The Quick Read: The best program is a true cash-out refinance on the home you live in, not a limited cash-out, an FHA Streamline or a VA streamline refinance. Only the true cash-out pays out usable equity, and the amount is capped by loan-to-value, seasoning and your debt-to-income ratio. Whether it fits depends on your equity, credit profile and how the old payment sits next to the new one.
What Counts as a Cash-Out Refinance for a Home Purchase?
A cash-out refinance replaces your current mortgage with a larger one and pays you the difference. You use that cash toward the next house. The loan is secured by the home you own now, so it is the old home’s equity that funds the new home’s down payment.
Cash-out refinance estimate
The starting figures are an example value with a balance and a cash request in proportion. Replace them with yours.
Editable benchmark: 7.24% as of October 29, 2026 · Freddie Mac 30-year average via FRED®. A conventional market reference, not a cash-out refinance quote.
Illustrative starting assumptions: a $350,000 home value, a $193,000 current balance, the agency cap on a one-unit principal residence, a thirty-year term at the current Freddie Mac benchmark, and property taxes and insurance estimated at typical national rates. Every field is editable.
Illustrative estimate only — not a Loan Estimate, approval, quote, or commitment to lend. The rate field carries the weekly Freddie Mac thirty-year conventional benchmark, a market reference and not a cash-out refinance quote; a cash-out loan is priced by the lender at lock. The cash available is the loan the program cap allows less the balances paid off, before closing costs, which are not included. The HELOC line is the program’s combined loan-to-value ceiling applied to the same value and balance. Taxes and insurance are editable estimates. Licensed in sixteen states for consumer mortgages.
Three program types get confused here, and the confusion sinks plans early:
- Limited cash-out (rate-and-term). Pays off the existing first mortgage, closing costs and a purchase-money second lien. Only incidental cash comes back. It is not an equity tool.
- FHA Streamline and VA streamline refinance. No-cash-out programs for borrowers who already hold an FHA or VA loan. Neither can fund a down payment. The VA’s home loan pages separate the VA streamline refinance from the VA cash-out loan, which is open to eligible veterans.
- True cash-out. Conventional, FHA and VA versions exist. Each sets its own leverage cap, and each is underwritten more tightly than a rate-and-term loan.
So the “best program” question has a short answer. If you need cash for a down payment, you are shopping true cash-out loans. Everything else on the menu pays off a loan, not a down payment.
Lendmire’s cash-out refinance programs page lays out the structures the wholesale network places. Lendmire is a mortgage broker licensed for consumer lending in 16 states. It arranges the loan; a wholesale lender reviews and decides.
Which Program Fits Which Borrower?
The best program for your situation turns on what you hold today. A conventional borrower, an FHA borrower and a veteran each land in a different lane, and the lenders that write each lane differ.
| Borrower situation | Program lane | Main tradeoff |
|---|---|---|
| Conventional loan, solid equity | Conventional cash-out | 80% LTV cap on a one-unit home |
| Strong score, conforming balance, primary home | Wholesale no-MI lane | Reaches 89.99% LTV; 680 score, 50% ratio, 30-year fixed |
| Existing FHA loan, wants cash | FHA cash-out | Its own leverage cap plus mortgage insurance |
| Eligible veteran | VA cash-out | Funding fee applies |
| Balance above conforming limit | Jumbo lane | 660 score, up to 90% leverage on fixed lanes |
The conventional cash-out tops out at 80% LTV on a one-unit principal residence. That means after the refinance, your new loan cannot exceed 80% of the appraised value. Equity above that line stays in the house. Terms vary by lender guidelines, property type, leverage, credit profile, and full file review.
Across the wholesale programs Lendmire works with, one lane reaches 89.99% LTV with no mortgage insurance. It needs a 680 score, a 50% ratio, a thirty-year fixed rate, a primary residence and a conforming balance. It carries its own six months of seasoning. In Texas, the homestead cash-out is capped by the state constitution at the agency figure, and that wholesale lane is not written there. Exact terms depend on the lender’s guidelines, property type, leverage, and a full review of the borrower’s file.
Mortgage insurance usually enters the picture on rate-and-term loans above 80% LTV. Typical published annual premiums run 0.58% to 1.86% of the balance. That is a range, not a quote. It cancels on request at 80% of original value with a good payment history, no subordinate liens and no decline in value. The servicer must end it automatically at 78%.
