The Quick Read: A conventional cash-out refinance is a new first mortgage that pays off your old one and hands you the extra equity as cash. A file is “clean” when five things line up: the old loan is at least 12 months old, a borrower has been on title for 6 months, the new loan stays within 80% of value on a one-unit home you live in, credit and debt ratios clear the lender’s tests, and every document matches. Miss one and the file gets complicated.
Key Takeaways
- Cash-out on a one-unit primary home tops out at 80% of the home’s value. Two- to four-unit homes top out at 75%.
- Two separate clocks apply: the age of the loan you are paying off, and how long you have been on title.
- Most files are decided by the automated underwriting finding, with a total debt ratio ceiling of 50%.
- A cash-out refinance has a three-business-day cancellation window after signing, so cash arrives after it ends.
What Does “Clean File” Mean?
A clean file is one where nothing needs an exception, a second opinion, or a special explanation. Think of it as a checklist. Every item passes on its own, and the paperwork agrees with itself.
“Clean” is not an official agency term. It is how brokers talk. A clean file has seasoned loans, a settled title, a home you occupy, and credit and income that fit the automated finding without manual overrides.
Why does cash-out get stricter treatment than other refinances? Because you are increasing the debt against the house, not just swapping one loan for another. The lender carries more risk, so the rules tighten. Leverage caps drop, pricing adjusts, and the waiting periods apply.
Across the wholesale programs Lendmire places files with, the pattern holds. Files that stall are rarely failing a big test. They usually trip over small mismatches: a title date that doesn’t match the story, or a debt nobody mentioned.
How a Cash-Out Refinance Works
Here is the plain version. The new loan pays off your current first mortgage. It also covers closing costs, and it can pay off other liens on the home. Whatever is left over comes to you.
Fannie Mae’s Selling Guide describes the permitted uses this way: pay off the existing first mortgage, finance closing costs and prepaid items, pay off subordinate liens of any age, and take equity out for any purpose. It also covers a home with no mortgage at all.
That last point surprises people. If you own your home free and clear, a new loan against it is still a cash-out refinance. It is not treated as a simple refinance.
Compare that with a rate-and-term refinance, sometimes called a limited cash-out refinance. It pays off the existing first mortgage, closing costs and a purchase-money second lien, with only incidental cash back. On a one-unit primary home it can reach 95% leverage, and 97% in some agency-owned and first-time-buyer cases. Cash-out is a different product with a lower cap. Final terms depend on the lender’s guidelines, the property type, and the borrower’s complete credit picture.
If you want to see the program side, Lendmire’s cash-out refinance programs page lays out the conventional options.
The Core Tests, at a Glance
| Test | What the lender checks | What proves it |
|---|---|---|
| Loan age | Existing first mortgage at least 12 months old | Note dates |
| Title time | A borrower on title for 6 months | Deed, title report |
| Leverage | 80% (one unit), 75% (two to four) | Appraisal |
| Credit | Decision score of 620 or higher | Credit report |
| Debt ratio | Within the automated finding, up to 50% | Pay stubs, debt list |
| Occupancy | You live in the home | Application, records |
Every figure above is a guideline. Individual lenders can add their own rules, and nothing here is a commitment to lend.
Equity and the Loan Cap
The 80% cap applies to the whole new loan, not just the cash. This is where most people’s math goes sideways.
Fannie Mae’s Eligibility Matrix sets the maximum at 80% for a one-unit principal residence and 75% for a two- to four-unit principal residence. Those limits apply to loan-to-value (LTV), which is the loan balance divided by the home’s appraised value.
Here is the formula in words. Take the appraised value and multiply by 80%. That is your maximum new loan. Subtract your payoff balance and any financed costs. What remains is your cash.
Run the picture on a one-unit home. A home appraises at 100 units of value. The cap allows a new loan of 80 units. Say your current mortgage is 60 units and costs run 2 units. You can take about 18 units as cash. You keep 20% equity in the home afterward.
You don’t need 20% equity on top of what you pull out. The equity requirement applies after the cash is taken. If your payoff and costs already sit near the cap, there is little or no cash left.
Many borrowers confuse this with purchase leverage. A purchase on a primary home can reach 95% or 97%. Cash-out cannot. That 95–97% range belongs to purchases and limited cash-out refinances.
Second homes and investment properties are lower still. Occupancy decides the leverage, so a rental or vacation home gets a different, tighter cap than the one you live in.
There is also a wholesale lane that reaches 89.99% LTV with no mortgage insurance. It requires a 680 score, a 50% ratio, a thirty-year fixed rate, a primary residence, a conforming balance, and its own six months of seasoning. It is a narrow lane, and it is not written on Texas homesteads. For a closer look at leverage limits, see Lendmire’s piece What Is The Maximum LTV For A Conventional Cash Out Refinance?. Each figure is subject to lender guidelines and a complete review of property type, leverage, and credit.
