The Quick Read: The ceiling is 80% of your home’s appraised value, and the new loan has to fit under it. Before a lender sizes the loan, it checks that you have lived in the home for 12 months, that your mortgage payments were on time, and that your credit and debt ratios fit. Pushing to the ceiling leaves you with at least 20% equity. Because the cap governs how large the loan can be, the sizing step is tested against it, and your lender can tell you how the financed premium is treated in that 80% test.
Key Takeaways
- Maximum LTV (loan-to-value, the loan divided by the home’s value) is 80% on an FHA cash-out of a primary home.
- The cap is measured against the appraised value, not what you paid.
- Your payoff, closing costs and financed mortgage insurance come out of that 80% before you see any cash.
- A 12-month owner-occupancy history and a clean payment record are gatekeepers, checked before the appraisal is ordered.
- A higher credit score does not raise the cap. It affects eligibility, debt-ratio flexibility and how a file is reviewed.
- Taking less than the maximum is often the smarter move.
What Does “Maximum LTV” Mean on an FHA Cash-Out?
Maximum LTV on an FHA cash-out refinance is 80% of the home’s appraised value. If the new loan, including any other liens that stay on the home, is larger than that, the file does not fit the program.
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.
A cash-out refinance replaces your current mortgage with a new, larger one and hands you the difference in cash. You are not adding a second loan on top. The old loan is paid off at closing, and one new FHA loan takes its place.
The cap is lower than it once was. HUD lowered it from an earlier, higher figure to 80%, and its press release on the lower cash-out limit explains that the change lined up FHA with the cash-out ceiling used in the conventional market. HUD also cut the cap once before that. The direction of travel has been toward more equity left in the home.
The other FHA refinances work differently. Across the wholesale programs Lendmire places FHA loans with, the rate-and-term refinance with an appraisal reaches 97.75% on a principal residence you have occupied for the previous twelve months. The Streamline, which refinances an existing FHA loan with no appraisal, has no cash-out at all. The 80% cap belongs only to cash-out.
This article covers what happens inside the file.
How Underwriting Works, Step by Step
Underwriting an FHA cash-out follows a fixed order: eligibility clocks first, then the case number and appraisal, then credit and ratios, then documents, then the loan sizing and insurance. Each step can stop the file, so lenders check the cheap ones before the expensive ones.
Step 1: The occupancy clock
You must have owned the home and lived in it as your principal residence for 12 months before the lender can request an FHA case number. That is the identifier HUD assigns to the loan. Renting the home out during that window does not count as living in it.
This is the first thing a loan officer asks about, because nothing downstream matters if the clock has not run. A buyer who closed on a home eight months ago is not eligible yet, however much the home has gone up in value.
Step 2: The payment history
Lenders then review your mortgage payment history. One late payment inside that window can delay the loan or stop it, depending on the lender.
Expect the lender to pull a payoff statement and a payment history from your servicer. Do not wait for them to find a problem. Pull your own record first.
Step 3: Case number, appraisal and value
Once the clocks check out, the lender requests a case number and orders an FHA appraisal. The appraisal produces the value the cap is measured against. HUD calls this the adjusted value, which is the appraiser’s value after HUD’s adjustments.
This is where files at maximum leverage live or die. If the appraisal comes in below what you expected, the 80% ceiling shrinks with it. A loan that worked on your estimate may no longer fit. We cover that case below.
Step 4: Credit score and the decision score
Lenders use a decision score, which is the middle of the scores from the credit bureaus (or the lower of two, for a single borrower). HUD also has a tier from 500 to 579 with a lower loan-to-value limit and a larger minimum investment. The wholesale programs Lendmire places FHA loans with start at 580, so that lower tier is a HUD rule the network does not reach.
HUD’s mortgagee letter on credit-score tiers and refinance maximums lays out the tiers. On a cash-out, the score does not change the 80% cap. It changes whether you are eligible and how much room a lender gives you on debt ratios. Some lenders also set a floor above HUD’s minimum, so two files with the same score can get different answers.
Step 5: Automated underwriting and debt ratios
A manual review uses fixed debt-to-income ratios. Debt-to-income, or DTI, compares your monthly debts to your monthly gross income. FHA states it as two numbers. The first is your housing payment as a share of income, and the second is all your monthly debts as a share of income.