How Is the Loan Underwritten, Step by Step?
Underwriting a cash-out loan follows a fixed order. Each step can stop a file, so it helps to know where the gates are.
1. Occupancy and property type. The lender confirms the home is your principal residence, a second home or an investment property. Occupancy sets the leverage cap. A one-unit principal residence gets 80%. Two- to four-unit homes, second homes and investment properties get 75%.
2. Seasoning. The first mortgage being paid off must be at least 12 months old, counted note date to note date. A borrower must also have been on title for 6 months. There are exceptions for delayed financing, inheritance and legal awards.
3. Credit. Wholesale conventional programs start at a 620 decision score. The automated underwriting finding governs most files. Manually underwritten loans carry tighter ratios and reserve requirements.
4. Debt-to-income. The automated total ratio ceiling is 50%. Manual files run at 36% or 45%, depending on score and reserves. Here is the catch for this particular plan: the new house’s payment and the old house’s payment can both count.
5. Appraisal. The appraised value sets the ceiling. Max loan equals the LTV cap times the value, less your existing balance, less costs.
6. Disbursement. The new loan pays off the old lien. Net proceeds go to you. You then use them toward the new purchase.
You will receive a Loan Estimate and, later, a Closing Disclosure. The CFPB’s Owning a Home resource explains how to compare them line by line. Compare the loan terms and the costs, not just the headline monthly figure.
The Sequence Problem: Refinance First, Then Buy
The refinance has to close and fund before the purchase does. That is the single biggest planning point. A purchase contract that depends on money you have not received yet puts the whole plan at risk.
Run the sequence this way. Get the refinance file clean and moving first. Hold the purchase contract until you know the proceeds are real, or write the contract with enough room for the refinance to land. Do not assume the two closings line up on their own.
Second, the new lender will look at the old home’s payment. If you keep the old home, the lender needs to see how that payment is treated: kept as a primary residence until you move, or converted to a rental. Rental treatment brings lease and income documentation requirements. If you plan to sell the old home, the purchase lender may want the sale documented before it removes that payment from the ratio.
Third, your equity drops. The old home now carries a bigger loan. If values slip, you have less cushion in the home that secures the cash.
Where the General Rule Breaks
A few edge cases change the answer.
You hold an FHA or VA loan and want a lower payment, not cash. A Streamline or IRRRL fits that goal. The FHA Streamline carries no appraisal and a limited credit review, with a net tangible benefit test. FHA rate-and-term loans go to 97.75% with an appraisal. The VA IRRRL carries a 0.5% funding fee unless exempt, no VA appraisal, a net tangible benefit test, and seasoning of the later of 210 days and 6 payments. Neither gives you cash toward a down payment.
The purchase is a second home or investment property. Occupancy decides leverage. On a purchase, second homes reach 90%, and investment property reaches 85% on one unit and 75% on two to four units. That governs the new house’s loan, separate from the refinance on your current home.
You are close to the 12-month seasoning line. A recent purchase or a recent refinance of the old loan can disqualify you. Files that skip this check get kicked back. The delayed financing exception covers some cash purchases, so ask about it if that is your history.
A past credit event. Agency waiting periods apply: four years from a chapter 7 discharge, seven from a foreclosure, four from a short sale or deed-in-lieu. Documented extenuating circumstances can shorten them.
Balance above the conforming limit. Jumbo lanes take over. They start at a 660 decision score, reach 90% leverage on fixed lanes, go to $5,000,000, and carry a 50% ratio ceiling. Every figure here varies by lender and program — guidelines, property type, leverage, and credit profile all apply.
What Does a Practical Decision Look Like?
Picture a homeowner with a sizable amount of equity who has found a new house. The question is not “which lender has the best advertised loan.” It is a short sequence of checks.
1. How much equity is in the current home, measured against the 80% cap on a one-unit primary residence? 2. Is the existing mortgage at least 12 months old, and has the borrower been on title 6 months? 3. With both payments counted, does the total ratio stay inside the program ceiling? 4. After the refinance, what cash cushion is left once closing costs are paid? 5. If the old home is kept, is it a rental with documented income, or is it being sold?
