The Quick Read: To qualify, you need to have owned and lived in the home as your principal residence for 12 months before the FHA case number is assigned. You also need a clean recent payment history and a file that clears credit and ratio review. The new loan can reach 80% of the home’s appraised value. Having an FHA loan today does not make this a shortcut, because a cash-out is a full refinance with a new appraisal and full underwriting.
What Is an FHA Cash-Out Refinance, Exactly?
An FHA cash-out refinance replaces your current mortgage with a new, larger FHA loan and pays you the difference in cash. It is a new loan, not a modification of the old one.
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.
HUD treats it as a refinance that produces cash proceeds. That separates it from two no-cash-out types. A rate-and-term refinance changes the loan without paying you anything. The FHA Streamline refinances an existing FHA loan with no appraisal and a limited credit review, but it cannot hand you cash.
Lendmire is a mortgage broker, so it arranges these loans through wholesale lenders rather than lending directly. The mechanics below walk through how the loan works.
Key Terms Defined
- Adjusted value: The appraised value figure the 80% cap is applied to.
- Combined loan-to-value (CLTV): Your first mortgage plus any other liens, divided by the home’s value.
- Case number: The FHA identifier assigned to your file. It starts the 12-month occupancy lookback.
- Upfront mortgage insurance premium (UFMIP): A one-time FHA premium, usually financed into the loan.
- Annual mortgage insurance premium (MIP): A yearly FHA premium charged monthly with your payment.
- Net tangible benefit: The test a Streamline must pass, showing the refinance helps the borrower.
Key Takeaways
- Maximum financing on a cash-out is 80% of the home’s value.
- You must have owned and occupied the home for 12 months before the case number.
- The principal residence is the only eligible property type.
- An existing FHA loan does not let you skip the appraisal or full underwrite.
- Mortgage insurance restarts on the new loan.
How Much Can You Borrow Against the Home?
The ceiling is 80% of adjusted value, and that single limit sets how much cash is possible. HUD Mortgagee Letter 2019-11 cut the maximum loan-to-value and combined loan-to-value on cash-out refinances to 80% for case numbers assigned on or after September 1, 2019. That ruling has since been folded into HUD’s current underwriting guidance, which now governs.
Many borrowers still carry an older number in their heads. HUD’s announcement explains the cap was lowered from an earlier, higher limit, and had been reduced before that as well. Anyone quoting those older figures is describing rules that no longer apply.
Three things share that 80% ceiling:
1. Your current loan payoff.
2. Any other liens that must be paid or that count toward the combined limit.
3. The financed costs and the cash you take.
Whatever cash is left after those items is your proceeds. A lower appraisal shrinks the cash directly. The base loan is also subject to FHA county loan limits, which change every year, so the county where the home sits matters.
By comparison, the FHA rate-and-term refinance with an appraisal can reach 97.75% on a principal residence occupied for the previous twelve months. That gap is the price of taking cash.
Who Qualifies? The Core Requirements
You qualify when the home, your history and your file all line up. Across the wholesale programs placed through Lendmire, the same questions come up on nearly every cash-out file.
| Requirement | What it means | How it is checked |
|---|---|---|
| Occupancy | Principal residence only | Occupancy documentation |
| Ownership | 12 months owned and occupied | Counted back from case number |
| Payment history | Recent payments made on time | Mortgage history review |
| Value | Up to 80% of adjusted value | New FHA appraisal |
| Credit | Decision score of 580 or higher | Credit review |
| Ratios | Housing and total debt checks | Income and debt documents |
Occupancy and ownership
The home must be your principal residence, owned and lived in by at least one borrower for the 12 months before the case number. The clock runs back from the case number date, not from application or closing. Count the months carefully before you apply.
A second home or rental does not qualify. Occupancy decides the leverage, and an FHA cash-out is for the home you live in.
Payment history
The lender documents your payment record on the loan being paid off. HUD reorganized the payment history language, including how forbearance is treated. Individual lenders may layer on their own stricter requirements. If you’ve had a hardship or a recent late payment, talk to a loan officer before you apply, since waiting can be the better path.
