Leverage, reserves, and pricing vary by lender and program; the final terms follow the full file review.
The Quick Read: A 650 score clears the 580 line that FHA uses for maximum financing, so the score is rarely what holds a file back. On a cash-out loan, the loan-to-value cap, the 12-month occupancy test, your recent mortgage payment history and the appraisal do most of the deciding. Income and debts then set how far the file can stretch. Every figure here is subject to lender guidelines and a full file review, and none of it is a commitment to lend.
Key Takeaways
- A 650 decision score sits above FHA’s 580 threshold, so no score-based leverage cut applies.
- FHA cash-out caps the loan-to-value at a fixed program maximum, whatever your score is above the minimum.
- You must have owned and lived in the home for 12 months before the case number is assigned.
- The appraisal sets the ceiling on your cash, because the new loan must first pay off your current mortgage and cover costs.
- Some lenders set a higher score floor than FHA does. A broker can shop for a lender whose rules fit your file.
FHA cash-out estimate
Seeded with an example value, a balance to match, and a round cash request; change any field.
Editable benchmark: 7.18% as of November 5, 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.
What Is an FHA Cash-Out Refinance?
An FHA cash-out refinance replaces your current mortgage with a larger FHA-insured loan. You keep the difference as cash. The loan is for a home you live in, and the new balance is secured by the house.
Three pieces matter before any underwriting starts. The first is leverage: the loan can go up to 80% of the home’s adjusted value. The second is occupancy: the home must be your principal residence, owned and occupied for 12 months before the case number. The third is mortgage insurance. FHA charges an upfront premium of 1.75% of the base loan, which can be financed into the balance, plus an annual premium that is added to the monthly payment.
Lendmire is a mortgage broker. It places FHA files with wholesale lenders, and those lenders do the underwriting and make the decision.
How Does a Lender Read a 650 Score?
A 650 is a middle-of-the-road score that FHA treats as fully eligible. FHA’s maximum-financing line sits at 580. Across the wholesale programs Lendmire places FHA files with, 580 is also where the programs start. Above that line, your score does not buy you more cash. It mostly affects pricing and any extra rules a lender adds on its own.
Here is how lenders actually handle the number:
- Tri-merge report. The lender pulls your credit from all three bureaus and merges the files.
- The middle score. With three scores, the lender uses the middle one. With two, it uses the lower. With one, that’s the one.
- Co-borrowers. Each borrower gets a score, and the lowest one governs the whole loan. A 650 paired with a 590 means the file is underwritten at 590.
- Newer score models. A recent HUD Mortgagee Letter formalizes additional scoring models alongside classic FICO. The eligibility thresholds stay where they were.
Underwriters also read what sits behind the number. Recent late payments, collections and how much of your available credit you are using all matter. Two borrowers with a 650 can look very different on paper.
Some lenders set a stricter floor than FHA itself. That is called an overlay. It means a file that fits FHA’s rules can still be declined by one lender and accepted by another. A broker that shops several wholesale lenders can match your file to one whose guidelines fit it.
The Underwriting Walkthrough, Step by Step
Here is the order a typical file follows. Each step can stop the file, so it helps to know what each one is looking for.
Step 1: Eligibility Gate
The lender confirms the basics before spending effort on anything else. Is this your principal residence? Did you own and live in it for the 12 months before the case number was assigned? Is the occupant a borrower on the new loan?
The case number date matters. The 12 months run back from that date, not from closing. A common mistake is counting forward from the day you apply.
Step 2: Credit Pull and Decision Score
The lender runs the tri-merge report and picks your decision score, using the middle of three scores. At 650, no score-based reduction applies. The lender also looks at tradelines and any recent derogatory marks, because these can trigger a closer look even when the score passes.
Step 3: Mortgage Payment History
The lender reviews how you have paid the mortgage you already have. On a cash-out loan, recent history is weighed heavily. Lenders want to see each payment made within the month it was due.
A forbearance does not end the conversation. Lenders generally want to see that the plan was completed, followed by a run of on-time payments. Credit events carry HUD’s waiting periods: two years from a Chapter 7 discharge and three years from a foreclosure. Those are HUD’s rules, not a promise from any one lender.
Step 4: Appraisal and the Cap
The appraisal is a pivotal step for a 650-score file. The appraiser values the home. The lender applies the 80% cap to that appraised value. The new loan has to cover the payoff of your current first mortgage, any liens that must be paid and closing costs. Whatever room remains under the cap is your cash.
