The Quick Read: Qualifying depends mostly on how the house is used. If you live there and rent rooms to housemates, you apply as an owner-occupant, and the loan is judged mainly on your own income. If you don’t live there, the house is an investment property, and a consumer cash-out is usually not the right product. Housemate rent generally cannot be counted as income on a standard conforming loan.
What Counts as a Co-Living House?
Lenders have no official definition of “co-living.” In practice, the term describes two very different setups.
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.
The first is a house where you live and rent rooms to housemates or boarders. Lenders treat this as a one-unit home with extra people in it. The second is a house you don’t live in, where several people rent rooms. That is an investment property, and occupancy rules push it out of the consumer lane.
Occupancy is the first gate. Everything else follows from it.
This article covers the first setup: you live in the house. If that’s you, the rest applies directly.
What Is a Cash-Out Refinance, and How Is It Different?
A cash-out refinance replaces your current mortgage with a larger one and hands you the difference as cash. A refinance only swaps the loan and may return a small amount of incidental cash. The two are underwritten differently, and leverage limits are tighter on cash-out.
Across the wholesale programs Lendmire places, the conventional cash-out limit is 80% loan-to-value (LTV) on a one-unit principal residence. LTV is the new loan balance divided by the home’s appraised value. On two- to four-unit principal residences, second homes, and investment property, the cap drops to 75%. Occupancy sets the leverage. Everything here is subject to lender guidelines and full file review.
Lendmire’s cash-out refinance programs page lays out the options. A wholesale lane also reaches 89.99% LTV with no mortgage insurance. It requires a 680 score and a 50% ratio on a thirty-year fixed loan, a primary residence, and a conforming balance. It has its own six months of seasoning. It is not available in Texas. The exact numbers vary by lender and program and follow a full review of property, leverage, and credit.
Mortgage insurance is generally required above 80% LTV on the agency path, with that no-insurance lane as the one exception. Texas homestead cash-outs are capped at 80% of the home’s value by the state constitution.
How Is the Loan Underwritten, Step by Step?
Underwriting a co-living cash-out follows six steps. The order matters, because an early failure ends the file.
Step 1: Classify occupancy. Occupancy sets the leverage on a cash-out, which can be written on a primary residence, a second home or an investment property. When you live in the house as your principal residence, Freddie Mac’s cash-out rules require all borrowers to occupy the property on a primary-residence cash-out. A personal-use second home or an investment house gets different leverage and different treatment.
Step 2: Check the clocks. The first mortgage being paid off generally needs to be at least 12 months old, counted note date to note date. At least one borrower must have been on title for six months, with exceptions for things like inheritance or legal awards. Freddie Mac’s section sets out both tests. Fannie Mae’s seasoning works similarly, and your loan officer will confirm the details.
Step 3: Qualify on your own income. Co-living files can bring surprises here. Your housemates’ rent generally doesn’t help you qualify.
Step 4: Decide whether housemate rent counts at all. Sometimes it can, under narrow exceptions. More on that below.
Step 5: Appraisal. The appraisal sets the value, and the value sets the maximum loan. A house laid out as rooms can raise questions: how many bedrooms, whether kitchens and baths are shared, and whether the layout reads as one unit or several. An appraiser who sees a one-unit home with a few housemates is in a better spot than one who sees something resembling a rooming house.
Step 6: Credit, ratios, and reserves. The underwriter reviews your credit, debt-to-income ratio, and cash reserves. The wholesale conventional programs generally start at a 620 decision score. Most files are decided by the automated underwriting finding, which allows a total ratio ceiling of 50%. A loan that is underwritten manually instead is held to a ratio of 36% or 45%, depending on reserves and score. Credit events carry waiting periods set by the agencies: four years from a chapter 7 discharge, seven from a foreclosure, and four from a short sale or deed-in-lieu. Documented extenuating circumstances can shorten them.
Does Housemate Rent Count as Income?