The base pair is 31/43 with no compensating factors. Documented compensating factors can stretch the ratios, with the top step reaching 40/50 for a borrower at the top credit tier. HUD’s notice on manual underwriting requirements explains how the manual matrix and compensating factors work. Compensating factors are strengths that offset a high ratio, such as savings after closing or a long, steady work history.
A lender can still apply its own tighter limits. Those limits are called overlays.
Step 6: Documents
A typical file includes:
- income documents, such as pay stubs and tax forms
- bank statements
- the credit report
- the mortgage payoff statement
- proof you live in the home, such as a deed, utility bills and ID at the address
- the appraisal
- title work
- your payment history
Which documents the lender asks for depends on how you earn income and what the automated finding says.
Step 7: Sizing the loan and adding insurance
Last, the lender sizes the loan. Several things must fit under the 80% line at once:
- the payoff of your current mortgage
- closing costs
- the FHA upfront premium
- any other lien that remains on the home
- the cash you want
Across the wholesale programs Lendmire places files with, the upfront premium is 1.75% of the base loan, and it is financed into the loan rather than paid in cash. The annual premium runs 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. Ask your lender how the financed premium is treated in the 80% test, because that detail changes how much cash you net. Terms vary by lender guidelines, property type, leverage, credit profile, and full file review.
County loan limits also apply on top of the LTV cap. They change every year, so check the limit for your county rather than assuming one.
A Worked Example
Here is a sizing exercise in percentages of value. Treat these as modeled assumptions, not a quote.
| Item | Share of appraised value |
|---|---|
| Maximum new loan | 80% |
| Payoff of current mortgage | 55% (assumed) |
| Left for costs, premium and cash | 25% |
| Equity you keep | 20% |
The 25% left over is not all cash in your hands. Closing costs and the financed premium come out of it first. Whatever remains is your net cash. If your costs and premium take a few points of value, your net cash is the rest.
Now see what happens if the appraisal lands 5% under your estimate. The loan ceiling drops by 4% of your original estimate (80% of the 5% shortfall). Your cash falls by that same amount, since the payoff and costs do not shrink. On a thin file, a low appraisal can erase the cash-out entirely.
Where the General Rule Bends
The 80% cap and the 12-month clock are the rule. Several situations change how they apply.
Inherited homes. HUD’s handbook is reported to waive the 12-month occupancy requirement for a home you inherited, as long as you have not rented it out since. If you rent it after inheriting, you are not eligible until you have lived in it for 12 months. Confirm the exact wording with your loan officer.
Free-and-clear homes. A home with no mortgage can still be cash-out refinanced. The definition of cash-out includes pulling equity from a home with no loan on it.
Non-FHA loans. The 80% cap applies to every FHA cash-out, including one that pays off a conventional or other non-FHA loan. You do not need an existing FHA loan.
Second liens. If you have a home equity loan or line that will stay in place, it counts toward the combined limit. If it is paid off at closing, it comes out of your cash.
Co-borrowers. A non-occupant co-borrower is allowed on an FHA purchase. Cash-out is tighter, and some lender matrices do not permit it. Ask before you plan around it.
Second homes and rentals. Only a principal residence qualifies. Occupancy decides the leverage.
Recently purchased homes. If you bought within the past year, the occupancy clock has not run. A different refinance type may fit instead.
What Trips Up Files at Maximum Leverage
Files at the ceiling have no cushion, so small problems turn into denials. These are the usual ones:
- A low appraisal. The ceiling falls with the value. Ask the lender what happens to your cash if the value comes in under your estimate.
- A late payment inside the past year. It can delay the file until the window clears.
- A DTI that was fine until the new loan. The larger loan raises your payment, and the debt ratio moves with it.
- A score just under a lender’s floor. HUD’s minimum and a lender’s own floor are not the same number.
- A forgotten lien. A second mortgage or tax lien changes the combined balance.
- Occupancy gaps. A stretch of renting the home out resets the clock.
Most of these can be fixed before you apply. Pulling your own credit report and payment record first costs nothing.
Should You Take the Full 80%?
Often, no. The maximum is a ceiling, not a target. Borrowing less keeps your payment lower and leaves more equity. It also gives you room if the appraisal comes in light.
