The Quick Read: These two products pull equity out of the same house in very different ways. An FHA cash-out refinance replaces your whole first mortgage with a bigger one and leaves you with one payment. A Texas home equity loan is a separate closed-end loan with a fixed lump sum. It adds a second lien and leaves your first mortgage alone. The catch for Texas owners is availability. Lenders widely report that FHA cash-out is not offered on a Texas homestead, so confirm that first. If it is off the table, the real choice is a Texas home equity loan or another Texas-compliant cash-out.
Who each option really fits comes down to your situation:
- FHA cash-out fits a borrower who wants a single new first mortgage and may have a credit profile that FHA handles well, where the program is actually available on the property.
- A Texas home equity loan fits a Texas homeowner with a first mortgage worth keeping and plenty of equity, who wants a separate loan on top of it.
Texas FHA cash-out estimate
Seeded with an example value, a balance to match, and a round cash request; change any field.
Editable benchmark: 7.32% as of October 22, 2026 · Freddie Mac 30-year average via FRED®. A conventional market reference, not an FHA cash-out refinance quote.
Illustrative starting assumptions: a $285,000 home value, a $157,000 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 rates for Texas. 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 inside the Texas homestead cap; 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. On a Texas homestead the state constitution caps the whole loan, financed premium included, at the FHA figure and adds a waiting period, a prescribed closing location, and a fee cap.
Side-by-Side
| Factor | FHA Cash-Out Refinance | Texas Home Equity Loan |
|---|---|---|
| Lien position | Replaces the first mortgage | Second lien on top of the first |
| Maximum leverage | 80% LTV | 80% combined, counting every lien |
| Credit floor | FHA files start at a 580 decision score | Set by the lender; varies |
| Mortgage insurance | Upfront and annual FHA premiums | No FHA premium |
| Occupancy | Owner-occupied primary home | Texas homestead |
| Seasoning | Owned and occupied 12 months | One-year seasoning on the equity loan |
| Documentation | Full income, credit and appraisal | Lender-set income, credit and valuation |
| Spouse consent | Per lender and title requirements | Each owner and spouse must consent |
| Texas homestead availability | Widely reported as unavailable; confirm | Available, under Texas rules |
Two terms in that table need a plain definition before the comparison goes deeper. Seasoning is the waiting period between events, such as buying a home and borrowing against it. LTV, or loan-to-value, compares the total debt to the home’s value.
For the FHA side in more detail, the FHA cash-out refinance program page covers how the loan is structured. Program figures are subject to lender guidelines and full file review, and nothing here is a commitment to lend.
Key Terms Defined
Homestead: the home you live in as your main residence, which Texas protects with special lien rules.
Lien: a lender’s legal claim against your home that must be repaid before the home can be sold or refinanced free and clear.
Mortgage insurance premium (MIP): the FHA charge that protects the lender, made up of an upfront piece and an annual piece.
Cash-out refinance: a new first mortgage larger than your payoff, with the difference paid to you.
Adjusted value: the appraised value figure FHA applies its leverage cap to.
How Each One Works
An FHA cash-out refinance is a federal insurance program. HUD’s Mortgagee Letter 2019-11 cut the maximum LTV on these loans to 80 percent of adjusted value. The change would strengthen equity in cash-out loans and reduce losses when a borrower defaults. The cap sits in HUD Handbook 4000.1, and Update 7.5 lists the 80 percent figure under its cash-out maximum mortgage amounts.
Across the wholesale programs we place FHA files with, the same envelope shows up. Cash-out reaches 80% LTV on a home you have owned and occupied for 12 months before the case number is assigned. Your payoff and closing costs come out first. What remains is your cash. The upfront premium is 1.75% of the base loan and is typically financed, so it eats into the same 80% ceiling. The annual premium runs between 0.15% and 0.75% of the balance, depending on term, amount and LTV. At 80% LTV on a thirty-year loan, that annual premium generally ends after eleven years.
Underwriting uses credit, income, payment history and the new payment. The base ratio pair is 31/43, housing to total. Documented compensating factors can stretch that toward 40/50 at the top tier, though the automated finding decides most files.
A Texas home equity loan comes from the Texas Constitution, not a federal program. Texas law lets a lender secure certain loans with homestead equity. That is a constitutional limit, not lender policy, so a lender cannot waive it.
The process has its own steps. Each owner and each owner’s spouse must consent. A statutory waiting period sits between application and closing. The OCCC is the place to check its exact length. The joint regulators’ home equity guidance also describes a one-year seasoning rule, with a narrow disaster exception that requires an oath from the homeowner.