Usually not. Fannie Mae’s boarder income rules say income from boarders living in your principal residence is generally not acceptable stable income, with a short list of exceptions. One is a live-in personal assistant paid through Medicaid Waiver funds.
When an exception applies, the documentation is strict:
- Proof of shared residency, such as a driver’s license, bills, bank statements, or W-2s showing the boarder at your address.
- At least 12 months of payment receipts, such as bank statements, canceled checks, or electronic payment records.
- A history that shows full, regular, and timely payments.
A signed lease with a new roommate doesn’t meet that standard. Twelve months of deposits do. Fannie Mae has also been rewriting its income policy. Its income assessment update moved boarder policy into the topic cited above and added an income-continuance requirement.
Whether the boarder exception is open on a standard cash-out is something your loan officer needs to confirm, because it isn’t assumed here. Plan to qualify without housemate rent, and treat any credit for it as a bonus.
Which Co-Living Setups Get Which Treatment?
| Setup | Typical lender treatment |
|---|---|
| You live there, rent rooms to housemates | One-unit home; your income qualifies you |
| Housemates with 12 months of documented rent | Rent may count under a narrow exception |
| Housemate under 12 months of history | Rent generally not counted |
| Separate accessory unit | Handled under rental-income rules |
| You don’t live there | Investment property; consumer cash-out not the fit |
The accessory unit row trips people up. A separate dwelling unit isn’t a boarder. Fannie Mae’s rental income rules generally bar rental income from a one-unit principal residence, with exceptions for boarders and accessory units. Those income rules are being updated, so ask your loan officer which version applies.
How Much Cash Can You Actually Take Out?
Your cap is the lesser of the leverage limit and what’s left after paying off your current loan and closing costs. At 80% LTV on a one-unit principal residence, you keep at least 20% of the home’s value as equity. A CFPB guide on using home equity notes that lenders typically want borrowers to keep 10% to 20% of the home’s value.
Closing costs come out of the new loan or your pocket. They reduce your net cash.
Picture a homeowner whose house appraises at a round number. They owe about half of it. At an 80% cap, the room between what they owe and 80% is the most they can take, before costs. The exact dollars depend on the appraisal and the file.
A bigger loan means a bigger payment, and your housemate rent generally can’t offset it on paper. The CFPB guide warns that the payment may rise and the payoff may stretch out. Before you borrow the maximum, check that your own income carries the new payment with room to spare.
Where Does the General Rule Break?
Several edge cases change the answer.
You don’t live there. A true co-living operator owns an investment property. The FHA cash-out loan is for owner-occupied principal residences only. Conventional cash-out can be written on investment property, but at 75% LTV on two to four units, and that falls outside the consumer path this article covers.
Your housemate history is short. Under 12 months of receipts, rent doesn’t count. Start depositing it consistently now, and keep records.
You own the home free and clear. A new loan on a home with no mortgage is still treated as cash-out under Freddie Mac’s rules. The same is true if a lien was paid off recently, so the timing of an earlier payoff matters.
You’re buying out a co-owner. Under a written agreement, this counts as a limited cash-out transaction at both agencies. Don’t confuse a co-owner with a housemate. They’re not the same thing.
You have an FHA or VA loan. The FHA Streamline and the VA IRRRL are streamlines, not cash-out products. They don’t put cash in your hands. A VA cash-out is a separate, fully underwritten loan. You need a Certificate of Eligibility, and a private lender makes the loan, not VA itself. A VA cash-out must also pass a net tangible benefit test.
You’re considering FHA cash-out. The FHA version requires owner occupancy and a period of ownership first, with a lower leverage cap than VA. Specifics depend on the program handbook and lender overlays, so ask your loan officer for current figures.
For more on how a lender handles room income, see Lendmire’s piece How Much Room Rent a Cash-Out Refinance Counts on a Co-Living House.
Key Terms Defined
Cash-out refinance: A new, larger mortgage that pays off the old one and gives you the difference in cash.
LTV (loan-to-value): The loan balance divided by the home’s appraised value, shown as a percentage.