The Two Seasoning Clocks
Seasoning is the waiting period a lender wants before you can refinance. Cash-out has two of them, and they run separately.
Clock one: the loan you are paying off. It must be at least 12 months old, measured from note date to note date. The note date is the date you signed the loan. Fannie Mae’s guide states this directly.
Clock two: your time on title. At least one borrower must have been on title for 6 months.
A quick example. You bought your home 14 months ago with a mortgage. You pass both clocks. Now say you bought it 5 months ago. You fail the title clock, and the loan is also too young.
Exceptions exist. Delayed financing covers a recent cash purchase, and it has its own conditions, such as documenting where the purchase money came from. Inherited property and certain legal awards are also exceptions. Do not assume an exception applies. Confirm it against the live guide before you plan around it.
Credit and Automated Underwriting
Most files are decided by an automated underwriting system. It weighs credit, income, debts, reserves and the loan together, rather than testing each in isolation. A strong score can offset a higher ratio, and the reverse is also true.
The wholesale conventional programs we place files with start at a 620 decision score. Pricing and available terms vary by lender, borrower profile, property type, and full underwriting review. The score also affects pricing. Cash-out loans carry loan-level price adjustments, which are fees built into the pricing based on credit score, loan purpose, occupancy and similar features. Cash-out has its own pricing grid, separate from limited cash-out. Those adjustments usually show up inside the pricing rather than as a line item.
Credit events matter too. The agencies set waiting periods: 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.
Your credit tier decides how clean the file looks. Check your report before you apply. A late payment you didn’t know about is the sort of thing that turns a clean file messy.
Debt Ratios and Reserves
Your debt-to-income ratio (DTI) is your total monthly debts, including the new mortgage payment, divided by your gross monthly income. It is the test that surprises people most, because the new payment counts, not the old one.
The automated finding allows a total ratio ceiling of 50% on most files. Fannie Mae’s guide on debt-to-income ratios adds that cash-out refinances are an exception, where the maximum for automated files may be lower. Manually underwritten loans run at 36% or 45%, with the reserve and score factors in the Eligibility Matrix.
Reserves are money you still hold after closing, counted in months of housing payments. The Matrix requires minimum reserves on cash-out files where the automated DTI is above 45%. A lower ratio often means fewer reserve questions.
Debts you pay off at closing can lower your ratio. Revolving accounts, like credit cards, can be paid from the proceeds, and that can pull the DTI down. Installment loans are treated differently, and the lender decides what counts. Existing debts you keep all stay in the ratio.
Think of a borrower with a modest car loan and two credit cards. Paying the cards off at closing can open room in the ratio. But it also uses up some of the cash you came for. That is a real tradeoff.
Occupancy and Property Type
| Property | Cash-out leverage cap |
|---|---|
| One-unit primary home | 80% |
| Two- to four-unit primary home | 75% |
| Second home | 75% |
| Investment property | 75% |
Occupancy decides the leverage, so we won’t go further on a second home or rental here.
Property type matters on the home you live in, too. Multi-width manufactured homes can do cash-out with a loan term up to 30 years under Fannie Mae’s announcement SEL-2024-01. Single-width manufactured homes are ineligible for cash-out.
On a primary-residence cash-out, all borrowers must occupy the property. A cosigner who lives elsewhere may work in some cases and not in others, since Fannie Mae’s non-occupant borrower rules differ. Check before you add anyone to the loan.
Valuation: The Appraisal
The appraisal sets the number everything else hangs on. Value times the cap gives your maximum loan, so a lower value means less cash.
Fannie Mae has an appraisal waiver called value acceptance, offered through its automated system on eligible transactions only. It is a system decision. A lender can’t promise one, and it is not offered if an appraisal was uploaded in the prior 120 days from any lender.
Plan for an appraisal. If you get a waiver, treat it as a bonus.
Where a Clean File Turns Messy
| Situation | Why it complicates the file | Common fix |
|---|---|---|
| Loan under 12 months old | Fails the loan-age clock | Wait, or check for an exception |
| Title under 6 months | Fails the title clock | Wait, or check delayed financing |
| Co-owner changes | Title date may reset or need review | Sort out title early |
| Delinquent property taxes | May need to be escrowed if rolled in, subject to applicable law | Confirm details with a qualified local professional |
| Existing second lien | Must be paid off or handled | Pay at closing |
| Free and clear home | Still treated as cash-out | Plan for cash-out rules |
Delinquent real estate taxes can be rolled into the new loan. If they are, an escrow account must be established, subject to applicable law.
Some transactions are ineligible, as listed in an archived version of Fannie Mae’s guide. They include loans with a temporary buydown, certain properties with PACE loans, and the payoff of an installment land contract. That page is an archived version, so verify against the live guide.
