates as a licensed mortgage broker, not a direct lender or depository. The discussion in this article is general in nature and should not be relied upon as financial, legal, or tax advice — every investment scenario is unique and should be reviewed by a qualified professional. Any loan inquiry is subject to lender underwriting, and this article is not a commitment to lend or a guarantee of approval. Mortgage rates, loan terms, and program guidelines vary by borrower, property, and state, and may change without notice. Equal Housing Opportunity. Verify licensure at NMLS Consumer Access.