The Quick Read: Usually, yes. Condo ownership does not rule out an FHA cash-out, and neither does living in a state with heavy closing costs. Two things decide the outcome: whether your building is eligible and whether you meet the usual cash-out rules, including a cap of 80% of the home’s value. Everything here is subject to lender guidelines and full file review.
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.
The Short Answer, Piece by Piece
The state you live in does not change FHA eligibility. FHA has no rule that treats one state differently on a cash-out. Where you live changes what the loan costs to close. It does not change whether you can get it.
The condo is a different story. With a house, the lender looks at you and the property. With a condo, the lender also looks at the building. A borrower with plenty of equity and clean credit can still be stopped by a project that fails the review.
Here is what Lendmire sees on these files. Borrowers spend their energy on the equity number. The files that stall are almost always stalled by the building. Check that first.
What Does “High-Cost Closing State” Actually Mean?
The phrase has two readings, and they are easy to mix up.
Reading one: states where closing a loan costs more. Some states charge transfer or recording taxes, require attorneys, or run heavier title processes. This affects how much cash you walk away with. It does not affect whether FHA allows the loan.
Reading two: high-cost loan-limit areas. FHA uses “high-cost” for one thing: county loan limits. A high-cost area is a county where the limit sits above the national floor. County loan limits apply to your loan, and they change every year, so this article does not quote them. The label says nothing about closing costs.
If you meant the first reading, read the closing-cost section below. If you meant the second, read the loan-limit section.
How an FHA Cash-Out Works on a Condo
A cash-out refinance replaces your current mortgage with a new, larger one. You receive the difference in cash, after payoff and costs. The mechanics are the same for a condo and a house.
The FHA cash-out refinance program reaches 80% LTV on a home you have owned and occupied for 12 months before the case number is assigned. LTV means loan-to-value: the new loan divided by the home’s appraised value. The case number is the file number FHA assigns when your lender opens the loan. Final terms depend on the lender’s guidelines, the property type, and the borrower’s complete credit picture.
Compare that with a purchase. A purchase can reach 96.5% financing with 3.5% down, from a 580 decision score. A cash-out cannot. The 80% cap is what makes cash-out equity feel smaller than people expect. Each figure is subject to lender guidelines and a complete review of property type, leverage, and credit.
The cap has a history. HUD’s Mortgagee Letter 2019-11 cut the cash-out limit from 85% to 80% for cases from September 2019 on. Older articles that quote 85% or 90% are out of date.
The Borrower Side
Across the wholesale programs Lendmire places FHA files with, the borrower basics look like this:
- Principal residence only. You live in the condo. A second home or an investment condo does not qualify for an FHA cash-out.
- Twelve months of ownership and occupancy before the case number.
- A decision score of 580 or higher. Some lenders set a higher floor on their own.
- Debt ratios. The base pair is 31/43: housing payment over income, and total debts over income. Documented compensating factors can stretch that to 40/50 at the top tier. The automated finding governs most files.
- Mortgage insurance. There is an upfront premium of 1.75% of the base loan, usually financed into the balance. There is also an annual premium between 0.15% and 0.75% of the balance, depending on term, loan amount and LTV.
On the annual premium, a cash-out lands at or below 80% LTV by design. On a thirty-year loan at or below 90% LTV, the annual premium ends after eleven years. Above 90%, it lasts the full term. That matters for cash-out borrowers, because the 80% cap puts you in the better bracket. Leverage, reserves, and pricing vary by lender and program; the final terms follow the full file review.
Why the Building Matters as Much as You Do
The condo project has to meet FHA’s approval standards. HUD’s FHA condominium page lists what the review covers: insurance coverage, the project’s finances, title, pending legal action, physical condition and marketability.
In plain terms, the lender wants to know that the association is healthy. Does it collect dues? Does it carry proper insurance? Is anyone suing it? Is the building in decent repair? A weak answer on any of these can sink the loan.
FHA also limits how much of a project can be FHA-insured, and it expects a healthy share of owner-occupants. These tests protect the lender from a building full of renters or a building where one loan program is overexposed. HUD can adjust the percentages by notice, so the current numbers belong to your lender, not to an article. The Federal Register rule on single-family condo approval also lets HUD suspend new case numbers in a project that exceeds its limits.
That last point surprises people. You can be a perfect borrower and still be told the building is not eligible.
What If My Building Is Not on the Approved List?
There is a second route called single-unit approval. It lets a lender review one unit in a completed project that FHA has not approved. The project must meet a smaller set of requirements, and a minimum unit count applies.
