The Quick Read: The FHA cash-out program is national, but your state’s property law decides who must sign at closing and whether the new lien is valid. The loan reaches up to 80% LTV on a home you have owned and lived in for at least 12 months. A spouse who is not on the loan may still have to sign a lien document, and in community property states that spouse’s debts can count in your ratios. A few states, Texas most of all, carry homestead protections strong enough that FHA cash-out is generally unavailable there.
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 $350,000 home value, a $193,000 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 national rates. 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 on top of the capped base loan; 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.
What a Cash-Out Refinance Actually Does
A cash-out refinance replaces your current mortgage with a new, larger one. The difference between the payoff and the new balance comes to you as cash. The new loan is always bigger than the old one, and that matters for everything that follows.
Through the FHA cash-out refinance program, the cap is 80% of the home’s value. Your existing loan can be any type. It does not have to be an FHA loan today. You must have owned the home and lived in it as your principal residence for 12 months before the case number is assigned.
Equity alone does not get you approved. The wholesale lenders Lendmire places FHA files with look at credit, income, payment history, and the new payment. Every figure here is subject to lender guidelines and full file review. None of it is a commitment to lend.
Why State Law Sits on Top of a Federal Program
The federal program sets the loan rules: leverage, occupancy, credit, ratios. It does not write property law. Each state decides how a married couple holds title, what a homestead is, and what it takes to create a lien the courts will enforce.
That split explains most of the confusion online. People ask whether FHA allows something, when the real question is whether their state does. Three layers apply to every file.
| Layer | Who sets it | What it controls |
|---|---|---|
| Federal program | FHA | LTV cap, occupancy, ratios |
| State law | State legislature, courts | Signatures, homestead, liens |
| Lender overlay | Each wholesale lender | Extra credit or document rules |
Keep the layers separate in your head. When someone says “FHA doesn’t allow that in my state,” ask which layer they mean. It could be a legal bar, a program rule, or one lender’s choice. The answers differ, and so do your options.
How the Loan Is Underwritten, Step by Step
Here is how a typical owner-occupied file moves from application to closing.
1. Pre-screen. The lender reviews how long you have owned and lived in the home. It checks your mortgage payment history, credit, income, and the new payment.
2. Appraisal. The appraisal sets the value. The 80% cap applies to the adjusted value, not the price you paid or the number you hope for.
3. Payoff and lien count. The lender collects payoff figures on every mortgage and home equity line on the property. Any second lien that stays in place counts toward the combined cap. A HELOC cannot simply sit on top of an 80% first mortgage.
4. Title and marital-status review. The title company checks how you hold title and your marital status. It also checks whether your state treats the home as a homestead or as community property. This step decides who signs what.
5. Spouse underwriting, where required. In community property states, the lender looks at the non-borrowing spouse’s debts. More on that below.
6. Closing. You sign the note and the security instrument. Any spouse or co-owner required by state law signs the documents that apply to them.
7. Funding. On a refinance of your primary residence, federal law gives you time to cancel. Money disburses after that window ends.
On ratios, the base pair is 31/43 (housing and total debt) with no compensating factors. Documented factors can stretch that, with the top tier reaching 40/50. The automated underwriting finding governs most files.
The Federal Cap, in Plain Words
The 80% limit is relatively recent. HUD Mortgagee Letter 2019-11 lowered the maximum loan-to-value and combined loan-to-value on cash-out refinances to 80%. It applied to case numbers assigned on or after September 1, 2019. HUD’s announcement says the cap fell from 85% to 80% and now matches the cash-out limit on conventional loans.
So if a website still says FHA cash-out goes to 85%, it is out of date. The cap exists to keep more equity in the home and reduce losses if a borrower defaults.
Two details people miss:
- Combined means combined. The new first mortgage plus any remaining subordinate liens must fit under the cap.
- Mortgage insurance applies. FHA charges an upfront premium of 1.75% of the base loan, usually financed. It also charges an annual premium between 0.15% and 0.75% of the balance, depending on term, loan amount, and LTV. On a thirty-year loan above 90% LTV, the annual premium lasts for the term. At or below 90%, it ends after eleven years. These are program facts, not an advertised price.
A cash-out loan at 80% LTV sits at or below that 90% line. That matters for how long the annual premium stays on the loan. Final terms depend on lender guidelines, property type, leverage, and the borrower’s complete credit picture.
Homestead Rules: Where the General Rule Breaks
Homestead law protects a family’s primary home from certain creditors and limits how it can be borrowed against. States vary a great deal. Some barely touch a standard refinance. Texas writes strict limits into its constitution.
