The Quick Read: These two loans serve different homeowners, and the size of your new loan usually decides which one is open. FHA cash-out fits a homeowner whose new balance sits under the county FHA limit and who wants credit flexibility more than a large cash payout. Jumbo cash-out fits a homeowner whose new balance is above the conforming limit and who has the credit, equity, and reserves a jumbo lender wants. A balance between those two limits is neither FHA nor jumbo, and an ordinary conventional cash-out often serves it.
Key Takeaways
- FHA cash-out tops out at 80% of the home’s value, so at least 20% equity stays in the home.
- FHA limits are set by county and reset every year. Look up your own county before you plan around any number.
- Jumbo rules are not set by a federal handbook. Each lender sets its own leverage, credit, and reserve standards.
- FHA adds a mortgage insurance line. Jumbo shifts the weight to credit, reserves, and documentation.
- Leaving a conventional loan for FHA is a real trade-off, and it rarely pays off for a strong-credit borrower.
Side-by-Side
Here is how the two paths compare on the factors that decide eligibility. Every figure on the FHA side is subject to lender guidelines and full file review.
| Factor | FHA County-Limit Cash-Out | Jumbo Cash-Out |
|---|---|---|
| What caps the loan size | County FHA limit | Starts above the conforming limit |
| Maximum leverage | 80% LTV | Set by each lender |
| Credit floor | 580 decision score at the programs Lendmire uses | Often higher; set by lender |
| Mortgage insurance | Upfront and annual premium | Varies by lender |
| Occupancy | Owned and lived in 12 months | Lender-set; may allow other uses |
| Documentation | Ratios 31/43 up to 40/50 with documented factors | Lender-set; often stricter DTI and reserves |
Two rows deserve a plain-language note. First, the FHA leverage cap is a ceiling on the combined balance, including any second mortgage that stays on the home. Second, jumbo has no single rulebook, so the “jumbo” column describes a range, not a standard.
Which Lane Does Your New Balance Land In?
Start with the new loan amount, not the product. Your new balance falls into one of three lanes.
1. Under the county FHA limit. FHA cash-out is available if you meet the occupancy, credit, and equity rules.
2. Above the FHA limit but within the conforming limit. FHA is out. This middle band is usually served by a conventional conforming cash-out.
3. Above the conforming limit. This is jumbo territory. Fannie Mae and Freddie Mac cannot buy the loan, so the lender sets the terms.
In most counties, the FHA limit sits well below the conforming limit. The FHA limit is tied by statute to the conforming limit that the FHFA sets, according to HUD’s announcement of the annual limits. FHA has a national floor and a high-cost ceiling. That ceiling is 150 percent of the national conforming limit. The conforming limit itself rises in high-cost areas, and FHFA’s loan limit release explains how those county-level values are set. So the two limits can meet only in the most expensive counties.
Both limits are county-level. The same loan amount can be conforming in a high-cost county and jumbo in a baseline county. Check your county on HUD’s FHA mortgage limits search and FHFA’s county list. A state or city number won’t tell you.
The Terminology Trap
Three phrases get tangled online, so here is how this article uses them.
- FHA high-balance means an FHA loan above the national floor but within the county’s FHA limit.
- “FHA jumbo” is a casual phrase. Some pages use it for FHA high-balance, and others mean a loan above the FHA limit. FHA has no product above its own limit.
- Jumbo means a conventional loan above the conforming limit.
Why a Conventional Homeowner Is the Special Case
If you already have a conventional loan, you are not choosing between two new products. You are deciding whether to leave one loan type for another.
A cash-out refinance replaces your whole first mortgage with a new loan. Moving to FHA means the FHA rules apply as if the loan were new. You must have owned and lived in the home as your principal residence for 12 months before the case number is assigned. HUD’s Handbook 4000.1 governs those rules. HUD’s refinance rules also do not let income from a non-occupant co-borrower help you qualify on a cash-out, though lenders confirm the details file by file.
