The Quick Read: Approval comes down to four things: your credit file, your documented income against your debts, the equity left after the new loan, and how long you have owned the home. Most conventional files start at a 620 decision score, and the automated underwriting finding governs most of them. The lender then checks that your total monthly debts, including the new payment, fit under a ratio ceiling of 50% on those files. Every figure here is subject to lender guidelines and full file review, and none of it is a commitment to lend.
What You Need to Know First
- A cash-out refinance replaces your whole first mortgage with a larger one and pays you the difference. The new terms apply to the entire balance, not just the cash.
- Conventional cash-out tops out at 80% of the home’s value on a one-unit primary residence. Two- to four-unit homes, second homes and investment properties top out at 75%.
- Your first mortgage must be at least 12 months old. You must also have been on title for 6 months, with a few named exceptions.
- Credit decides whether you are eligible and shapes the cost. Income and debts decide how much payment you can carry.
- Weak credit and tight income are not the same problem. A strong file in one area can offset a thin spot in the other, within limits.
Lendmire’s cash-out refinance programs page lays out the options it brokers. Lendmire is a mortgage broker, not a lender. It arranges these loans through wholesale lenders, and the lender makes the decision. What follows is how that decision actually gets made.
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: 7.24% as of October 29, 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.
How Does a Lender Decide on a Cash-Out Refinance?
The lender runs your file through six checks in order: credit, income, debts, seasoning, appraisal, and a final underwriting decision. Each check can stop the file or change the terms. Knowing the order tells you where to fix problems before you apply.
Here is how a typical file moves:
1. Application. You list income, assets, employment history and debts.
2. Credit review. The lender pulls your credit, which feeds both eligibility and cost.
3. Income documentation. You prove what you earn, and the proof depends on how you are paid.
4. Seasoning check. The lender confirms how long you have owned the home and how old your current mortgage is.
5. Appraisal. The appraised value sets the ceiling on the new loan.
6. Underwriting decision. The automated finding, or a human underwriter on a manual file, approves, adds conditions or declines.
Federal rules also require the lender to make a reasonable, documented judgment that you can repay. That means verifying income and debts with third-party records. It is why “just trust me” never works on a mortgage application.
What Credit Does a Cash-Out Refinance Require?
Across the wholesale conventional programs a broker places files with, the decision score starts at 620. Adjustable-rate loans that are manually underwritten start at 640. Jumbo loans, which sit above the conforming limit, start at 660. The wholesale no-mortgage-insurance cash-out lane asks for 680. Treat all of these as starting points. The automated finding governs most files.
The score is only part of it. The lender reads the whole credit file: late payments, collections, how much of your card limits you use, and any past credit event. Waiting periods after credit events are set by the agencies. They are four years from a chapter 7 discharge, seven years from a foreclosure, and four years from a short sale or deed-in-lieu. Documented extenuating circumstances can shorten those waits.
Credit also drives cost. Cash-out loans carry their own pricing adjustments by score and leverage. Those adjustments are built into the pricing of the loan, not itemized as a separate fee. A borrower at the minimum score and the maximum leverage sits at the expensive corner of that grid.
Some lenders set a higher floor than the agencies do. That is a lender overlay. It is why two lenders can give you different answers on the same file.
How Much Income Do You Need, and How Is It Proven?
There is no minimum salary. The test is whether your verified income supports the new payment and your other debts. What counts as income, and how long you must have earned it, depends on how you are paid.
| Borrower type | What counts | History usually needed | Typical proof |
|---|---|---|---|
| Salaried or hourly | Base pay, plus steady overtime or bonus | About two years | Pay stubs, W-2s |
| Self-employed (25%+ owner) | Net business income after expenses | Two years, sometimes one | Tax returns, transcripts |
| Commission or bonus | Averaged over the history | About two years | W-2s, returns, pay stubs |
| Retirement or fixed income | Pension, Social Security, distributions | Must continue | Award letters, statements |
Underwriters want a reliable pattern over roughly the last two years. Under the agency guidelines, a work gap longer than one month in the past 12 is a problem unless the work is seasonal.
Self-employed borrowers get the most scrutiny. The agencies define self-employed as owning 25% or more of a business. Lenders typically want two years of personal and business income documentation. One year can be enough when the business has existed five years and you have held 25% or more of it for five straight years, per Fannie Mae Announcement SEL-2023-09. The lender may also pull your tax transcripts directly from the IRS, so the returns you submit must match what you filed.
Here is the catch for business owners. Underwriters use net income after deductions, not gross revenue. Aggressive write-offs that lower your tax bill also lower your qualifying income.
How Does Your Debt-to-Income Ratio Work?
Debt-to-income (DTI) is your total monthly debt payments divided by your gross monthly income. The lender counts the new mortgage payment, including taxes and insurance, plus car loans, student loans, minimum card payments and support obligations. It does not count utilities or groceries.
Run a modeled example. Say your gross income is 100 parts. Your car loan, student loan and card minimums total 12 parts. The new mortgage payment, with taxes and insurance, comes to 28 parts. Total debts are 40 parts, so your DTI is 40%.