The cap is not new. HUD Mortgagee Letter 2019-11 lowered the limit for case numbers assigned on or after September 1, 2019. HUD said the change aligned FHA with the cash-out limit the government-sponsored enterprises allow, and described it as protecting the insurance fund and homeowners’ equity, per its press release. In plain terms, at least 20% equity stays in the home.
A low appraisal can shrink your cash or erase it. A high payoff balance does the same.
Step 5: Income, Debts and Automated Findings
The base ratio pair is 31/43. That means housing costs at 31% of gross income and total debts at 43%, with no compensating factors. Documented compensating factors can reach 40/50 at the top tier. The automated finding and your documented strengths decide where in that range your file lands.
Step 6: Mortgage Insurance, Conditions and Clear to Close
The lender calculates the upfront premium on the base loan. If you are refinancing an existing FHA loan into a new one, a refund credit on the old upfront premium may apply, depending on how long you have held the loan.
Then come conditions: the lender’s list of items still needed before the file clears. Typical examples are a missing pay stub, a letter explaining a credit inquiry or a repair the appraiser flagged. Answer them completely and the deal works on. Leave gaps and it stalls.
What Decides a 650-Score File?
Here is a practical way to think about what limits a 650 file, starting with the inputs that tend to constrain it most:
1. Appraised value against your current payoff, which sets the cash available. 2. The 12-month ownership and occupancy test. 3. Your recent mortgage payment history. 4. Documented income against debts. 5. The credit score itself, which matters little above 580 beyond overlays and pricing.
The score gets all the attention, yet above the 580 line it is usually the least restrictive input.
Three Sample Files Side by Side
These are illustrative profiles in plain terms. They are not dollar figures, not predictions, and not approvals.
| Factor | Strong file | Borderline file | Weak file |
|---|---|---|---|
| Decision score | 650 | 650 | 650 |
| Payoff vs. 80% cap | Well under | Near the cap | Over the cap |
| Mortgage history | Clean | One recent late | Several lates |
| Debt ratios | Near 31/43 | Stretched toward 40/50 | Beyond documented support |
| Compensating factors | Several | One or two | None |
| Likely read | Straightforward | Needs strong documentation | Not workable as asked |
The score is identical in all three columns. Everything else moves the outcome. That is why a lender will often ask about equity and payment history before it says much about credit.
Compensating Factors: How Files Stretch Past 31/43
Compensating factors are documented strengths that offset a higher debt load. They are how a file reaches ratios above the base pair.
| Factor | What the lender wants to see |
|---|---|
| Cash reserves | Savings left after closing |
| Employment | A steady, documented work history |
| Credit use | Low balances relative to limits |
| Payment change | A new payment close to the old one |
| Other debt | Few or no new obligations |
The strongest factors can support ratios up to 40/50 at the top tier. The reach is not automatic. The automated finding and the lender’s own guidelines still apply.
Where the Standard Rules Break
The rules above fit most borrowers, but several situations change the answer.
You have owned the home less than 12 months. Standard FHA cash-out is not available, because the home must be owned and occupied for 12 months before the case number. Time spent renting the home out does not count toward the occupancy period.
You only want a lower payment or a different term. That is a rate-and-term refinance, which with an appraisal reaches 97.75% on a principal residence occupied for the previous twelve months. Taking any cash for yourself moves the loan into the cash-out bucket, and the 80% cap takes over.
Your current loan is already FHA. The FHA Streamline refinances an existing FHA loan with no appraisal, a limited credit review and a net tangible benefit requirement. It is not a cash-out path. The premium continues.
You are an older homeowner looking at a reverse mortgage. That is a different FHA product, and it does not rely on credit scores the way a forward mortgage does.
The property is a rental or second home. Occupancy decides leverage here. FHA cash-out is for the home you live in, so those properties do not fit this program.
Your co-borrower’s score is lower than yours. The lowest borrower-level score governs. Sometimes the cleaner move is to apply with only the borrower who holds the stronger file, if income allows.
Automated Approval vs. Manual Review
If the system returns a refer-type result instead of an approval, a human underwriter can review the file manually. Manual review typically asks for more documents and tighter ratios, and it leans on compensating factors. Not every lender will take a manual file, which is another reason to place the file with the right lender up front.
The Documents Lenders Ask For
Expect a list that looks something like this:
- Pay stubs, W-2s and tax returns, or equivalent income documentation for your employment type
- Recent bank and asset statements
- Your current mortgage statement
- Proof the home is your principal residence, such as a license or utility bill
- A homeowners insurance declaration page
- Explanations for any credit events or large deposits
Gather these before applying. Missing paperwork is a common reason conditions drag on.