Across the wholesale programs Lendmire works with, the pattern is consistent. Homeowners with strong credit and steady income rarely gain by moving into FHA from a conventional loan. They pick up a premium line and a lower leverage ceiling than they may have wanted. Homeowners with bruised credit, a thin file, or a high debt load sometimes find FHA is the only door that opens. Lendmire’s comparison of FHA and conventional cash-out for credit and DTI walks through that split in more detail.
When FHA Cash-Out Is the Better Fit
FHA is the better fit when flexibility matters more than size. It tends to work best in these situations.
- Your credit has taken a hit. The wholesale programs Lendmire places FHA loans with start at a 580 decision score. HUD’s waiting periods also apply after credit events: two years from a chapter 7 discharge and three years from a foreclosure. These are HUD rules, not a promise from any lender. Many jumbo lenders expect more credit strength, as consumer bank explainers commonly note.
- Your debt load is high. The base ratio pair is 31/43 (housing over total debt) with no compensating factors. Documented factors can reach 40/50 at the top tier. The automated finding governs most files. A jumbo lender may look for lower debt ratios and more cash in reserve.
- Your new balance sits comfortably under the county limit. A homeowner whose loan is modest relative to the home’s value is the natural FHA candidate.
- You can live with 20% equity staying in the home. FHA cash-out is not a path to higher leverage. HUD cut the cap from 85 to 80 percent of adjusted value to reduce risk to the FHA Insurance Fund, and the cap applies to the combined balance of all liens.
- You want one program with clear published rules. FHA’s rules are written down in a federal handbook. Jumbo’s are not.
The cost side matters too. FHA charges an upfront premium of 1.75% of the base loan, which can be 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 at or below 90% LTV, the annual premium ends after eleven years. Above 90% LTV it lasts for the term. At the 80% cash-out cap, that first case applies. These are program mechanics, not a price quote, and your Loan Estimate shows what applies to your file.
The program itself is covered on Lendmire’s FHA cash-out refinance program page.
When Jumbo Cash-Out Is the Better Fit
Jumbo is the better fit when the size of the loan is the problem. It works in these situations.
- Your new balance is above the conforming limit. FHA is closed to you regardless of credit, because the loan cannot fit under the county FHA limit. Jumbo is the main lane left.
- You have strong credit and low debt. Jumbo lenders may ask for a higher credit score, a lower DTI, and more cash reserves. If you clear those bars, you skip the FHA premium line entirely.
- You want more flexibility on property use. Jumbo lenders may finance second homes and other property types, while FHA cash-out is for a principal residence.
- You want to keep more of the home’s value in hand. FHA caps you at 80%. A jumbo lender may set its own cap, which could be higher or lower depending on its guidelines and the file.
Here is the catch. Jumbo terms vary a great deal between lenders. Many jumbo loans are built to meet the Qualified Mortgage standard, but not all do. Reserves, appraisal type, and documentation can differ from one lender to the next. Getting a clean comparison takes more legwork than FHA does.
If your balance is close to the conforming line, ask whether trimming the cash-out would move you into a cheaper lane. Lendmire has a separate piece Jumbo Cash-Out vs High-Balance for a Homeowner Near the Limit for that situation.
Three Scenarios, Without the Dollar Signs
These are illustrations in percentages and plain words. They are not offers or approvals.
Scenario one: a balance well under the FHA limit. A homeowner owes about half the home’s value. A cash-out to 80% LTV would stay under the county FHA limit. Credit is middling and debts are heavy. FHA is the natural first look. The trade-off is the premium line and the 20% equity that stays put. Final terms depend on the lender’s guidelines, the property type, and the borrower’s complete credit picture.
Scenario two: a balance between the two limits. A homeowner wants a new loan above the county FHA limit but below the conforming limit. FHA doesn’t fit, and jumbo isn’t needed. A conventional conforming cash-out is the likely path. Trimming the cash-out might also bring the balance back under the FHA limit, but that only helps if the credit profile points toward FHA in the first place.
Scenario three: a balance above the conforming limit. A homeowner with strong credit, solid reserves, and ample equity needs a larger loan. Jumbo is the lane. The question becomes which lender’s guidelines suit the file best, since each sets its own rules.
Where the General Rule Breaks
A few edge cases change the picture.