If the answers hold, a true cash-out is a workable funding source. If they do not, alternatives deserve a look.
What Are the Alternatives?
A cash-out refinance replaces your whole first mortgage. That matters when the loan you have now carries terms you want to keep.
| Option | What changes | Main tradeoff |
|---|---|---|
| Cash-out refinance | Entire first mortgage replaced | Whole balance reset, closing costs on the full loan |
| Home equity loan or line | Second lien added | Two payments, first mortgage untouched |
| Bridge or contingent-sale approach | Short-term bridge to the next home | Carrying costs while both homes are held |
| Sell first, then buy | Proceeds from the sale | Gap in housing, timing risk |
Selling first removes the old payment from the ratio entirely. A home equity loan or line leaves the existing first mortgage in place. A cash-out refinance resets the whole loan, so it makes the most sense when the current mortgage terms are no better than what a new loan offers. A broker that shops several wholesale lenders can show where each one lands for your file.
Common Mistakes That Stall These Files
- Calling a Streamline or IRRRL a cash source. It is not. Both are no-cash-out.
- Assuming a limited cash-out taps equity. It allows only incidental cash back.
- Counting only the new payment. The old payment often still counts toward the ratio.
- Writing the purchase contract before the refinance is secure. The proceeds must exist first.
- Missing the seasoning dates. The 12-month and 6-month clocks are checked from the documents.
- Judging by a single headline term alone. Mortgage insurance, leverage caps, funding fees and loan term all affect the cost of the loan.
Tax treatment can depend on your situation; borrowers should speak with a qualified tax professional before relying on any deduction or credit. The IRS is the right starting point for those questions.
Key Terms Defined
Cash-out refinance: A new, larger mortgage that pays off the old one and pays the difference to the borrower.
LTV (loan-to-value): The loan balance divided by the appraised value of the home.
Seasoning: The minimum time a borrower has owned the home or held the existing loan before a cash-out is allowed.
Debt-to-income ratio: Total monthly debt payments divided by gross monthly income.
Net tangible benefit: A test that the streamline refinance must leave the borrower better off in a measurable way.
Limited cash-out refinance: A rate-and-term refinance that allows only small, incidental cash back.
Frequently Asked Questions
Can a VA IRRRL or FHA Streamline give me cash for a down payment?
No. Both are no-cash-out programs for borrowers with an existing VA or FHA loan. An eligible veteran who wants cash needs the VA cash-out loan, and an FHA borrower needs an FHA cash-out loan.
How much equity can I reach on a conventional cash-out?
On a one-unit principal residence, the new loan is capped at 80% of the appraised value. Two- to four-unit homes, second homes and investment properties are capped at 75%. A wholesale lane reaches 89.99% for qualifying primary residences with a 680 score and a 50% ratio, subject to lender guidelines.
Will the old home’s payment count when I qualify for the new house?
Often yes. If you keep the old home, its payment generally stays in your debt-to-income ratio unless the rules allow an exclusion, such as a documented sale or qualifying rental income. Underwriters review the treatment case by case.
How long do I need to own the home before a cash-out?
The first mortgage being paid off must be at least 12 months old, counted note date to note date, and you must have been on title for 6 months. Delayed financing, inheritance and legal-award exceptions exist.
Is a cash-out refinance better than a home equity loan for this purpose?
It depends on your current mortgage. A cash-out replaces the whole loan, while a home equity loan adds a second lien and leaves the first mortgage alone. Compare total costs and terms on the Loan Estimate for each.
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 the investor-side version of this question, Lendmire’s piece on whether a rental cash-out refinance can fund a capital call or business purchase covers a different set of rules.
For your own numbers, request a scenario review with Lendmire.
For current guidelines and terms, see Lendmire’s refinance programs page.
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.
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Informational only. Not a Loan Estimate, approval, or commitment to lend. Program availability and eligibility are subject to lender guidelines, credit approval, property review, and underwriting.
References
3. IRS
This article is part of Lendmire’s cash-out refinance program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: How Much a Cash-Out Refinance Lends for a Large Expense · Can You Do a Cash-Out Refinance on a Home Under a Blanket Lien? · Should Co-Owners Use a Cash-Out Refinance Buyout or Sell the Home?
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.