Texas is the clearest case. The state constitution requires that a home equity lien be created by written agreement, with the consent of each owner and each owner’s spouse. Texas law, not the lender’s label, decides whether a cash-out loan counts as a Texas home equity loan. Fannie Mae’s guide says as much in its Texas Section 50(a)(6) eligibility rules.
Texas also layers on its own waiting periods, a fee limit, and closing-location and attendance requirements. Those belong to the Texas package, and no other state should be assumed to work the same way.
Many sources say FHA does not insure these Texas home equity loans, which would make an FHA cash-out generally unavailable on a Texas homestead. The explanations vary, from a legal bar to how the insurance fits, the economics of the fee limit, or plain lender practice. Treat it as generally not available, and have a licensed loan officer confirm against current FHA policy before you plan around it.
If you own in Texas, Lendmire’s piece Texas Homestead Rules for an FHA Cash-Out Refinance covers that case in more detail.
Other states. Most homestead-protection states do not block an ordinary FHA cash-out the way Texas does. They may still shape the closing documents, the title review, and who signs. Check your own state’s rules instead of assuming Texas is typical. It isn’t.
Spouse Signatures: Three Different Questions
People lump these together. Pull them apart.
1. Does FHA require your spouse to be a borrower? No. A spouse who is not on the loan is a non-borrowing spouse.
2. Does your spouse have to sign something? Possibly. FHA policy says that when it is necessary to perfect a valid first lien under state law, the lender must require the non-borrowing spouse to sign. The signature goes on either the security instrument or a document giving up rights to the property. The signature is tied to what your state requires, not to a blanket federal rule.
3. Do the spouse’s debts count? In a community property state, often yes. If you live in one, or the property is in one, the non-borrowing spouse’s debts generally go into your qualifying ratios. The exception is any debt that state law excludes. The lender has to note in the file the specific state law behind any exclusion. A spouse’s credit history alone is not a reason to deny the loan.
A spouse who signs only to protect the lien is not treated as a borrower. The spouse signs the security instrument or relinquishment, not the note. In plain terms, the signature acknowledges the lien. It does not make the spouse responsible for repaying the loan. Because lender overlays differ, confirm the exact documents with your loan officer.
Which states are community property?
The USDA’s credit requirements list nine community property states: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. Alaska lets couples opt in. If you live in a different state than the home you are refinancing, the rule can still apply when either location is a community property state.
| State type | Spouse signature | Spouse’s debts |
|---|---|---|
| Community property | Often needed | Usually counted |
| Common-law | Only if state law requires | Generally not counted |
| Strong homestead protection | Frequently needed | Depends on state |
| Opt-in or mixed | Depends on setup | Depends on setup |
Treat this table as orientation, not legal advice. Louisiana and Puerto Rico have state-law exceptions that can exclude certain spouse debts. Pre-marriage debt may need an attorney’s opinion to exclude. Your title company and loan officer will confirm the specifics for your state.
Three Borrower Scenarios
The spouse who isn’t on title. Picture a married borrower in a community property state who holds title alone. The spouse is not on the loan. The lender still pulls the spouse’s debts into the ratios and still needs the spouse’s signature on a lien document. Before you apply, ask whether the spouse’s student loans or collections could push the combined ratio over the line.
The out-of-state spouse. Say one spouse lives and works in a common-law state while the home sits in a community property state. The property’s location still triggers the community property treatment. Plan for scheduling too, because the spouse has to sign. Signing at a distance is a title company question. In some states, it is not permitted for certain documents.
The post-divorce refinance. Consider a borrower who kept the house in a divorce and wants to pull cash against it. The divorce decree, the deed, and the old mortgage all matter. Ownership and occupancy history must still meet the 12-month test. If the borrower was not on the existing mortgage, the lender wants to see that the prior 12 months of payments were made on time. A former spouse who is still on title may need to sign off.
The Right to Cancel
Federal law gives you a cooling-off period on a refinance of your primary residence. The CFPB explains that you have until midnight of the third business day after the transaction to cancel. Saturdays count as business days for this purpose. Sundays and legal public holidays do not. A purchase loan carries no such right.
Two practical consequences follow:
- The cash is not at the closing table. Funds disburse after the cancellation period ends. Plan any big expense around that, not around the signing date.
- One owner can cancel for everyone. The required notice tells joint owners that one owner’s cancellation is effective for all.
This right covers the principal residence. It does not extend to second homes.
Common Mistakes
- Assuming FHA cash-out still reaches 85%. It is 80%.
- Treating a signing spouse as a borrower. Signing to protect the lien is a different role.
- Ignoring the spouse’s debts. In community property states they can raise your debt-to-income ratio even though your spouse is not on the loan.
- Planning a HELOC on top. A remaining second lien counts toward the combined cap.
- Assuming state law doesn’t matter for FHA. The signature rule ties directly to what your state requires to create a valid lien.
