The Quick Read: Qualifying comes down to four things: your credit score, your debt-to-income ratio, your equity, and how long you have owned the home and held the current loan. Across the wholesale conventional programs Lendmire places files with, a 620 decision score is the starting point and the total debt ratio tops out at 50%. A conventional cash-out on a one-unit primary residence reaches 80% of the home’s value. Every figure here is subject to lender guidelines and full file review, and none of it is a commitment to lend.
What Is a Cash-Out Refinance?
A cash-out refinance replaces your current mortgage with a new, larger one. The new loan pays off the old balance, and you keep the difference as cash. Your equity is the gap between what the home is worth and what you owe. A cash-out turns part of that gap into money you can use.
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: 7.18% as of November 5, 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.
It is different from a refinance. That loan changes your term or interest cost, and you get only incidental cash back. Fannie Mae’s limit on that cash is the lesser of 2% of the new loan or $2,000. Take more than that, and the loan becomes a cash-out.
One catch trips people up. Paying off a second lien, such as a home equity line you used for other spending, generally makes the loan a cash-out. Only a second mortgage used to buy the home keeps it in the rate-and-term lane.
Lendmire’s cash-out refinance programs page covers how the different options are laid out.
What Do Lenders Check Before Approving a Cash-Out?
Lenders check six things, and each one can decide the outcome on its own.
- Credit score. It affects eligibility and how the loan is priced.
- Debt-to-income ratio (DTI). This is your monthly debts divided by your gross monthly income.
- Equity and loan-to-value (LTV). LTV is the new loan divided by the home’s appraised value.
- Time in the home. A borrower must have been on title for 6 months, with some exceptions.
- Age of your current loan. The first mortgage being paid off must be at least 12 months old, counted from note date to note date.
- Reserves. These are savings left after closing. They matter more when DTI runs high.
Beyond those six, the property’s occupancy also sets how much you can borrow. A conventional cash-out on a one-unit principal residence reaches 80% LTV. Two- to four-unit principal residences, second homes and investment properties reach 75%. This article stays with the home you live in. Terms vary by lender guidelines, property type, leverage, credit profile, and full file review.
How Does Your Credit Score Affect a Cash-Out Refinance?
Your score works in two places. It sets whether you are eligible at all, and it shifts the price of the loan. Fannie Mae applies a loan-level price adjustment to many cash-out loans, and it varies with both LTV and credit score. The same home at the same leverage can cost more to finance with a lower score.
Across the wholesale conventional programs we place files with, the floor is a 620 decision score. On an adjustable rate under manual underwriting, it is 640. Jumbo loans, which sit above the conforming limit, start at 660. One wholesale lane reaches 89.99% LTV with no mortgage insurance. It needs a 680 score, a 50% ratio and a thirty-year fixed rate on a primary residence at a conforming balance. It carries its own six months of seasoning.
Mortgage insurance is otherwise required above 80% LTV on the agency path, and that no-MI wholesale lane is the one exception to the eighty-percent rule.
Some lenders set higher score floors than the program minimum. VA loans show this clearly. A VA borrower must meet both the VA standards and the lender’s standards. VA publishes no single score floor, so a lender’s overlay is often the real number.
Your score is also not frozen. If you are close, a few months of on-time payments and lower card balances can move you into a better tier.
Credit events and waiting periods
A past bankruptcy or foreclosure adds a clock. The agencies’ waiting periods are four years from a chapter 7 discharge, seven years from a foreclosure, and four years from a short sale or deed-in-lieu. They run shorter with documented extenuating circumstances.
How Is Debt-to-Income Calculated for a Cash-Out Refinance?
DTI is your total monthly debt payments divided by your gross monthly income. Gross means before taxes. Add up the new mortgage payment (principal, interest, taxes, insurance and any HOA dues), plus car loans, student loans, minimum credit card payments and other recurring debts. Divide by income.
Here is a walk-through without dollar amounts. Say your monthly debts, including the new payment, equal 38% of your gross income. That is comfortable. Say they equal 48%. That is close to the ceiling, and any extra debt could push you over.
For loans run through Fannie Mae’s automated system, called Desktop Underwriter, the maximum DTI is 50%, per the Fannie Mae Selling Guide. A manually underwritten loan has a lower cap. The Fannie Mae Eligibility Matrix lists two manual tiers, 36% and 45%, with the higher tier tied to stronger credit and reserves. That same matrix says cash-out files with DTI above 45% need minimum reserves. So a high-DTI borrower needs savings as well as income.
