How Much Cash a Conventional Cash-Out Lends an FHA Condo Owner

The Quick Read: The cash comes from one subtraction. The new conventional loan, capped at a percentage of appraised value, minus the FHA payoff and any closing costs you roll in, equals what you receive. For a one-unit primary residence, Fannie Mae’s matrix shows an 80% cap. The condo adds one extra gate: the building itself has to pass conventional project review.

What Is This Loan, Exactly?

A conventional cash-out refinance is a brand-new first mortgage. It pays off your FHA loan in full, and the extra goes to you. The FHA loan ends, and so does its mortgage insurance.

Two things are worth knowing up front. The upfront FHA premium you paid at the start is generally not refunded when you refinance into a conventional loan. A refund credit applies only to FHA-to-FHA refinances within a short window.

The other point is that conventional rules now govern your cash-out. Fannie Mae and Freddie Mac set the leverage cap, the credit standards and the condo-building tests.

Key Terms Defined

• Appraised value: The opinion of value from a licensed appraiser. The loan cap is a percentage of this number, not of your equity.
• Loan-to-value (LTV): The new loan amount divided by appraised value.
• Payoff: What you owe on the FHA loan on the day it is retired, including accrued interest.
• Rolled-in costs: Closing costs added to the new loan balance instead of paid out of pocket. They reduce your cash dollar for dollar.
• Project review: The lender’s check that the condo building meets Fannie Mae’s standards.
• Loan-level price adjustment (LLPA): A pricing add-on that applies to certain cash-out loans based on LTV and credit score.

How Is the Cash Calculated, Step by Step?

The formula is short. The steps behind it are where files succeed or stall.

1. Screen eligibility. Borrower eligibility and the leverage cap come from Fannie Mae’s cash-out refinance rules, which point to the Eligibility Matrix for exact limits.

2. Order the appraisal. Value sets the ceiling. A lower appraisal shrinks the cap and your cash with it.

3. Apply the cap. The Fannie Mae Eligibility Matrix shows 80% for a one-unit principal residence cash-out. Multiply appraised value by that percentage to find the largest loan.

4. Subtract the FHA payoff. Every dollar needed to retire the old loan comes off the top.

5. Subtract rolled-in costs. Any closing cost you finance sits inside the capped loan, so it comes out of your cash.

6. What remains is your cash.

Take a condo appraised at a round 100 units of value, and picture the cap at 80 of them. If the FHA payoff is 62 and you roll in 2 of costs, you receive 16. Pay the costs from savings instead and you receive 18. Same loan, different cash. These are modeled units, not dollar figures.

One more number matters: other liens. A second mortgage or HELOC counts toward the cap, so it reduces what is left. Ask your loan officer how any second lien is treated before you assume the full cap is available.

Does a Condo Get a Lower Cash-Out Limit Than a House?

No, not on the matrix itself. A condo unit is treated as a one-unit property, so the same leverage number applies. The difference is the building test. A condo loan is only eligible if the project passes review, and that is where condo owners get surprised.

Does the Building Have to Pass Review Too?

Yes. Before a loan on a unit can be delivered to Fannie Mae, the lender has to confirm the project meets its requirements. The review type depends on the project. Options include a full review, a Fannie Mae process for certain projects, and a route for units in condo projects approved by the FHA.

Here is the catch. “FHA-approved” does not automatically mean “conventionally approved.” FHA approval is one route Fannie Mae recognizes, not a guarantee. Whether it is enough for your building is something a broker confirms early, before you pay for an appraisal.

A strong borrower can still be declined if the building fails. Typical trouble spots:

• Unavailable status. A project marked “Unavailable” in Fannie Mae’s project system makes loans on its units ineligible, whatever review type applies.
• Ineligible project types. Fannie Mae’s list of ineligible projects includes condo hotels and projects with pending litigation over safety, structure or habitability.
• Delinquent dues. Full review tests how many owners are significantly behind on association assessments.
• Thin reserves. The association budget has to fund replacement reserves at a set share of the budget. A special assessment is a separate charge to owners and does not meet that budget test.