Texas homeowners face a state-level limit as well. The homestead cash-out is capped by the state constitution at the agency figure, and the wholesale 89.99% lane is not written there. Lendmire’s piece Can a Texas Homestead Get a Conventional Cash-Out Refinance Early? covers that situation.
Step by Step: From Application to Cash
1. Check the purpose. Confirm you are paying off the first mortgage and taking cash beyond payoff and costs.
2. Check the clocks. Confirm 12 months on the old loan and 6 months on title.
3. Run the equity math. Value times 80% (or 75%), minus payoff and costs.
4. Pull your credit and list your debts. Include everything. Surprises hurt.
5. Gather documents. Pay stubs and W-2s for salaried income.
6. Underwriting and appraisal. The automated finding runs, and the value is set.
7. Disclosures and signing. You receive a Loan Estimate and a Closing Disclosure, and compare the terms.
8. The cancellation window. After you sign, the three-business-day window runs.
9. Funding. The lender pays off the old lien and disburses your cash.
A practical tip: avoid opening new credit while the file is in process. A new car loan can change your ratio overnight.
Your Right to Cancel
Refinances on a primary residence carry a right of rescission, which is your legal right to cancel after signing. The CFPB explains how the cancellation period is counted, including which days do and do not count.
The clock starts only after three things happen: you sign the note, you receive an accurate Truth in Lending disclosure (usually the Closing Disclosure), and you receive two copies of the notice of right to rescind. Cancellation must be in writing. A phone call does not count.
This is why cash arrives after the window closes. A purchase loan has no such right.
Is Cash-Out the Right Tool?
Honestly, it depends on what you’re replacing. Cash-out resets the whole first mortgage. If your current loan is one you want to keep, that is a real cost. A larger new balance can also raise your monthly payment and lengthen your payoff timeline.
Government options exist for people with existing FHA or VA loans, such as the FHA Streamline and VA IRRRL. Those are streamlines, not cash-out products. The right comparison is what you need the money for, how much of your current loan terms you’d give up, and how far the new balance stretches your budget.
Tax treatment can depend on your situation; borrowers should speak with a qualified tax professional before relying on any deduction or credit.
Key Terms Defined
Cash-out refinance: A new first mortgage that pays off the old one and gives you the leftover equity as cash.
LTV (loan-to-value): The loan balance divided by the home’s appraised value.
Seasoning: The waiting period a lender requires, here measured on the old loan and on your time on title.
DTI (debt-to-income): Your total monthly debts divided by gross monthly income, including the new mortgage payment.
Reserves: Money you still have after closing, counted in months of housing payments.
Loan-level price adjustment: A pricing charge built into the loan based on credit score, purpose, occupancy and similar features.
Frequently Asked Questions
How much cash can I take out on a conventional loan?
Your new loan can reach 80% of the home’s value on a one-unit primary home, or 75% on two to four units. Subtract your payoff and financed costs from that number to find your cash. The remainder depends on the appraisal, subject to lender guidelines and full file review.
Can I do a cash-out refinance right after buying?
Usually not. The loan you pay off must be 12 months old, and a borrower must have been on title for 6 months. Exceptions exist for delayed financing after a cash purchase, inheritance and certain legal awards. Confirm the details before you plan around one.
Does a home I own free and clear count as a cash-out refinance?
Yes. A new loan on a home with no mortgage is still treated as cash-out, not a simple refinance. That means the leverage cap, seasoning rules and pricing adjustments for cash-out all apply.
Will I get an appraisal waiver?
Maybe, but it is not something a lender can promise. Fannie Mae’s automated system decides whether to offer one on eligible transactions. It is not offered if an appraisal was uploaded in the prior 120 days, so plan on an appraisal.
Can I cancel after I sign?
Yes, in writing, within the rescission period that applies to your loan. The clock starts only after you sign the note and receive both the Truth in Lending disclosure and two copies of the notice. A phone call does not count.
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.
For your own numbers, request a scenario review with Lendmire.
About Lendmire
Lendmire (NMLS# 2371349) is a mortgage brokerage serving homeowners and home buyers in 16 states. FHA, VA, conventional and jumbo purchase and refinance loans are arranged through wholesale lending channels; Lendmire brokers the financing and the lender underwrites each application. 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. Fannie Mae Selling Guide B2-1.3-03, Cash-Out Refinance Transactions
2. Fannie Mae Eligibility Matrix
3. Fannie Mae Selling Guide B3-6-02, Debt-to-Income Ratios
4. Fannie Mae’s announcement SEL-2024-01
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: Conventional Cash-Out Refinance Requirements for a Vacation Home · Conventional Cash-Out Refinance Requirements on a Paid-Off Home · Can You Get a Conventional Cash-Out Refinance on a Vacation Home?
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.