A cash-out raises your DTI in a way people forget. The new loan is larger than the old one, so the new payment is higher. That higher payment goes into the ratio you are being measured on.
Can paying off debts at closing help?
Often, yes. Cash-out proceeds can pay off credit cards or other loans as part of the closing. Those payments leave your ratio, which can bring DTI under the line.
There is a behavior risk here. Research from the Consumer Financial Protection Bureau found borrowers often used cash-out proceeds to pay down card and auto debt. Credit scores improved sharply at first, then gradually worsened, as card balances drifted back toward earlier levels. Paying the cards off helps only if the balances stay down.
Do credit and DTI offset each other?
Partly. Strong credit, healthy reserves and low LTV can support a higher DTI, which is how the manual tiers work. But they do not erase a ratio over the ceiling. When DTI is over the limit, the loan is not eligible for delivery to Fannie Mae no matter how good the score is.
How Do You Apply, Step by Step?
The process runs in order. Skipping ahead is where files stall.
1. Know your numbers. Pull your credit reports and score. Add up monthly debts and gross income. Estimate your equity from a realistic home value.
2. Classify the loan. Decide whether you need real cash out or only a rate-and-term change. That choice sets the rules you are under.
3. Check the clocks. Confirm your current mortgage is at least 12 months old and you have been on title for 6 months. Exceptions exist for delayed financing, inheritance and legal awards. Fannie Mae’s cash-out eligibility notice states the 12-month first-mortgage requirement.
4. Gather documents. Expect pay stubs, W-2s, recent tax returns, bank statements, your current mortgage statement and proof of homeowners insurance. Self-employed borrowers should expect to provide more income paperwork.
5. Apply and get a Loan Estimate. After you apply, the lender must send a Loan Estimate that lays out the loan terms and costs. Compare it line by line.
6. Run the automated review. The lender runs your file through underwriting, which weighs credit, DTI, LTV and reserves.
7. Appraisal. An appraiser sets the home’s value. Value sets the maximum loan, and the cash you receive is that loan minus your payoff, other liens and costs.
8. Conditions and decision. An approval often comes with conditions, such as a missing document or a letter explaining a deposit. Once you clear them, the loan can move toward closing.
9. Closing Disclosure and closing. You receive a Closing Disclosure with final figures. Review it before you sign.
Where Does the General Rule Break?
Several situations change the rules. Know which one is yours.
- Free-and-clear homes. A home with no mortgage is still a cash-out when you borrow against it, under both Fannie Mae and Freddie Mac.
- Delayed financing. If you bought with cash recently, an exception lets you borrow against the home sooner than the usual clocks allow.
- Co-owner buyouts. A buyout under a written agreement is treated as a limited cash-out at both agencies.
- HELOC payoffs. Paying off a home equity line that funded other spending generally makes the loan a cash-out, while a second mortgage used to buy the home does not.
- Renovation loans. Fannie Mae says HomeStyle Energy and HomeStyle Refresh transactions are not eligible as cash-outs. Renovation loans such as CHOICERenovation are treated as no cash-out when proceeds fund only eligible improvements.
- Student loan payoffs. Fannie Mae has a feature that waives the cash-out price adjustment when proceeds pay off student debt. It carries a small cap on cash to the borrower, and the current limit should be confirmed.
- Texas homesteads. A cash-out on a Texas homestead, known as a Section 50(a)(6) loan, is capped at 80% of the home’s value by the state constitution. The no-MI wholesale lane is not written there.
- Title in an LLC. Conventional limited cash-out requires an individual owner on title. If the home sits in an LLC, raise it with your broker early.
- Government loans. The FHA Streamline and the VA IRRRL are not cash-out products. They are streamlines for borrowers who already have an FHA or VA loan, and they give essentially no cash back. An FHA cash-out is generally for a principal residence with a record of owning and occupying it.
- VA cash-out. A veteran can use a VA cash-out to take equity out or to refinance a non-VA loan into a VA loan. You need a Certificate of Eligibility, and you go through a private lender, not VA directly. A funding fee may apply at closing. VA.gov also warns borrowers to be careful with refinance offers.
What If You Don’t Qualify Yet?
First 30 days:
- Pull your credit reports and dispute errors.
- Pay every account on time.
- Stop opening new accounts. Each new application adds an inquiry.
Days 30 to 60:
- Pay card balances down. Lower balances can lift your score and cut the minimum payments counted in DTI.
- Pay off small installment loans where it makes sense. A loan with a few payments left still counts as a monthly debt.
- Gather the documents from the checklist above.
Days 60 to 90:
- Re-check your score and recalculate DTI.