Credit score and ratios
HUD has a lower 500-579 tier that carries a 10% minimum investment, but the network does not reach below 580. Some lenders set a higher floor still.
The base debt ratios are 31/43 (housing to total), with no compensating factors. Documented compensating factors, such as reserves or a low payment shock, can raise the limits as far as 40/50 for the strongest files. The automated finding governs most files, and all of this is subject to lender guidelines and full file review.
For credit events, HUD sets waiting periods, such as two years from a chapter 7 discharge and three from a foreclosure. Those are HUD’s rules, not a promise from any lender.
How Is the Loan Underwritten, Step by Step?
Underwriting follows a fixed order, and each step can change how much cash you net.
1. Eligibility screen. Confirm principal residence, 12 months of ownership and occupancy, and a clean payment record.
2. Case number. This starts the lookback and fixes the rules that apply.
3. Appraisal. The FHA appraisal sets adjusted value, which the 80% cap uses.
4. Loan math. The new loan must cover the payoff, other liens, costs and your cash, all inside the cap.
5. Credit and income review. Underwriters check your score, income and ratios against the program.
6. Mortgage insurance. The new loan carries its own premiums, covered below.
7. Closing. Proceeds are paid to you at closing, and costs are paid or financed within the cap.
This is a consumer mortgage, so you’ll receive a Loan Estimate and a Closing Disclosure. Review them against each other.
What Happens to Your Mortgage Insurance?
It restarts. Because the new loan is a fresh FHA endorsement, you pay the upfront premium again and a new annual premium schedule begins.
The upfront premium is 1.75% of the base loan, typically financed into the balance. HUD’s premium appendix lists that figure. 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 with a high LTV, it lasts for the full term. At or below 90% it ends after eleven years. A cash-out refinance is capped well below that 90% line, so the eleven-year treatment applies to a thirty-year loan.
One bit of fine print: when you refinance an FHA loan into a new FHA loan within three years, a refund credit may reduce the new upfront premium. It’s a credit, not cash back, and it’s worth asking your loan officer whether it applies.
Cash-Out or Streamline? Choosing for an Existing FHA Loan
If you already have an FHA loan, the choice comes down to whether you need cash. They are different tools.
| Factor | FHA Cash-Out | FHA Streamline |
|---|---|---|
| Cash back | Yes | No |
| Appraisal | Required | None |
| Credit review | Full | Limited |
| Max LTV | 80% | Not value-based |
| Mortgage insurance | Restarts | Continues |
A Streamline is lighter paperwork, but it needs a net tangible benefit and cannot pay you. If you want cash, you can’t use it. If you don’t, the cash-out’s full underwrite and lower LTV cap are costs you don’t need to pay.
What Documents Should You Gather?
Lenders vary, but a typical file includes:
- Recent pay stubs and W-2s, or tax returns if self-employed.
- Bank statements for recent months.
- Your current mortgage statement and homeowners insurance.
- Government ID and proof the home is your primary residence.
- Documentation of any other liens or HOA dues.
Having these ready before you apply helps you answer questions without stalling the file.
Where Does the General Rule Break?
Several situations bend the standard path.
- Inherited home. HUD’s Handbook has an exception: a borrower may not need the minimum occupancy period before a cash-out, provided the property was never treated as an investment. If the heir rented it out, the 12-month occupancy rule applies first.
- Owned under 12 months. A standard cash-out isn’t available. The no-cash-out rate-and-term path has a lower cap for borrowers with under a year of occupancy.
- Owned free and clear. A new loan on a home with no mortgage is generally treated as a cash-out.
- Non-occupant co-borrower. On a cash-out, a non-occupant co-borrower’s income generally can’t carry the file. Confirm this with your loan officer before relying on it.
- Manufactured homes. Extra Handbook restrictions apply, so ask early.
