The Quick Read: Any lender with FHA approval can offer this loan, because FHA insures mortgages and does not lend. The program lets you replace your current mortgage with a larger one, up to 80% of the home’s value, and keep the difference as cash. It can build an emergency cushion, but it swaps savings for debt secured by your home, so it fits some borrowers and not others.
Is There a List of Banks That Do This?
There is no official FHA bank list, and that surprises most people. FHA is an insurance program run by HUD. Banks, credit unions, online lenders and mortgage brokers all originate FHA loans once they hold HUD approval. HUD Handbook 4000.1 sets out what a lender must meet to do business with FHA.
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.
So the useful question is not which bank has a special program. It is which lenders will write your particular file. Every FHA lender follows the same HUD rules. Each one then adds its own extra requirements, called overlays. One lender may want a higher credit score than another. One may be stricter about payment history.
That is where a broker earns its keep. Lendmire is a mortgage broker, not a lender. It works with a network of wholesale lenders and matches your situation to the lender whose overlays fit it. The best program for your situation depends on your credit, your equity, how long you have owned the home and how much cash you actually need.
What Is an FHA Cash-Out Refinance?
An FHA cash-out refinance is a brand-new first mortgage that pays off your old one and hands you the leftover equity as cash. It is not a second mortgage. Your old loan disappears, including any low-rate terms it carried.
The Consumer Financial Protection Bureau describes it the same way: you replace your mortgage with a bigger one and take the difference in cash. A home equity loan or HELOC works differently. Those leave your first mortgage alone and add a second lien on top.
Here is the simple picture. Your home is worth a certain amount. FHA lets the base loan reach 80% of that value. Your old payoff and the financed costs come out of that 80% first. Whatever room is left is your cash. The upfront insurance premium is financed on top of that capped base loan.
How Is the Loan Underwritten, Step by Step?
Underwriting follows six steps, and the first one can stop everything. Check the occupancy rule before you spend money on anything else.
1. Eligibility screen. You must own and live in the home as your principal residence. Across the wholesale programs Lendmire places FHA files with, the FHA cash-out reaches 80% LTV on a home you have owned and occupied for 12 months before the case number is assigned. (LTV, or loan-to-value, is the loan amount divided by the home’s value.) A case number is the FHA ID assigned to your loan file.
2. Appraisal. A full appraisal sets the value. HUD’s 80% cap is measured against “Adjusted Value,” which is the appraised value after HUD’s adjustments. A low appraisal shrinks both the loan ceiling and your cash.
3. Sizing the loan. The new loan must pay off your first mortgage and any second lien being paid off. Financed costs and the upfront premium count too. Cash to you is whatever fits under the cap.
4. Mortgage insurance. FHA charges an upfront premium of 1.75% of the base loan, which is usually financed. It also charges an annual premium that runs between 0.15% and 0.75% of the balance, depending on term, loan amount and LTV. On a thirty-year loan above 90% LTV, the annual premium lasts the full term. At or below 90%, it ends after eleven years.
5. Full file review. The lender reviews your credit, income, debts and payment history, and the credit score a lender requires depends on the lender and your file. Ratios start at 31/43 (housing payment over income, then total debts over income) with no compensating factors. Documented factors can stretch that to 40/50 at the top tier. The automated finding governs most files.
6. Closing. You receive a Loan Estimate early and a Closing Disclosure before you sign. Compare the full terms on both.
All of this is subject to lender guidelines and full file review. Nothing here is a commitment to lend.
Where Does the 80% Rule Come From?
HUD cut the cash-out cap to 80% in Mortgagee Letter 2019-11, and it still applies. The previous cap was 85%. The change strengthened the equity position of cash-out loans and reduces losses when a loan defaults.
HUD’s announcement of the change adds some history. FHA had already cut the cap from 95% to 85% in 2009. The new 80% figure also lines up with the limit Fannie Mae and Freddie Mac use on conventional cash-out loans.
If you read an old article promising 85% or 95%, it is out of date.
What Mistakes Do People Make About the 80%?
The biggest one is thinking 80% is the cash you can take. It is not. The 80% applies to the entire new loan. Your existing mortgage payoff and the costs come out of it first.