What the Cash Costs You
A cash-out refinance is a new, larger loan. The Consumer Financial Protection Bureau describes it as replacing your mortgage with a bigger one and taking the difference in cash, and notes you often pay closing costs.
Here is what changes in practice:
- Your balance rises. The upfront premium can be financed, which adds to the loan.
- Your payment may rise. Annual mortgage insurance is added monthly, and a bigger balance can mean a bigger payment.
- Insurance lasts a long time. The annual premium varies with term, loan amount and LTV. Because FHA cash-out is capped at a loan-to-value limit, the annual premium can stay on the loan for many years, so it is worth asking how long it would last on your specific loan.
- Your home is the collateral. CFPB’s guide to using home equity warns that missed payments can put you at risk of foreclosure and that the loan can lengthen your payoff time.
What you do with the cash matters. If you use it to pay down credit card balances, you trade unsecured debt for debt backed by your house. That can make sense. It also means the debt can cost you the home if payments stop. Tax treatment can depend on your situation; borrowers should speak with a qualified tax professional before relying on any deduction or credit.
Strengthen Your File Before You Apply
- Check your equity first. Compare your payoff to the 80% line using a realistic value.
- Pay down revolving balances. Lower credit use helps both the score and the ratios.
- Keep payments on time. A clean recent history on your current mortgage carries real weight.
- Avoid new debt. A new car loan in the middle of a refinance can change the ratios.
- Document everything. Explanations for late payments or deposits, prepared in advance, prevent delays.
- Compare against other options. A home equity line may carry lower up-front costs, which the CFPB suggests weighing.
Key Terms Defined
Adjusted value: The figure HUD defines from the appraisal. The 80% cap applies to it.
Case number: The FHA identifier assigned to your loan. It starts the 12-month occupancy and ownership clock.
Compensating factor: A documented strength, such as reserves, that offsets a higher debt load.
Decision score: The credit score the lender uses to underwrite the loan, based on the middle of three scores or the lower of two.
Loan-to-value (LTV): The loan amount divided by the home’s value, shown as a percentage.
Overlay: A lender’s own rule that is stricter than FHA’s minimum.
Upfront and annual mortgage insurance premium: FHA’s insurance charges. The upfront premium is 1.75% of the base loan and can be financed. The annual premium is paid monthly.
Frequently Asked Questions
Does a 650 score get me more cash than a 600?
No. FHA caps cash-out at 80% of adjusted value whatever your score is above the 580 threshold. A higher score can help with pricing and with lenders that set stricter overlays, but it does not raise the cap. Terms vary by lender guidelines, property type, leverage, credit profile, and full file review.
Does the 12 months of occupancy run from closing?
No. It runs back from the date the case number is assigned. If you bought or moved in recently, count from that date to see whether you meet the test.
Can I do an FHA cash-out if my current loan is not FHA?
Yes, in general. The new loan is an FHA loan either way, and it pays off whatever mortgage you have now. The existing loan type matters mostly for details such as the premium refund credit, which applies when you refinance one FHA loan into another.
Will the lender ever use a score below my 650?
Yes, if you apply with a co-borrower. The lowest borrower-level score governs the whole transaction. A lender may also look harder at your file if recent late payments or collections sit behind the number.
Does refinancing remove my mortgage insurance?
No. FHA charges an upfront and an annual premium on a cash-out loan. The annual premium ends after eleven years at or below 90% LTV on a thirty-year loan. Narrow exceptions exist for certain streamlines of older FHA loans. Exact terms depend on the lender’s guidelines, property type, leverage, and a full review of the borrower’s file.
If You’re Weighing Your Options
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. A 650 score gives you a solid starting point. Your equity, your occupancy history and your payment record decide where you land.
For your own numbers, request a scenario review with Lendmire.
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
1. HUD Mortgagee Letter 2026-11
2. HUD Mortgagee Letter 2019-11
3. HUD
5. Consumer Financial Protection Bureau
6. CFPB: Using home equity to meet financial needs
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 Lenders Underwrite an FHA Cash-Out Refinance to Pay College Tuition
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
- Mortgage Loan Originator · NMLS# 1129696 · Verify on NMLS Consumer Access
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- North Carolina Insurance Producer · License# 19053198 · Property, Casualty, Life, Health · Verify on NAIC SBS
- Lendmire LLC · Firm NMLS# 2371349 · Verify firm licensure
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.