- Build up savings. Reserves can support a borderline file.
- Revisit whether you need less cash. Taking less lowers LTV and the new payment, and either can fix a ratio problem.
If you were denied, ask what drove the decision. A score issue, a DTI issue and an equity issue each have different fixes. A file that was too close on DTI may work with a smaller loan, a paid-off account or another income source. Different programs also read the same file differently, which is a reason to compare options rather than stop at the first no.
What Does a Cash-Out Do to Your Budget?
A bigger loan usually means a higher payment and a longer road to paying the house off. The CFPB’s home equity guide says a cash-out refinance may lengthen the time to pay off your mortgage, and your payment may rise because you are replacing your loan with a larger one.
Mortgage insurance can enter the picture. It is required above 80% LTV on the agency path, apart from the no-MI wholesale lane. You can ask to cancel it at 80% of the original value with good payment history and no second liens. The servicer must end it automatically at 78%. Lendmire’s conventional program sheet lists typical annual premiums of 0.58% to 1.86% of the balance. That is a program-sheet range, not a quote. These specifics are subject to lender guidelines and a full review of property, leverage, and credit.
Cash-out is also not the only way to reach equity. A home equity loan or HELOC leaves your first mortgage alone and adds a separate loan. That can make sense when your current first loan is one you want to keep. A cash-out replaces everything, so the whole mortgage resets under new terms. Weigh both against the loan you have today.
Tax treatment can depend on your situation; borrowers should speak with a qualified tax professional before relying on any deduction or credit.
Key Terms Defined
Cash-out refinance: A new, larger mortgage that pays off your old one and gives you the difference in cash.
Debt-to-income ratio (DTI): Your total monthly debt payments divided by your gross monthly income.
Loan-to-value (LTV): The new loan amount divided by the home’s appraised value.
Seasoning: The required waiting period on your title and on the loan being paid off.
Reserves: Savings you still have after closing, often counted in months of payments.
Loan-level price adjustment: A pricing add-on from Fannie Mae based on factors like credit score and LTV.
Desktop Underwriter: Fannie Mae’s automated system that reviews your file and gives a finding.
Frequently Asked Questions
What credit score do I need for a cash-out refinance?
Across the wholesale conventional programs Lendmire places files with, the starting point is a 620 decision score, or 640 on an adjustable rate under manual underwriting. Jumbo loans start at 660, and the no-MI wholesale lane asks for 680. Some lenders set higher floors. Everything is subject to lender guidelines and full file review.
What is the maximum DTI for a cash-out refinance?
For files run through the automated system, the total ratio ceiling is 50%. Manually underwritten loans are held to 36% or 45%, depending on score and reserves. A cash-out above 45% DTI needs reserves, and a lender may apply a stricter limit.
How much equity do I need?
On a one-unit primary residence, a conventional cash-out reaches 80% LTV, so you must keep at least 20% equity. Two- to four-unit homes, second homes and investment properties reach 75%. A wholesale no-MI lane reaches 89.99% with its own conditions, and a Texas homestead is capped at 80% by the state constitution. Terms depend on the lender’s guidelines, the property type, the leverage, and a full review of the credit profile.
How long must I own the home first?
A borrower must generally have been on title for 6 months, and the mortgage being paid off must be at least 12 months old. Delayed financing, inheritance and legal-award exceptions exist. The no-MI wholesale lane has its own six months of seasoning.
Will a cash-out refinance hurt my credit?
The application adds a hard inquiry, which can lower your score slightly. Paying off cards with the proceeds can help your score at first.
For your own numbers, request a scenario review with Lendmire.
About Lendmire
As a mortgage broker (NMLS# 2371349), Lendmire helps homeowners and home buyers in 16 states with FHA, VA, conventional and jumbo purchase and refinance loans arranged through wholesale lenders. Lendmire is never the lender; program terms are set by the lender and the agency guidelines. 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. Fannie Mae Selling Guide B3-6-02, Debt-to-Income Ratios
2. Fannie Mae Eligibility Matrix
3. Consumer Financial Protection Bureau
4. Fannie Mae, Updates to Cash-Out Refinance Eligibility
5. Fannie Mae Selling Guide B2-1.3-02, Limited Cash-Out Refinance Transactions
6. VA.gov, Cash-Out Refinance Loan
7. CFPB Older Americans Housing Guide
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 to Qualify and Apply for a Cash-Out Refinance on a Fourplex · How to Qualify and Apply for a Cash-Out Refinance With a High Debt-to-Income Ratio
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
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.