Here is the open question. HUD’s paperwork treats single-unit approval as a parallel path to project approval, but it does not say whether that path is allowed or barred for a cash-out specifically. Whether a given lender will use it on a cash-out is a question for that lender, answered against the handbook. Ask directly before you pay for anything.
HUD-published instructions for Form HUD-9991 note that the lender completes the form from verifiable sources, such as the association, its management company or public records. Your part is to be ready: expect to ask your association for documents.
A Quick Decision Table
| Your situation | Likely path |
|---|---|
| Building is FHA-approved | Standard cash-out review |
| Not approved, but unit may qualify | Ask a lender about single-unit approval |
| Project over its FHA concentration limit | Unit likely ineligible; look at other programs |
| Weak association finances or active litigation | Expect trouble; confirm before applying |
| Existing FHA loan, no cash needed | Streamline may fit (not a cash-out) |
On that last row: a streamline refinances an existing FHA loan with no appraisal and a limited credit review. An older HUD help page says the condo questionnaire is not required for an FHA-to-FHA streamline. That exemption does not carry over to a cash-out. Do not assume it does.
How HOA Dues Affect Your Qualifying
Dues count. Lenders include your monthly association dues in the housing side of your debt ratio, alongside the new loan payment, insurance and taxes. Higher dues push the first number in 31/43 up, which can reduce how much loan you qualify for.
Two things follow from that. A condo with high dues has less room under the housing ratio than a house at the same price. And a cash-out that raises your balance pushes the ratio up a second time.
Dues also show your project’s health. Heavy delinquency in the building is a red flag for the project review. Special assessments, which are one-time charges the association levies on owners, also draw lender attention.
Association dues typically are not paid through your escrow account. You pay them directly, so they do not show up in your lender’s escrow line, but they still count in the ratio.
How Appraisals and Loan Limits Cap Your Cash
Two ceilings apply at once. The lender uses the lower one.
1. The 80% cap. The new loan cannot exceed 80% of the home’s adjusted value. That is the appraised value, adjusted under FHA’s rules. A condo appraisal leans on recent sales of similar units, plus project factors. A lower appraisal shrinks your cash dollar for dollar.
2. The county loan limit. Your area has a maximum FHA loan amount. In high-cost counties, the limit is higher than the national floor. For many condos the 80% cap binds first, but in expensive markets the county limit can matter.
Don’t treat the loan limit as your cash-out cap. It is a ceiling on total loan size, not a measure of your equity.
Closing Costs by State: Where Differences Really Show Up
Closing costs are the upfront costs of getting the loan and transferring or recording ownership. The CFPB’s Loan Estimate explainer defines them the same way. The agency’s own research points to lender origination charges and title fees as the largest categories.
State differences live mostly in the title and government side of closing costs. No federal source ranks states on this, so this section stays general.
| Cost driver | What it is | Varies by state? |
|---|---|---|
| Title and settlement | Search, insurance, closing agent | Yes |
| Recording fees | Filing the new mortgage | Yes |
| Transfer or mortgage taxes | State or local tax on the loan | Yes, sometimes heavy |
| Attorney involvement | Required in some states | Yes |
| Escrow and prepaids | Insurance and tax setup | Some |
| Condo document fees | Association paperwork charges | By association |
Some states let you reduce a recording or mortgage tax with paperwork that carries your old loan forward. A CEMA is one example of that. Lendmire’s piece How to Use a CEMA on an FHA Cash-Out in a High-Cost Closing State covers how it works. And for a deeper look at the cost side, see Lendmire’s piece How Much a High-Cost Closing State Like Florida Adds to an FHA Cash-Out.
Your Loan Estimate shows every cost line. Compare it line by line before you commit.
Worked Examples (Percentages, Not Dollars)
These use percentages of value only. They show the logic, not a quote.
Example one: approved building, lighter closing costs. Your condo appraises at 100% of value. You owe 55% of that. The 80% cap leaves a gap of 25 points of value. From that gap, costs and the financed upfront premium come out, and the rest is your cash.
Example two: same condo, heavy closing costs. Same value, same payoff. The cap gap is still 25 points. But transfer taxes and attorney charges take a bigger bite, so your net cash is smaller. The size of the loan did not change. The cost of closing it did.
Example three: high-limit county. Your condo sits in a county with a high limit. At the 80% cap, your loan lands well under the county limit, so the cap decides everything. A higher limit does not mean more cash.
