The Quick Read: Usually, yes. Keeping the total new loan, payoff plus renovation money, at or under the conforming limit keeps the file inside standard Fannie Mae and Freddie Mac underwriting. A jumbo loan moves to each lender’s own rules instead. One label needs fixing first: the agency renovation loans are not cash-out refinances at all, and that changes how you plan the project.
What does “under conforming” actually mean?
“Conforming” means the loan amount is at or under the limit the Federal Housing Finance Agency sets each year. That limit decides whether Fannie Mae or Freddie Mac can buy the loan. Above it, the loan is jumbo and sits outside the agency rulebooks.
FHFA’s 2026 announcement sets the baseline for one-unit homes at $832,750, up $26,250 from the prior year. High-cost counties get a higher ceiling, up to $1,249,125, which is 150 percent of the baseline. Those higher limits apply where 115 percent of the local median home value exceeds the baseline.
Your county’s limit is the one that counts. Look it up on the FHFA site rather than assuming the national number applies. And note that a limit set for one year gets replaced, so check for the current announcement before you plan around a figure.
Here is the catch for renovation borrowers. The renovation money is part of one new first mortgage. The payoff, the project funds and any financed costs all have to fit under the limit together.
Is a renovation loan really a cash-out refinance?
Not in the agency programs. Fannie Mae’s HomeStyle Renovation page says the loan applies to a purchase or a limited cash-out refinance, with no cash-out refinance option.
So you have two different tools.
- Agency renovation loan. One first mortgage. The money is held in a lender-controlled account and released in draws after inspections. You get no lump sum.
- Standard cash-out refinance. You receive the cash at closing and spend it however you like. Different leverage rules apply, and the house is appraised as it stands today.
Most people searching for a “renovation cash-out” want one of those two, and the choice drives everything else. Across the wholesale programs Lendmire places files with, a common mistake is planning around a lump sum and then discovering the loan type pays out through draws, or the reverse.
How does a standard cash-out refinance work for a remodel?
On the conventional cash-out refinance programs Lendmire arranges, maximum leverage is 80% LTV on a one-unit principal residence. Two- to four-unit principal residences, second homes and investment property top out at 75%. These figures are subject to lender guidelines and full file review.
Two seasoning rules matter for people who bought or refinanced recently:
- The first mortgage you are paying off must be at least 12 months old, counted note date to note date.
- You must have been on title for at least 6 months. Delayed financing, inheritance and legal-award exceptions exist.
There is also a wholesale lane that reaches 89.99% LTV with no mortgage insurance. It requires a 680 score, a 50% ratio and a thirty-year fixed rate. It covers a primary residence with a conforming balance and carries its own six months of seasoning. In Texas, a cash-out on the homestead is capped by the state constitution, and that lane is not written there. Every figure here varies by lender and program.
The appraisal is the other piece. A standard cash-out values the home as is. A project that will add value does not raise your borrowing power on that loan, which is why some owners look at renovation products.
How does an agency renovation loan size the money?
It sizes the loan on the as-completed value. Fannie Mae’s Selling Guide requires an appraisal that estimates the property’s value after the work is finished. The appraiser works from the plans and specifications, and the lender uses the same documents to decide how much financing is available.
For refinances, loan-to-value is measured against that as-completed figure. Freddie Mac’s maximum mortgage worksheet also caps renovation costs as a share of the as-completed value and allows only a small amount of cash back to the borrower. Exact caps change, so confirm them with your loan officer.
What the process asks of you:
1. A construction contract with a qualified, licensed contractor.
2. Plans prepared by a licensed or certified general contractor, renovation consultant or architect.
3. Work that is permanently affixed to the property.
4. Funds released in draws after inspections.
5. Completion within the program’s window. Fannie describes about fifteen months, and Freddie’s window is stated differently, so confirm the current number.
Not every lender is approved to deliver these loans before the work is done. That narrows shopping, and it is a real constraint, not a formality.
Why stay under the conforming limit?
Because it keeps your options open. Under the limit, you can use agency renovation products, standard cash-out rules and the usual mortgage insurance framework. Above it, the jumbo lanes take over, and terms depend on the lender.
That does not make jumbo bad. Some borrowers need it. Those are different programs with different overlays, and not every file fits them. Exact terms depend on lender and investor guidelines, credit profile, reserves, and property review.
A few edge cases to know:
- High-balance loans. These sit above the baseline but within a county’s high-cost limit, so they are still conforming. Fannie’s limited cash-out rules state that high-balance and ARM loans are not permitted in the 95.01–97% tier.
- Occupancy. Second homes and investment property get lower maximum leverage than a principal residence. This article is written for the home you live in.
- HomeReady. Combined with HomeStyle, the more restrictive rules apply, so the home must be a principal residence.
- Manufactured homes. Eligible with HomeStyle, with a lower cap on renovation funds.
Keep it or consider something else? (Decision table)
| Your situation | Keep a conforming cash-out | Consider alternatives |
|---|---|---|
| Project size | Total loan fits under county limit | Total loan would cross the limit |
| Value basis | Today’s value supports the need | Need depends on post-work value |
| Cash timing | You want money at closing | You prefer draws tied to progress |
| Existing loan | Current first mortgage is a poor fit | Current first mortgage is one you want to keep |
| Equity cushion | Stays comfortable after closing | Becomes thin |
If the right-hand column describes you, the options are a smaller or phased project, a conforming first mortgage plus a separate home equity product, or a jumbo loan. Each one adds a second payment, a lender-specific rulebook or both.