Picture a home with a modest remaining balance. Most of that 80% is room for cash. Now picture a home where the balance already sits near 75% of value. Almost nothing is left after the payoff and the upfront premium. Same program, very different result.
A second mistake is assuming the upfront premium applies only to the cash. It applies to the whole new base loan. You pay it on your old balance as well as on the cash you take. That is simply how HUD defines the premium.
A third is believing that price gains let you skip the waiting period. They do not. Appreciation does not shorten the 12 months.
Where Does the Rule Break?
- A recently bought home. If you have owned the home under 12 months, the standard cash-out is generally off the table. A big jump in value does not change that.
- An inherited home. Say you inherited a house and rented it out. You would need to live in it as your principal residence for 12 months before cash-out is available.
- A second home or rental. Standard FHA cash-out is for owner-occupied principal residences only. Occupancy decides the leverage, and FHA does not stretch it for other uses.
- Manufactured homes. These carry extra requirements, including how the home is installed. Lenders vary here, so ask early.
- Hawaiian Home Lands (Section 247). HUD’s 2019 cap change does not apply to these mortgages.
- A paid-off home. A new loan on a home owned free and clear can still work, but check with your lender how it is treated.
- Recent credit events. HUD sets waiting periods of two years from a chapter 7 discharge and three years from a foreclosure. Those are HUD’s rules. Lender overlays may add more.
Also remember that FHA county loan limits apply and change every year. In higher-priced areas that can cap the loan before the 80% does.
What If You Only Want a Lower Balance or Less Cash?
Cash-out is one of three FHA refinance paths, and you may fit a different one. Across the wholesale programs Lendmire places files with, the options look like this:
| Refinance type | Cash to you | Typical leverage reach |
|---|---|---|
| FHA cash-out | Yes, from equity | Up to 80% LTV |
| FHA rate-and-term | Little or none | Up to 97.75% LTV |
| FHA Streamline | None | No appraisal, limited credit review |
The rate-and-term loan reaches 97.75% on a principal residence you have occupied for the previous twelve months. The Streamline refinances an existing FHA loan with a net tangible benefit, meaning the change must actually help you. The insurance premium continues on a Streamline.
If you want money in hand, only the cash-out delivers it. If you only want a different term or payment structure, one of the others may cost you less.
Is It a Good Way to Build an Emergency Fund?
It can work, but it is rarely the first tool to reach for, and honest brokers say so. An emergency fund exists to protect you. A cash-out refinance protects you by borrowing against the roof over your head.
Start with the timing problem. This is not instant cash. You apply, get an appraisal, go through underwriting and wait for closing. If your emergency is next week, a refinance is the wrong tool. If you are planning ahead, it is a candidate. The CFPB notes that home equity is hard to spend on short notice, and that is exactly the point. You are converting a frozen asset into a liquid one.
Then weigh what you give up:
- A bigger loan. The CFPB’s home equity guide says a cash-out refinance can lengthen your payoff time and raise your monthly payment because the loan is larger.
- Closing costs and insurance. The upfront premium hits the whole loan, and closing costs often apply.
- Your current mortgage. If you hold a low-rate first mortgage today, a cash-out refinance replaces all of it. A HELOC or home equity loan leaves it in place.
- Higher stakes. Moving unsecured debt, such as a credit card balance, into your mortgage turns it into home-secured debt. Missing payments then puts the house at risk.
The same guide says lenders typically want you to keep 10% to 20% of the home’s value as equity. That is a useful gut check.
A reasonable reading: the loan suits someone with stable income who is already refinancing for another good reason, who has the equity, and who can keep the cash untouched. It suits a borrower in a shaky budget much less. This is a trade-off to weigh, not a recommendation.
How Do You Size the Fund?
Size it by what you need, not by what the program allows. The 80% cap is a ceiling. It is not a target.