Some considerations when you decide how much to take:
- Your payment rises. A larger loan can mean a bigger monthly payment and a longer payoff. CFPB’s guide on using home equity notes both.
- You replace the whole first mortgage. If your current loan carries terms you like, a cash-out gives them up. A home equity loan or line sits behind your first mortgage and leaves it alone, which may suit you better. CFPB advises comparing them.
- Mortgage insurance applies. The financed upfront premium and the annual premium add cost on top of the loan.
- Consolidating debt carries risk. Paying off credit cards and auto loans with a cash-out can feel like a clean slate, but card balances can creep back up afterward. Moving unsecured debt into a mortgage puts your home behind it.
- A cash-out and a rate-and-term are different tools. If you want a different term or a lower payment with no cash, the rate-and-term refinance reaches higher leverage.
A broker is useful at this point. Lendmire is a mortgage broker, not a lender. It shops several wholesale lenders and matches your situation to the program that fits. The right fit depends on your score, your equity, your debt ratios and how much cash you actually need. For a related walk-through, see Lendmire’s piece How to Close a Cash-Out Refinance at Maximum LTV on a Primary Home.
Key Terms Defined
LTV (loan-to-value): The new loan amount divided by the home’s appraised value, shown as a percentage.
Adjusted value: The appraisal-based value HUD uses to measure the LTV cap.
Case number: The identifier HUD assigns to an FHA loan, requested after the occupancy and payment checks.
Decision score: The credit score a lender uses, taken as the middle of three bureau scores.
DTI (debt-to-income): Your monthly debts as a share of your monthly gross income.
Compensating factors: Documented strengths, such as savings after closing, that justify higher debt ratios.
Overlay: A lender’s own rule that is stricter than the program minimum.
Upfront premium: The one-time FHA mortgage insurance charge, financed into the loan.
Frequently Asked Questions
Does a higher credit score let me borrow more on an FHA cash-out?
No. The cap is 80% at any eligible score. A higher score helps you qualify and can give a lender more comfort on your debt ratios. It does not raise the ceiling. Across the programs Lendmire works with, the starting point is a 580 decision score, subject to lender guidelines and full file review.
Can I do an FHA cash-out on a home I just bought?
Not until you have owned it and lived in it for 12 months before the case number is assigned. If you bought recently, a different loan or simply waiting may fit better. Inherited homes can be treated differently, so mention that to your loan officer.
Does the 80% limit include my closing costs and mortgage insurance?
Yes, in practice. The new loan has to cover your payoff, your costs and the financed upfront premium. All of it sits under the 80% line, and what remains is your cash. Ask your lender how the financed premium is counted before you plan around a number.
What if my appraisal comes in lower than I expected?
The ceiling drops with the value, and your cash drops by the same amount, since the payoff and costs stay put. You can take less cash, wait, or look at another loan type. The lender can walk you through the options once the value is in.
Is an FHA cash-out the same as a Streamline or rate-and-term refinance?
No. A Streamline refinances an existing FHA loan with no appraisal and no cash back. A rate-and-term refinance reaches 97.75% on a primary home you have occupied for the previous twelve months. Only the cash-out is limited to 80%. All figures are subject to lender guidelines and not a commitment to lend.
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 loan officer can check your occupancy history, your payment record and your equity before you order anything, so you know where you stand at the 80% line.
For your own numbers, request a scenario review with Lendmire.
About Lendmire
Lendmire (NMLS# 2371349) is a mortgage brokerage serving homeowners and home buyers in 16 states. FHA, VA, conventional and jumbo purchase and refinance loans are arranged through wholesale lending channels; Lendmire brokers the financing and the lender underwrites each application. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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References
1. HUD Press Release: lower FHA cash-out limit
2. HUD Mortgagee Letter on credit-score tiers and refinance maximums
4. CFPB: Using your home equity guide for older Americans
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: FHA Cash-Out Refinance Requirements on a Recently Bought Home · FHA Cash-Out Refinance Requirements to Consolidate Debt or Fund Home Improvements · FHA Cash-Out vs Selling an Inherited Home as a Retiree
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
- Mortgage Loan Originator · NMLS# 1129696 · Verify on NMLS Consumer Access
- North Carolina Real Estate Broker · License# 343312 · Verify on NCREC
- 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.