What does a worked example look like?
Run the logic without dollar figures. Say a home is worth a given amount today, and the planned project would raise its value.
Scenario one: fits under the limit. The payoff plus the project funds come in at or under the county limit. On a one-unit principal residence the standard cash-out reaches 80% LTV on today’s value. If that covers the project, the standard route is simple. If it falls short but the as-completed value is higher, a renovation product may reach further because it sizes on the finished home. Final terms depend on lender guidelines and the borrower’s full file.
Scenario two: does not fit. The payoff plus the project would cross the limit. The binding constraint is the loan amount, not your equity. Your choices are to cut the scope, phase the work, add savings, or move to a different structure.
Name the binding constraint first. It is the loan limit, the leverage cap, the debt ratio or the size of the project. Fixing the wrong one wastes time.
What are the costs and risks after the work is done?
A bigger first mortgage means a bigger payment, and a refinance usually resets the loan term. The CFPB’s guide to using home equity notes that a cash-out refinance may lengthen the time it takes to pay off the mortgage, and that missed payments put the home at risk because it is collateral. It also notes a home equity loan is a second mortgage with its own separate payment.
Other points to weigh:
- Equity cushion. Borrowing up to the cap leaves less room if values soften or the project overruns.
- Closing costs. Renovation loans add an as-completed appraisal, plans review and draw inspections to the usual refinance costs.
- Mortgage insurance. It is required above 80% LTV. You may ask to cancel it at 80% of the original value with good payment history, no subordinate liens and no decline in value, and the servicer must end it automatically at 78%.
- Reserves. On a cash-out, Fannie’s cash-out guidelines call for six months of reserves when DTI is above 45% on an automated file.
- After the project. You can pay the balance down, ask about recasting, or refinance again later if your situation changes. Every figure here varies by lender and program — guidelines, property type, leverage, and credit profile all apply.
The CFPB’s research on cash-out refinances found home repairs or new construction was the second most common reason borrowers gave for taking one. Common does not mean right for every file.
Tax treatment can depend on your situation; borrowers should speak with a qualified tax professional before relying on any deduction or credit.
What gets files stuck?
Documentation is where preventable problems start.
- Plans that do not match the contract. The appraiser and lender work from the same documents. A mismatch triggers questions.
- Scope changes. If something unplanned happens, the lender has to evaluate how material it is, and an updated appraisal may be needed.
- Seasoning on a recent purchase. Files that assume the 12-month and 6-month rules away get kicked back. Keep the settlement statement handy.
- A contractor who cannot show credentials. State licensing and the ability to finance the work are part of the review.
- Assuming the county limit. Confirm it before you size the project.
Lendmire’s team sees the same pattern on cash-out files in general: the math is rarely the problem, the paperwork around it is.
Lendmire’s cash-out refinance programs page lays out how the leverage tiers work.
Key Terms Defined
Conforming loan: a loan at or under the FHFA county limit, so Fannie Mae or Freddie Mac can buy it.
Jumbo loan: a loan above the conforming limit that follows each lender’s own rules.
As-completed value: the appraised value of the home after the planned work is finished.
Seasoning: the minimum time you must have owned the home or held the loan being paid off.
Draw: a release of renovation funds after an inspection confirms the work.
Frequently Asked Questions
Is a renovation loan the same as a cash-out refinance?
No. The agency renovation products are built as purchase or no-cash-out structures, and funds are released through draws. A standard cash-out refinance pays you at closing and values the home as it stands today.
Does the new loan have to stay under the conforming limit?
Not required, but it matters. At or under your county’s limit, the loan stays within agency underwriting. Above it, the loan is jumbo and each lender sets its own terms, which may be stricter or not.
What leverage can I reach on a conventional cash-out?
On the programs Lendmire arranges, 80% LTV on a one-unit principal residence and 75% on two- to four-unit homes, second homes and investment property, subject to lender guidelines. A wholesale lane reaches 89.99% with no mortgage insurance at a 680 score and a 50% ratio on a thirty-year fixed.
Can I use my own labor?
Sometimes. Fannie’s materials allow do-it-yourself work at the lender’s discretion on a one-unit owner-occupied home that is not manufactured, with limits on how much can be financed. Larger items need inspections, and sweat equity cannot be reimbursed.
What if the project costs more than the loan allows?
Shrink or phase the work, add savings, or change the structure, such as a conforming first mortgage with a separate home equity product. A jumbo loan is another path, with terms that vary by lender.
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 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 current conventional guidelines, see Lendmire’s conventional loan programs page.
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References
1. FHFA – Conforming Loan Limit Values for 2026
2. Fannie Mae’s HomeStyle Renovation page
3. Fannie Mae Selling Guide B5-3.2-03, HomeStyle Collateral Considerations
4. Freddie Mac CHOICERenovation Maximum Mortgage Worksheet
5. Fannie Mae Selling Guide B2-1.3-02, Limited Cash-Out Refinance
6. CFPB – Using home equity to meet financial needs
7. Fannie Mae Selling Guide B2-1.3-03, Cash-Out Refinance
8. CFPB – Cash-Out Refinances and Paydown Behavior
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 Electronic Verification Rules · Should You Trim a Cash-Out Refinance That Crosses the Conforming Limit? · Can a Condo Owner Get a Conventional Cash-Out Refinance?
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.