Work through it in this order:
1. Decide your cushion. Many households think in months of essential expenses.
2. Find your current payoff balance.
3. Estimate your home’s likely appraised value.
4. Take 80% of that value. This is the most the new loan can be.
5. Subtract your payoff, financed costs and the 1.75% upfront premium. What remains is the most cash you could take.
6. Compare that room to the cushion you want. Borrow only the amount you need.
Borrowing more than you need means paying interest on savings you are not using. Borrowing less than the maximum is always allowed.
Where you park the cash matters too. Put it in a separate savings account that is not tied to your daily spending, so it stays an emergency fund and not a vacation fund.
How Does It Compare With Other Ways to Build a Cushion?
The right answer depends on the loan you already have. A rough comparison:
| Option | Keeps your first mortgage? | Secured by your home? |
|---|---|---|
| FHA cash-out refinance | No, replaces it | Yes |
| HELOC | Yes | Yes (second lien) |
| Home equity loan | Yes | Yes (second lien) |
| Personal loan | Yes | Usually no |
| Saving from income | Yes | No |
Neither is always cheaper. If your existing mortgage terms are strong, leaving them alone may matter more than anything else.
Saving from income is slow, but it adds no debt and no risk to your home. A cash-out refinance is the opposite trade: fast to size, heavy on obligations.
Which Lenders Write These Loans, and How Do You Choose?
Lender types differ in how they work. Depositories, credit unions, online lenders and brokers all appear in the FHA market, and none of them makes its own FHA rules. What differs is service, overlays and how many options they can show you.
A lender that holds its own funds has one set of overlays. A broker like Lendmire shops multiple wholesale lenders and matches your scenario to the program.
Whichever route you take, ask these questions:
- What credit score and debt ratios do you require beyond HUD’s minimums?
- How do you treat my property type?
- How much room is left under the 80% cap after payoff and the upfront premium?
- What will the Loan Estimate show for closing costs and total insurance?
- What does my payoff date look like after the refinance?
Compare Loan Estimates side by side. The lowest-looking offer is not always the lowest-cost one once insurance and costs are added up.
Key Terms Defined
Adjusted Value: The appraised value after HUD’s adjustments. The 80% cap is measured against it.
Case number: The ID FHA assigns to your loan file. The 12-month ownership clock counts back from its assignment date.
CLTV: Combined loan-to-value, which adds all loans on the home together and compares them to its value. HUD caps this at 80% too on a cash-out.
Overlay: A requirement a lender adds on top of HUD’s rules, such as a higher credit minimum.
Upfront premium: FHA’s one-time mortgage insurance charge, 1.75% of the base loan, usually financed.
Net tangible benefit: A real, measurable improvement to the borrower, required on an FHA Streamline.
Frequently Asked Questions
Can I refinance into an FHA cash-out loan if my current mortgage isn’t FHA?
Yes. The new loan is a fresh FHA mortgage, so your existing loan can be conventional, VA or another type. You still need to meet the ownership and occupancy test, the 80% cap and the lender’s full file review.
Can I use the cash for an emergency fund?
Nothing in the program stops you from holding the proceeds as savings. Lenders review the loan, not how you spend the cash. Keep in mind that you pay interest on every dollar you borrow, including dollars that sit idle.
Why is this not instant emergency money?
It is a full mortgage. It needs an appraisal, a file review and a closing, and you receive a Loan Estimate and Closing Disclosure along the way. If you may need cash immediately, plan for a different source and treat the refinance as a longer-term step.
Does a bigger loan always raise my payment?
Usually, since the balance grows. Your actual result depends on the loan’s term and its other terms, which the Loan Estimate shows.
What about taxes?
Tax treatment depends on your own situation, and this article does not give tax advice. Ask a qualified tax professional how a cash-out refinance affects you before you decide.
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. Reach the team at 828-256-2183.
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
2. Consumer Financial Protection Bureau
3. HUD Mortgagee Letter 2019-11
4. HUD press release PR 19-114
5. CFPB
6. CFPB: Using home equity to meet financial needs
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 Much Cash Comes Out of an FHA Cash-Out Refinance for Repairs Without a Contractor? · How Much Cash Comes Out of an FHA Cash-Out Refinance to Build an Accessory Dwelling Unit? · How Much a Broker Can Charge on an FHA Cash-Out Refinance?
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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- 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.