The Quick Read: There is no fixed dollar or percentage cap on a broker’s fee for a standard FHA cash-out refinance, but the fee is far from unlimited. It has to be reasonable, disclosed on your Loan Estimate, and it counts toward a federal limit on total points and fees. On a cash-out, any fee you finance also comes out of your cash, because the whole new loan sits under an 80% loan-to-value ceiling.
Is There a Cap on What a Broker Can Charge?
No single FHA number caps it. HUD used to limit origination fees to 1% of the mortgage. HUD Mortgagee Letter 2009-53 ended that for FHA’s standard insurance programs. The letter says FHA expects fees to be fair and reasonable and will monitor so borrowers aren’t overcharged.
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.
The 1% caps lived on only in a few niche programs. Reverse mortgages (HECM) still have a formula-based limit under 24 CFR 206.31. An HECM is not a standard cash-out refinance, so you can skip it if you’re refinancing the home you live in.
So the honest answer is “reasonable and disclosed,” not “capped at X%.” A quote that presents a flat FHA ceiling for a standard cash-out refinance deserves a second look.
What Is a Broker, and How Is One Paid?
A mortgage broker arranges your loan but doesn’t fund it. Lendmire works this way: it is a mortgage broker licensed for consumer lending in 16 states, placing FHA loans through wholesale lenders. The lender reviews your file and makes the lending decision. The broker finds the program and builds the file.
A broker gets paid in one of two ways, and only one at a time:
| Factor | Borrower-paid | Lender-paid |
|---|---|---|
| Who pays the broker | You | The wholesale lender |
| Where it shows | Its own line in Origination Charges | No separate borrower fee line |
| Can the broker also take lender pay? | No | Not if you pay directly |
| Trade-off | Fee up front or financed | Cost built into loan pricing |
Here is the catch with “lender-paid.” It does not mean free. The broker’s pay still exists. It just doesn’t show up as a fee you write a check for, because the cost is carried inside the loan’s pricing. Fair comparison means looking at the whole loan, not just the fee line.
Can a Broker Be Paid by Both You and the Lender?
No. Federal rules say that if you pay the broker directly, nobody else can pay that broker on the same loan. Payments taken out of your loan proceeds count as paying directly. This is the rule that ended the old practice of charging a borrower fee and collecting a bonus from the lender too.
A second rule matters just as much. A broker’s pay can’t change based on the loan’s terms. It can be a flat amount per loan or a percentage of the loan size, sometimes with a minimum or maximum. It can’t be higher because you accepted a pricier loan. That keeps a broker from profiting by steering you into worse terms.
What Actually Limits the Fee?
Four things work together:
- The “reasonable” standard. FHA’s rules let the originator collect a charge for originating and closing the loan, and let you compensate a broker who doesn’t represent the lender. HUD expects both to be reasonable.
- The compensation rules above. One payer, no pay tied to loan terms.
- Disclosure. Origination charges appear on your Loan Estimate and are finalized in Section A on page 2 of your Closing Disclosure. They generally can’t rise at closing except in limited circumstances.
- The points-and-fees test. This is the real dollar ceiling.
FHA’s Qualified Mortgage rule borrows the federal points-and-fees limit. For most loan sizes that limit is 3% of the total loan amount, per the annual qualified-mortgage threshold adjustment. Smaller loans get higher percentage or fixed-dollar tiers.
Think of that 3% as a shared bucket. It covers origination compensation you pay, including to a broker, plus certain other lender charges. It is not a 3% allowance for the broker alone. If the total goes over, the loan can’t be made as written, so the broker has to cut or restructure the fee.
Where Does Broker Pay Show Up on Your Paperwork?
Look at Section A, “Origination Charges,” on page 2 of the Loan Estimate. A borrower-paid broker fee sits there as its own line. Some brokers show it as a percentage of the loan, others as a flat amount.
Lender-paid compensation doesn’t appear as a charge to you. If a broker says “no fee,” ask directly how they’re being paid and what that does to your loan pricing.
Watch for padding in vague lines such as processing or administration. Ask what each line covers and who receives it. A broker’s charge and a third party’s charge look similar on paper but are different things.
These are not broker fees:
- FHA mortgage insurance. Across the wholesale programs Lendmire works with, FHA charges an upfront premium of 1.75% of the base loan, which is financed, plus an annual premium between 0.15% and 0.75% of the balance. The annual figure depends on term, loan amount and LTV. These are program costs set by HUD, not broker pay.
- The appraisal.
- Title and settlement services.
- Prepaid items such as insurance and taxes set aside at closing.
All of these are subject to lender guidelines and full file review.
How the Fee Eats Your Cash on a Cash-Out
This is where cash-out differs from other FHA refinances. A standard FHA cash-out has a loan-to-value (LTV) ceiling of 80% on a home you’ve owned and lived in as your primary residence for 12 months before the case number is assigned. HUD Mortgagee Letter 2019-11 set that ceiling, lowering it from the prior level.