Can You Actually Get an FHA Cash-Out on a Texas Homestead?
Probably not, and the honest answer is a little murky. Texas treats a cash-out refinance on a homestead as a home equity loan, so those rules apply to the new first mortgage too. Many lenders report that FHA cash-out is not available under that structure.
Lenders widely report this as the market reality in Texas, but it is not a quoted statute or a rule you can point to. Before you plan around FHA cash-out on a Texas home, ask a licensed loan officer to confirm availability for your property and check HUD Handbook 4000.1.
Many national FHA articles ignore this entirely. A Texas homeowner can read one and walk away believing the product is a sure option. Skip that trap. Ask the availability question first, before you spend time on credit and paperwork.
Even if FHA cash-out is available, another point trips people up. FHA measures its 80% against adjusted value, while Texas measures against fair market value. The two can land on different numbers, and the lower one controls.
When FHA Cash-Out Is the Better Fit
FHA cash-out works best when three things line up. The program must be available on your property. Your equity must support 80% LTV after the financed premium. And you must want one new first mortgage, not two payments. These specifics are subject to lender guidelines and a full review of property, leverage, and credit.
A few situations favor it:
- Credit that is bruised but recovering. FHA is generally more flexible on credit than conventional loans. That is a market characterization, not a HUD figure. Files in the network start at a 580 decision score, and HUD sets its own waiting periods after credit events, such as two years from a chapter 7 discharge and three years from a foreclosure.
- Your current first mortgage is not worth keeping. If you were going to refinance anyway, folding the cash into one loan is simpler than layering a second lien.
- You want one payment. A replacement first mortgage means a single monthly obligation on a larger balance.
The trade-offs are real. The FHA premium adds cost over the life of the loan, and financing it raises your balance. The loan resets your term. Leverage tops out at 80%, so thin equity shrinks your cash fast. And you must have owned and lived in the home for 12 months.
Run a quick check against purchase math, because it causes confusion. The 96.5% maximum applies to buying a home with FHA, not to cash-out. A borrower who expects 96.5% on a cash-out will be disappointed.
When a Texas Home Equity Loan Is the Better Fit
A Texas home equity loan is the stronger play when your first mortgage is worth protecting. Say your existing loan was set up on terms you like. Replacing it just to reach equity would mean giving up that first loan. A second lien lets you borrow against the equity and leave the first mortgage untouched.
It also suits Texas owners who want the process built around Texas protections. Each owner and spouse signs on. The 80% combined-lien limit is in the Constitution. A lender cannot make an exception.
If you are still torn, Lendmire’s piece Texas Cash-Out Refinance vs Home Equity Loan: What Decides goes deeper on that choice.
The trade-offs mirror FHA’s in reverse:
- Two payments. Your first mortgage stays, and the new loan adds another payment.
- A seasoning wait. One-year seasoning applies to the equity loan, with a narrow disaster exception.
- Combined lien math. The 80% cap counts every lien on the homestead, so an existing second lien or HELOC uses up room.
- A statutory waiting period before closing, which shapes your planning.
A home equity loan also carries no FHA mortgage insurance premium. Lender pricing and fee structure for these loans vary, and Texas limits certain lender fees. Read your Loan Estimate line by line and compare full terms.
What Both Options Share
Both products put your home at risk. If you stop paying, the lender can foreclose. Neither one is a free pool of cash.
Both also carry a federal right to cancel. The CFPB explains that refinances and home equity loans on your main home carry a three-business-day right of rescission, and Saturdays count as business days. Funds are released after that window. The right covers your primary residence, not a vacation or second home. Waiving it is limited to a genuine personal financial emergency.
Both leave you with at least 20 percent equity in the home. Lenders typically require you to keep a share of your home’s value as equity, whichever route you take.
Edge Cases That Change the Answer
A few situations bend the comparison.
Existing FHA borrowers. An FHA Streamline refinances an existing FHA loan with no appraisal and a limited credit review. It requires a net tangible benefit, and the premium continues. It does not put cash in your pocket, so it is not a cash-out. If your only goal is a better structure on the FHA loan you have, it is a different tool.
A rate-and-term FHA refinance. With an appraisal, an FHA rate-and-term refinance reaches 97.75% on a principal residence occupied for the previous twelve months. It changes your loan terms but does not take cash.