In all three, the order is the same: appraised value, then 80%, then payoff, then costs. The remainder is yours.
FHA Cash-Out vs. Other Ways to Pull Equity
Not every condo owner should pick FHA. Weigh these tradeoffs honestly:
- FHA cash-out. Accessible credit standards and a 580 floor at the wholesale programs Lendmire places with. The cost is mortgage insurance, and the 80% cap.
- FHA rate-and-term. No cash taken, but it can reach 97.75% on a principal residence you have occupied for the previous twelve months. Useful if your goal is a different term or a lower payment, not cash.
- FHA streamline. Only for an existing FHA loan. No appraisal, limited credit review, and you need a net tangible benefit.
- Conventional cash-out. Different condo rules apply. Fannie Mae and Freddie Mac set their own owner-occupancy and project standards, and some projects pass one program and fail the other.
- Home equity loan or line. Leaves your first loan alone. Often worth a look if your current loan is a keeper.
If your first mortgage has features you value, a second-lien product may serve you better than replacing the whole loan. If you need the building to clear a different set of tests, a conventional program may be the answer. Honestly, neither is clearly better. It depends on your balance, your credit and your building.
Your Pre-Application Checklist
Before anyone pulls your credit, confirm these:
1. Building status. Is the project FHA-approved? If not, ask about single-unit approval on a cash-out.
2. Occupancy history. Have you owned and lived in the condo for 12 months?
3. Payment history. Have your mortgage payments been on time?
4. HOA standing. Are your dues current? Is the association facing a lawsuit or heavy delinquency?
5. Equity math. Take 80% of a realistic value, subtract your payoff, and expect costs to shrink the result.
6. Ratio check. Add dues to your housing payment and see how it sits against 31/43, or higher with documented compensating factors.
7. County limit. Ask your lender what applies in your county.
8. Closing-cost drivers. Ask your lender which state and local charges apply to your loan.
Key Terms Defined
Condo project approval: FHA’s review of the whole building, covering insurance, finances, title, litigation, condition and marketability.
Single-unit approval: A route that lets a lender review one unit in a completed project that FHA has not approved.
Seasoning: The waiting period a lender wants between events. Here, 12 months of owning and living in the home before the case number.
UFMIP (upfront mortgage insurance premium): A one-time FHA premium of 1.75% of the base loan, usually financed.
Adjusted value: The appraised value as FHA’s rules count it. The 80% cap applies to this number.
County loan limit: The maximum FHA loan amount for your county, set each year.
Closing costs: The upfront costs of getting the loan and transferring or recording ownership.
Frequently Asked Questions
Do I need an existing FHA loan to get an FHA cash-out?
No. A cash-out can replace a conventional loan too. Only the streamline requires an existing FHA loan. You still need to meet the ownership, occupancy and payment-history rules, subject to lender guidelines.
What if my condo building is not FHA-approved?
You may still have a path. Single-unit approval lets a lender review one unit in an unapproved project. Whether it can be used for a cash-out varies, so ask each lender directly. If neither route works, other programs have their own condo rules.
Do HOA dues reduce how much I can borrow?
Often, yes. Dues count in your monthly housing figure, which is the first number in the 31/43 ratio. Higher dues leave less room. Documented compensating factors can raise the ceiling, up to 40/50 at the top tier, subject to the automated finding.
Can I take cash out of a second-home or rental condo with FHA?
No. The FHA cash-out is for your principal residence. Occupancy decides the leverage, so a condo you do not live in falls outside this program.
What can I do with the cash, and does it affect my taxes?
FHA does not restrict how you use cash-out proceeds. Tax treatment can depend on your situation; borrowers should speak with a qualified tax professional before relying on any deduction or credit.
Next Step
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. The first call to make is about your building, because it decides more than your state ever will.
For your own numbers, request a scenario review with Lendmire.
About Lendmire
As a mortgage broker (NMLS# 2371349), Lendmire helps homeowners and home buyers in 16 states with FHA, VA, conventional and jumbo purchase and refinance loans arranged through wholesale lenders. Lendmire is never the lender; program terms are set by the lender and the agency guidelines. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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References
1. HUD Mortgagee Letter 2019-11
3. Federal Register, Project Approval for Single-Family Condominiums
4. CFPB Loan Estimate explainer
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: How Much a High-Cost Closing State Like Florida Adds to an FHA Cash-Out · Can an FHA Condo Owner Take Conventional Cash-Out and Drop MIP? · FHA Cash-Out Closing Costs Line by Line Under the Cap
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.