- Unit count. FHA limits differ for two- to four-unit homes. FHA cash-out is for owner-occupied principal residences, so the unit count and occupancy both matter.
- Special areas. Alaska, Hawaii, Guam, and the U.S. Virgin Islands have special statutory limit rules, per FHFA.
- A second lien. A second mortgage that stays on the home counts against the 80% cap. It doesn’t let you get past it.
- Property type and inheritance. Manufactured homes and inherited homes have their own rules on the ownership test. A loan officer should confirm them against HUD’s text.
- Yearly changes. Limits reset each January. The numbers you read last year may not apply this year.
- Payment history. FHA cash-out needs a clean recent mortgage payment history. Lenders confirm the exact standard.
Think About What the Cash Is For
Cash-out spreads the cost of the money across a new thirty-year-style loan. The CFPB’s research on cash-out borrowers found that more than half of survey respondents from 2014 to 2019 cited paying off other bills or debts. Home repairs ranked second. The same release cautions that paying non-mortgage debts with mortgage debt can raise the risk of foreclosure. Using the equity for a home improvement is a different case from clearing credit cards, and the second deserves a harder look.
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 mortgage that pays off your old one and lets you take part of your equity as cash.
County FHA limit: The most FHA will insure on a home in your county, which resets each year.
Conforming limit: The largest loan Fannie Mae and Freddie Mac can buy, set each year by the FHFA.
Jumbo loan: A loan above the conforming limit, with terms set by each lender.
CLTV: The combined loan-to-value ratio, which adds every mortgage on the home and divides by its value.
Mortgage insurance premium (MIP): The FHA insurance charge, paid partly upfront and partly through the year.
The Balanced Verdict
For a conventional homeowner, the honest answer is that loan size picks the lane and credit picks the comfort level inside it. If the new balance fits under the county FHA limit and credit or debt ratios are the obstacle, FHA cash-out is a sensible option, with a premium line and a 20% equity cushion as the cost. If the balance is above the conforming limit and credit and reserves are strong, jumbo is the practical route, with more lender-to-lender variation. If the balance falls in between, neither may be the best fit.
The flip point is credit strength. A borrower with strong credit and a modest balance usually has no reason to leave conventional for FHA. A borrower with weaker credit and a large balance may find that no lane is comfortable, and that is a signal to trim the cash-out or wait, not to force a fit.
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. Call 828-256-2183 or request a quote. Program figures are subject to lender guidelines and full file review, and nothing here is a commitment to lend.
Frequently Asked Questions
Can I use FHA cash-out if my new loan is above the county limit?
No. FHA only works where the new balance fits under your county’s FHA limit. If the amount you want is above it, the options are trimming the cash-out, a conventional conforming loan if you are under the conforming limit, or a jumbo loan if you are above it.
How much equity do I have to leave in the home with FHA?
At least 20%. FHA cash-out is capped at 80% of the home’s adjusted value, counting every lien on the property. A second mortgage that stays in place uses up part of that room.
Does jumbo cash-out have a standard credit score and leverage?
No. No federal handbook sets jumbo credit or leverage rules, so each lender sets its own. Jumbo lenders may look for higher credit scores, lower debt ratios, and more reserves, but the exact bar differs between lenders and files.
Is mortgage insurance required on both loans?
FHA carries an upfront premium of 1.75% of the base loan, which can be financed, plus an annual premium that depends on term, loan amount, and LTV. Jumbo mortgage insurance treatment varies by lender, and many jumbo loans carry no such line. Your Loan Estimate shows what applies.
When do the loan limits change?
Each year. FHFA and HUD announce new limits in late fall to early December, and they take effect in January. Look up your county on the official tools before you plan around a number.
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.
For current guidelines, see FHA loan programs.
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References
1. HUD announcement of annual FHA loan limits
2. FHFA conforming loan limit release
3. HUD Handbook 4000.1 Overview
4. HUD Mortgagee Letter 2019-11
5. The CFPB’s research on cash-out borrowers
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 and Conventional Cash-Out Requirements for a Condo Primary Home · Does an FHA Cash-Out Near the County Limit Get an MIP Refund?
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.