Reserve and review standards have been tightening, so confirm the current Selling Guide rather than relying on an older checklist.

Where the General Rule Breaks

Fannie Mae waives project review for certain small projects and detached units. It also waives review for certain Fannie-to-Fannie limited cash-out refinances. An FHA loan is not a Fannie Mae loan, so that Fannie-to-Fannie waiver does not apply to you.

Occupancy changes the cap. The matrix gives different limits for second homes and for two- to four-unit properties. This article assumes a one-unit primary residence. If yours is anything else, occupancy decides the leverage, and the matrix is the place to read the exact number.

Texas is different. Texas homestead cash-outs follow state constitutional limits that sit on top of the agency rules. Texas owners should ask for those limits early.

Freddie Mac runs a parallel standard. It has its own cash-out and condo rules. They work along similar lines, but the details differ, so a file that stalls under one set of rules is sometimes reviewed under the other.

HOA dues count against you. Monthly association dues enter your debt-to-income calculation. High dues raise the monthly obligation the lender counts, which can limit how much loan the file supports even when the LTV cap would allow more.

What Changes in Your Monthly Budget?

Ending the FHA loan removes the FHA annual mortgage insurance premium line. On a thirty-year FHA loan with an original LTV above 90%, that premium lasts for the full term, while at 90% or below it ends after eleven years. Confirm your own loan’s schedule at hud.gov.

The new loan may carry private mortgage insurance, or none at all if leverage stays at roughly 80% or below. A bigger balance also raises the principal-and-interest portion. And because an LLPA applies to certain cash-out loans, pricing is typically higher than on a plain rate-and-term refinance.

Costs can be paid out of pocket or financed. The Loan Estimate separates “Closing Costs Financed” from “Estimated Cash to Close,” and they are different lines. The CFPB’s Loan Estimate explainer walks through both, and comparing that form with your Closing Disclosure is the cleanest way to catch changes.

The Alternatives Side by Side

The FHA cash-out allows borrowing up to FHA’s program leverage limit on a home you have owned and occupied for 12 months before the case number. Whether it fits better depends on the building, your credit profile and how long you plan to stay. Final terms depend on lender guidelines, property type, leverage, and the borrower’s complete credit picture.

Common Mistakes

• “I can borrow 80% of my equity.” The cap is 80% of appraised value, and all liens count toward it.
• “My building is FHA-approved, so I am set.” Fannie Mae reviews the project under its own standards.
• “Cash to close and closing costs are the same number.” They are separate lines on the forms.
• “20% equity cancels my FHA premium.” Not on newer loans. Check your schedule.
• Skipping the building question. Ask early whether the project is likely to pass. An appraisal paid for on a failing building is money gone.

When This May Not Be Worth It

Skip the conventional cash-out, or at least pause, if the building has known litigation, a heavy special assessment or high delinquencies. And think twice if you are only a few years into the FHA loan and a different FHA path would meet the goal.

If the cash would pay off higher-cost debt or fund a repair that protects value, the math tends to work better.

What Does the Decision Look Like in Practice?

Work in this order:

1. Ask whether the building looks eligible before anything else.

2. Get an appraisal-based estimate of the cap.

3. Subtract your FHA payoff and decide whether to pay costs or finance them.

4. Compare the resulting cash with what you need.

5. Compare the monthly picture, including HOA dues and any new mortgage insurance.

6. Weigh it against staying FHA or an FHA cash-out.

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. Program details are subject to lender guidelines and full file review, and nothing here is a commitment to lend.

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.

References

1. Fannie Mae Selling Guide B2-1.3-03, Cash-Out Refinance Transactions

2. Fannie Mae Eligibility Matrix

3. Fannie Mae Selling Guide B4-2.1-03, Ineligible Projects

4. Fannie Mae Selling Guide B4-2.1-02, Waiver of Project Review

5. CFPB Loan Estimate Explainer