Seasoning: The waiting period a lender wants on the loan being paid off, or on your time on title, before you refinance.
Boarder income: Rent paid by someone who lives in your home, which agencies generally don’t count as stable income on a principal residence.
Limited cash-out refinance: A refinance that pays off your loan and costs and returns only a small amount of incidental cash.
Mortgage insurance: A policy that protects the lender when you borrow above 80% LTV. It cancels at 80% on request and ends automatically at 78%, with the no-insurance wholesale lane as the exception. Final terms depend on the lender’s guidelines, the property type, and the borrower’s complete credit picture.
What Should You Do Before You Apply?
1. Confirm you live in the house as your primary home. 2. Check the age of your current mortgage and your time on title. 3. Gather 12 months of bank statements showing housemate deposits, plus proof of shared address. 4. Calculate whether your own income carries a larger payment without the rent. 5. Ask whether the layout, bedroom count, and shared spaces could confuse an appraiser. 6. Decide how much equity you want to leave in the house.
Common mistakes that stall files: counting on housemate rent to qualify, taking a new roommate’s lease as proof of income, ignoring seasoning clocks, and borrowing right to the cap.
If a lender declines the property type, don’t force it. Compare a rate-and-term refinance, a different occupancy structure, or leaving your current loan alone. Rules vary by lender, so a decline at one doesn’t always mean a decline at all.
Frequently Asked Questions
Can I qualify if my housemates pay most of the mortgage?
Not on their rent alone. Housemate rent generally isn’t counted as income on a standard conforming loan. You qualify on your own income, with a narrow exception for documented boarder income. Qualification remains subject to lender guidelines and full file review.
How long must I own the house before a cash-out?
Freddie Mac requires at least one borrower on title for six months, with exceptions. The first mortgage being paid off must be at least 12 months old. The wholesale no-insurance lane has its own six months of seasoning.
Does a new roommate’s lease help?
No. Fannie Mae’s standard is 12 months of payment receipts plus proof the boarder lives at your address. A new lease doesn’t establish that history.
Can I take out all my equity?
No. On a one-unit principal residence, conventional cash-out is limited to 80% LTV. Lenders generally want you to keep a cushion of equity, and the CFPB notes 10% to 20% is typical.
Does an FHA or VA streamline give me cash?
No. The FHA Streamline and VA IRRRL are no-cash products. A VA cash-out is a separate, fully underwritten loan made by a private lender.
Where to Go From Here
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. Start with whether you’ll keep living in the house, because that answer shapes every number after it.
For your own numbers, request a scenario review with Lendmire.
About Lendmire
Lendmire is a mortgage brokerage (NMLS# 2371349) licensed for consumer mortgage lending in 16 states, arranging FHA, VA, conventional and jumbo purchase and refinance loans through a wholesale lending network. Eligibility is determined by the lender on each file. 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. Freddie Mac Guide §4301.5, Cash-out refinance Mortgages
2. Fannie Mae Selling Guide B3-3.4-04, Boarder Income
3. Fannie Mae, Income Assessment Simplified
4. Fannie Mae Selling Guide B3-3.1-08, Rental Income
5. CFPB guide on using home equity
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 a Cash-Out Refinance Works When You Buy Before You Sell · How to Qualify and Apply for a Cash-Out Refinance Versus Rate-and-Term Refinancing · How the Cancellation Period Works on a Cash-Out Refinance
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
Disclosure information. Lendmire is a state-licensed mortgage brokerage under NMLS# 2371349. Lendmire is not a depository institution, direct lender, or financial advisor — all loans referenced are placed through wholesale lender partners and are subject to each lender's underwriting standards. This article is provided for general informational purposes and is not a commitment to lend, nor does it constitute financial, legal, or tax advice. Loan programs, terms, rates, and qualification standards change without notice and depend on borrower profile, property type, and the state in which the subject property is located. Equal Housing Opportunity provider. NMLS Consumer Access: nmlsconsumeraccess.org.