- Planning around a Texas FHA cash-out without checking. Get it confirmed first.
What the Decision Looks Like in Practice
Your choice usually comes down to three questions.
Do you need cash, or just a better loan? If you only want a lower payment or a shorter term, a rate-and-term FHA refinance with an appraisal can reach 97.75% on a principal residence you have occupied for the previous twelve months. If your loan is already FHA, the FHA Streamline refinances with no appraisal and a limited credit review, but it needs a net tangible benefit. Neither one gives you cash. A cash-out costs you more equity because it caps at 80%.
Does your state change the answer? In Texas, check availability before anything else. In community property states, run your spouse’s debts through the ratios early. In common-law states, the process is usually more straightforward, though your state may still require a signature.
Can the paperwork happen on time? A required spouse who can’t attend closing can stall the file. Find out who signs what before the closing date is set, not after.
Credit events also matter. HUD’s waiting periods are two years from a chapter 7 discharge and three years from a foreclosure. Those are HUD’s rules, not a promise from any lender. Some lenders set stricter credit floors than the program minimum. The wholesale programs Lendmire places FHA files with start at a 580 decision score for purchase, so a borrower below that level should ask about options before applying.
Key Terms Defined
Homestead: A legal status that protects a family’s primary home from certain creditors and limits how the home can be borrowed against.
Community property state: A state where most property and debt acquired during marriage is treated as owned jointly by both spouses.
Non-borrowing spouse: A spouse who is not on the loan application or the note.
Security instrument: The document, such as a mortgage or deed of trust, that puts the lien on the property.
Perfecting a lien: Meeting the state’s legal steps so the lender’s claim on the home is valid and enforceable.
Adjusted value: The value FHA uses to apply the LTV cap, based on the appraisal.
Right of rescission: Your federal right to cancel a refinance of your primary residence within three business days.
If You’re Weighing Cash-Out Against Keeping Your Loan
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. A mortgage broker arranges the loan through wholesale lenders, and the lender makes the final decision. Bring your state, how title is held, and your spouse’s situation to the first conversation. Those three facts shape the file more than almost anything else.
Frequently Asked Questions
Does my spouse have to be on the loan for an FHA cash-out refinance?
No. A spouse does not have to be a borrower. Your spouse may still have to sign the security instrument or a document giving up rights to the property, if state law requires it to create a valid first lien. In a community property state, the spouse’s debts can also count in your qualifying ratios.
Can I do an FHA cash-out refinance on a Texas homestead?
Generally not, though you should confirm with a licensed loan officer. Texas treats cash-out loans on a homestead as a special category with its own consent rules, and sources indicate FHA does not insure those loans. Explanations differ, so check current FHA policy rather than relying on a single website.
How much equity can I take out with an FHA cash-out refinance?
The new loan can reach up to 80% of the home’s adjusted value, and any subordinate liens count toward that limit. You also need to have owned and lived in the home for at least 12 months. Premiums and closing costs come out of what you borrow, so the cash in hand is less than the gap between 80% and your payoff.
Does a non-borrowing spouse’s credit affect my approval?
Their credit history alone is not a reason to deny the loan. Their debts, however, can count toward your ratios if you or the property are in a community property state. State law can exclude certain obligations. The lender has to document the specific law behind any exclusion.
Can I cancel an FHA cash-out refinance after closing?
Yes, for a limited time. On a refinance of your primary residence, you have until midnight of the third business day to cancel. Saturdays count, Sundays and legal holidays do not, and one owner’s cancellation is effective for all joint owners.
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.
For the program’s current guidelines, see FHA loan programs.
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References
1. HUD Mortgagee Letter 2019-11
2. HUD press release on the cash-out LTV change
3. Fannie Mae Selling Guide: Texas Section 50(a)(6) Loan Eligibility
4. USDA Rural Development credit requirements
5. CFPB: How long do I have to rescind?
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: FHA Cash-Out Refinance Documentation for a Locked-in Homeowner · FHA Cash-Out Rules for a Texas Second Home That Isn’t a Homestead · Should a Veteran Refinance an FHA Loan Into a VA Cash-Out?
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Compliance and disclosures. Lendmire (NMLS# 2371349) is a licensed mortgage broker and is not a direct lender, depository institution, financial advisor, or tax professional. Content in this article is general market analysis and educational information — not financial, legal, or tax advice for any specific situation. Lendmire does not guarantee loan approval; every transaction is subject to underwriting by the funding lender. Mortgage pricing and loan program guidelines are subject to change at any time without notice and vary by borrower characteristics, property type, and state regulations. Lendmire complies with Equal Housing Opportunity. Licensure verification: NMLS Consumer Access.