Loan-to-value is the new loan divided by your home’s value. The 80% covers the entire new mortgage, not just the cash you receive. Here is how the pieces stack up:
1. HUD takes your home’s adjusted value and applies 80% to it.
2. That gives the maximum new loan.
3. Your existing mortgage and any other liens being paid off come out first.
4. Financed closing costs, including a broker fee, come out next.
5. What’s left is your cash.
So when the loan is sized at the 80% maximum, a financed broker fee reduces your cash dollar for dollar. A fee of one percentage point of the loan then means a full point less cash in your hands than you’d have otherwise. Pay the fee from your own pocket and the loan stays smaller, but you’ve spent savings.
A common misunderstanding: 80% LTV does not mean you receive 80% of your equity. It means the new loan can be up to 80% of value. Whatever you already owe comes out of that first.
Borrower-Paid vs. Lender-Paid: Which Fits Your Situation?
It’s a toss-up that depends on what you’re protecting. A borrower-paid fee is visible and easy to compare. It either reduces your cash or raises your loan balance. A lender-paid structure removes the upfront line but builds the cost into pricing, so your monthly cost and long-run cost can shift.
If you plan to keep the loan a long time, ask how a lender-paid structure changes your overall cost. If your cash at closing is the priority, compare how each structure changes your net proceeds. Get both versions in writing and compare the Loan Estimates side by side. Don’t judge on one number.
Broker vs. Bank: What Changes?
| Factor | Broker | Direct lender or bank |
|---|---|---|
| Who funds the loan | A wholesale lender | The institution itself |
| Programs offered | Several lenders’ programs | One institution’s menu |
| Who is paid | Broker, per the rules above | Lender’s own staff |
Both must give you a Loan Estimate and follow the same disclosure rules. A broker’s advantage is reach across several lenders’ guidelines and overlays. A bank’s advantage is a single point of contact. Neither is automatically cheaper. Only the Loan Estimates tell you.
Red Flags and Questions to Ask
Walk away or push back if you see any of these:
- A broker who won’t say whether they’re borrower-paid or lender-paid.
- A fee quoted as “FHA’s maximum.” There isn’t one.
- Compensation that changes depending on the loan you pick.
- Vague lines in Origination Charges that no one can explain.
- Fees on the Closing Disclosure that jumped from the Loan Estimate without a clear reason.
Ask these questions:
1. How are you being paid on this loan?
2. What is every line in Section A, and who gets it?
3. How much of my cash does the fee reduce if I finance it?
4. Are total points and fees within the federal limit?
5. What would change if I paid the fee out of pocket instead?
If something still looks wrong, state law may add limits on top of the federal rules, and state regulators take complaints.
Key Terms Defined
Origination charges: the fees for creating and processing your loan, shown in Section A of the Loan Estimate.
Points and fees: a federal measure of certain loan charges, including origination compensation you pay, added up and compared to a cap.
Loan-to-value (LTV): the new loan balance as a percentage of your home’s value.
Adjusted value: the value HUD uses to apply its LTV limit, which isn’t always the raw appraisal.
Lender-paid compensation: broker pay that comes from the lender through loan pricing, not from you.
Qualified Mortgage (QM): a loan that meets federal standards, including the points-and-fees cap.
Frequently Asked Questions
Does FHA limit broker fees to 1%?
No. That limit was removed for standard FHA programs years ago. HUD now expects fees to be fair, reasonable and disclosed. The 1% figure you may see online is outdated for a standard cash-out refinance.
Can I negotiate a broker’s fee?
Yes, before you lock in a Loan Estimate. Ask for borrower-paid and lender-paid versions and compare them. Pay generally can’t be lowered later to match a competing offer, except to cover unexpected closing cost increases, so negotiate early.
Will a lender-paid broker mean no closing costs?
No. It means no separate broker fee line. The cost is carried in the loan’s pricing, and other closing costs such as the appraisal and title still apply.
Does my credit score raise the 80% limit?
No. HUD sets the 80% LTV ceiling for an FHA cash-out refinance, and a higher score doesn’t lift it. Lender guidelines and your file still decide whether you qualify. Every figure here varies by lender and program — guidelines, property type, leverage, and credit profile all apply.
Can I use an FHA cash-out on a rental or second home?
No. A standard FHA cash-out is for your owner-occupied primary residence, owned and lived in for 12 months.
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 figures 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 — NMLS# 2371349 — is a mortgage broker that arranges FHA, VA, conventional and jumbo home purchase and refinance financing in 16 states through wholesale lenders. Every option is subject to the lender’s guidelines and full underwriting. 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 2009-53
3. Federal Register: 2026 Reg Z QM thresholds (regulations.gov)
4. HUD Mortgagee Letter 2019-11
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: How to Plan and Use an FHA Cash-Out Refinance to Go Fixed · How to Get an FHA Cash-Out When Conventional Costs Too Much · How Lenders Underwrite an FHA Cash-Out Refinance Versus Limited 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
Disclosures. The information presented in this article is general market commentary, not financial, legal, or tax advice. Lendmire is a mortgage brokerage (NMLS# 2371349) — not a direct lender or depository institution — and loan placement is subject to lender underwriting. Nothing in this content represents a commitment to lend. Loan terms, pricing, and program availability vary based on borrower qualifications, property characteristics, and state of subject property, and are subject to change at any time. Lendmire complies with Equal Housing Opportunity requirements. Consumer access: nmlsconsumeraccess.org.