Modifications. In the Sims discussion in the OCCC guidance, a modification that does not satisfy and replace the original home equity loan, and creates no new extension of credit, is not a new home equity loan. If you are adjusting an existing equity loan, ask whether the change counts as new credit.
Inherited homes. An FHA borrower generally needs to occupy the home, and the occupancy minimum has narrow exceptions for inheritance. Confirm the details in the Handbook before you count on one.
Rental or second home. If the property is not your main residence, occupancy decides leverage and eligibility. Neither product here is built for that.
Which Fits You? A Quick Decision Guide
Match your situation to the starting point:
- You have an FHA loan already and want cash. Ask whether FHA cash-out is offered on your Texas homestead. If it is not, a Texas home equity loan may be the practical route, since it leaves the FHA loan in place.
- You have a first mortgage you like. Lean toward a home equity loan, since replacing the first loan would give it up.
- You are replacing your first mortgage anyway. Compare a cash-out refinance structure against a separate second lien on total cost.
- Your credit is limited. FHA is generally more flexible. A Texas home equity lender sets its own floor, so ask what it is.
- Your equity is thin. Both options cap at 80% leverage, and the FHA premium reduces your cash. A smaller draw may be your only option.
- You want a single payment. Cash-out gives you one. A second lien gives you two.
What to Ask Your Loan Officer
- Is FHA cash-out offered on my Texas homestead, and where is that written?
- What is my maximum cash after the financed upfront premium?
- How are my appraised value and the fair market value being measured?
- Do any existing liens use up my combined 80%?
- What does the Loan Estimate show for each option, line by line?
- What waiting period applies before closing, and when does the rescission window start?
Frequently Asked Questions
Can I get an FHA cash-out refinance on a Texas primary home?
Lenders widely report that it is not available on a Texas homestead, because Texas treats a homestead cash-out as a home equity loan. Confirm with a licensed loan officer and the HUD Handbook before you plan around it.
Can I keep my current first mortgage and still get cash?
Yes, with a Texas home equity loan. It sits as a second lien, so your first mortgage stays in place. The 80% combined-lien limit counts both loans together, so your first mortgage balance uses up part of the room.
How many payments will I have under each option?
An FHA cash-out replaces your first mortgage, so you make one payment on the larger balance. A Texas home equity loan adds a second payment alongside your first mortgage. Which one costs less overall depends on your existing loan and the terms you are offered.
Does FHA cash-out let me borrow up to 96.5% of my home’s value?
No. The 96.5% maximum applies to FHA purchases. FHA cash-out tops out at 80% LTV, and HUD cut it to that level from 85 percent. The financed upfront premium counts toward the cap. Terms depend on the lender’s guidelines, the property type, the leverage, and a full review of the credit profile.
Can I cancel after I sign?
Yes, on your main home. Both loans carry a three-business-day right to cancel, and Saturdays count. Funds are released after that window, and the right does not extend to second homes or vacation properties.
The Balanced Verdict
Neither option wins across the board, and for Texas owners the first question is availability, not preference. If FHA cash-out is offered on your homestead, it suits a borrower who wants one new first mortgage and values FHA’s credit flexibility. Weigh the premium and the 80% ceiling against the first loan you would give up.
If you want to keep a first mortgage you like, a Texas home equity loan is the cleaner structure. You trade a second payment, a seasoning rule and a waiting period for protection of the loan you have.
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 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 Mortgagee Letter 2019-11
2. HUD Handbook 4000.1 Update 7.5
3. Texas Joint Regulators Home Equity Guidance
4. CFPB Ask CFPB: right of rescission
This article is part of Lendmire’s FHA cash-out refinance program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: How an FHA Lender Sizes a Cash-Out Refinance on a Primary Home · FHA Cash-Out Refinance vs HELOC When LTV Limits Your Equity · Is an FHA Cash-Out Refinance Legitimate and Who Is Eligible?
Guides: FHA Cash-Out Refinance in Texas
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Required disclosures. Lendmire (NMLS# 2371349) operates as a licensed mortgage broker, not a direct lender or depository. The discussion in this article is general in nature and should not be relied upon as financial, legal, or tax advice — every investment scenario is unique and should be reviewed by a qualified professional. Any loan inquiry is subject to lender underwriting, and this article is not a commitment to lend or a guarantee of approval. Mortgage rates, loan terms, and program guidelines vary by borrower, property, and state, and may change without notice. Equal Housing Opportunity. Verify licensure at NMLS Consumer Access.