- Prior forbearance or modification. Payment history rules were adjusted for these, and they need individual review.
- Hawaiian Home Lands (Section 247). These mortgages were carved out of the 80% change.
Why Do Applications Get Delayed or Denied?
The usual culprits are fixable if you catch them early.
- Miscounted occupancy. The 12 months run from the case number, so applying early gets you stuck.
- A recent late payment. A late payment inside the lookback can stop a cash-out. Waiting out the window may be the answer.
- Low appraisal. Value drives the 80% cap, so a lower figure shrinks or erases your cash.
- High ratios. Debt that pushes you past the program’s limits needs paying down or compensating factors.
- Credit below the floor. Raising your score before applying can change the outcome.
None of these is a verdict. They’re reasons to prepare before you apply.
Is It Worth It? What the Decision Looks Like
Decide by weighing what you’ll do with the money against what the new loan costs you. The CFPB’s home equity guide notes that a cash-out replaces your mortgage with a larger one, may lengthen how long you take to pay off the home, and may raise your monthly payment. Annual mortgage insurance adds to that, and restarting the term means paying interest on your old balance and the new cash.
Since the cap is 80%, at least 20% equity stays in the home. That cushion is real protection.
Consider how the money will be used. Home improvements that add value are a different decision from paying off credit cards. The CFPB found debt payoff was the most common reason borrowers took cash out, and that credit card balances drifted back toward earlier levels afterward. Converting card debt into mortgage debt only helps if the spending habits change.
A few questions help:
- Will the new loan’s total cost be offset by what the cash accomplishes?
- Does restarting the term fit your plans for how long you’ll own the home?
- Could a different tool, such as keeping your current loan, serve you better?
Tax treatment can depend on your situation; borrowers should speak with a qualified tax professional before relying on any deduction or credit.
What Is a Realistic Application Path?
Start with readiness, then work through the file in order.
1. Confirm 12 months of ownership and occupancy and a clean payment record. 2. Gather documents and check your credit. 3. Talk to a loan officer about your equity and the likely cash. 4. Receive your Loan Estimate and compare it. 5. Complete the appraisal and underwriting steps. 6. Review the Closing Disclosure before signing.
Lendmire is licensed for consumer mortgage lending in 16 states: Alabama, California, Colorado, Florida, Georgia, Indiana, Michigan, Montana, New Mexico, North Carolina, Ohio, Pennsylvania, Tennessee, Texas, Virginia and Washington. Each file is subject to lender guidelines and full review, and nothing here is a commitment to lend.
Frequently Asked Questions
Do I need an existing FHA loan to get an FHA cash-out refinance?
No. An FHA cash-out is available on a principal residence whether or not your current loan is FHA. What changes with an existing FHA loan is the option of a Streamline, which can’t give cash. Either way, the cash-out is a full refinance with a new appraisal and underwriting.
How much equity do I need to leave in the home?
At least 20%. The cash-out cap is 80% of adjusted value, and that limit includes your payoff, other liens and costs. A lower appraisal reduces the cash available.
Can I cash out on a rental or second home with FHA?
No. FHA cash-out is only for an owner-occupied principal residence. Occupancy decides the leverage a lender can offer.
What credit score do I need?
The wholesale programs Lendmire places FHA loans with start at a 580 decision score. Some lenders set a higher floor, and approval depends on your full file, including payment history and ratios.
Do I get my old upfront mortgage insurance back?
Not in cash. Refinancing FHA into FHA within three years may earn a credit that reduces the new upfront premium. The new loan also carries its own annual premium.
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.
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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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 2019-11
2. HUD press release PR 19-114
3. HUD Mortgagee Letter 2020-30
4. HUD mortgage insurance premium appendix
6. CFPB: CFPB Report Finds Cash Out Mortgage Refinance Borrowers Improve Credit Scores
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 With No Mortgage · How a Conventional Cash-Out Replaces FHA Mortgage Insurance · Can You Get Approved for an FHA Cash-Out Refinance Twice in a Row?
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
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.