That sits comfortably under the 50% total ratio ceiling that applies on most conventional files with an automated finding. Manually underwritten loans are tighter: 36% or 45%, depending on the reserve and score factors in the agency’s Eligibility Matrix.
Two details matter here. First, the new payment replaces your old one, but it is larger because the balance is larger. Second, debts you pay off at closing with the cash-out can drop out of the ratio. Lenders sometimes require that payoff as a condition of the loan. When your DTI is above 45% on an automated file, the agency guidelines can add a requirement for six months of reserves, per the Fannie Mae Selling Guide on cash-out transactions.
Does Credit or Income Matter More?
Neither wins outright. They work as a pair. Strong credit makes a high ratio easier to approve, and strong income makes a thin credit score easier to accept. But a score below the program floor stops the file no matter how much you earn. Likewise, a ratio over the ceiling stops it no matter how clean your credit is. Lendmire’s article Does Credit or Income Matter More for a Cash-Out Refinance? works through the trade-off in more detail.
How Much Equity and Seasoning Do You Need?
Leverage is set by the property, not just by you. Conventional cash-out is written on a primary residence, a second home or an investment property, and occupancy sets the limit. The Fannie Mae Eligibility Matrix puts the cap at 80% for a one-unit principal residence and 75% for two- to four-unit properties.
| Property | Conventional cash-out maximum |
|---|---|
| One-unit principal residence | 80% of value |
| Two- to four-unit principal residence | 75% of value |
| Second home | 75% of value |
| Investment property | 75% of value |
A wholesale lane reaches 89.99% with no mortgage insurance. It needs a 680 score, a 50% ratio and a thirty-year fixed loan on a primary residence with a conforming balance. It carries its own six months of seasoning. It is also the one exception to the usual rule that mortgage insurance applies above 80%. In Texas, a cash-out on a homestead is capped at 80% of the home’s value by the state constitution, and that lane is not written there.
To estimate your cash, use this formula: appraised value times the maximum percentage, minus your payoff, minus closing costs. Say the loan you owe equals 60% of the appraised value. At an 80% cap, that leaves 20% of value before costs. Closing costs come out of that 20%, so the cash you receive is smaller than the headroom.
Now the two clocks. The agency guidelines require the first mortgage being paid off to be at least 12 months old, counted from the note date of the old loan to the note date of the new one. They also require at least one borrower to have been on title for 6 months. Those are separate tests, and either one can block an otherwise strong file. The Selling Guide carries the details.
How Do FHA, VA and Jumbo Compare?
The conventional rules above are one lane. Government-backed and jumbo loans test credit and income differently, and each has its own cash-out rules.
| Program | Occupancy | Credit and income test | Cash-out? |
|---|---|---|---|
| Conventional | Primary, second, investment | Score floor, DTI ceiling | Yes, 75% to 80% |
| FHA cash-out | Owner-occupied primary | Score and DTI per FHA and lender | Yes, capped below full value |
| FHA Streamline | Existing FHA loan | Limited credit review | No, small cash-back cap |
| VA cash-out | Veterans with eligibility | Certificate of Eligibility, credit, income | Yes |
| VA IRRRL | Existing VA loan | Net tangible benefit | No |
| Jumbo | Above conforming limit | 660 decision score, 50% ratio on fixed lanes | Per lender |
The VA cash-out page says you need a Certificate of Eligibility and must meet VA and lender standards for credit and income. A VA cash-out can also refinance a non-VA loan into a VA-backed one. Many people miss that.
The FHA Streamline is not a cash-out loan. The mortgage must already be FHA-insured and current, the refinance must give a net tangible benefit, and cash back is capped at a small amount. Streamlines come in credit-qualifying and non-credit-qualifying versions.
Where Does the General Rule Break?
The six-month and 12-month clocks have named exceptions. A few edge cases come up often enough to know.
- Delayed financing. A cash buyer can refinance inside the six-month title window if the delayed-financing conditions are met. Cash-out pricing still applies.
- Co-owner buyouts. Buying out a co-owner under a written legal agreement is a limited cash-out transaction at both agencies. The 12-month first-mortgage clock does not apply in these named cases.
- Inherited or awarded property. Inheritance and legal-award treatment is an exception to the title clock. Details are narrow, so the lender must confirm which documents prove it.
- Free-and-clear homes. A new mortgage on a home with no lien is a cash-out loan, even if you want only a small amount.
- Paying off a second lien. It depends on whether the second was used to buy the home. A purchase-money second can fit inside a limited cash-out refinance.
- Manufactured homes. Single-width manufactured homes are limited to purchase and limited cash-out under the agency matrix.
- Some states. Some states add cash-out rules of their own, as the Texas cap above shows.
Limited cash-out, which Lendmire also calls rate-and-term, is the neighbor worth knowing. It pays off the first mortgage, closing costs and a purchase-money second, with only incidental cash back. Leverage goes much higher, up to 95% on a one-unit primary residence. Cash back is limited to the lesser of 2% of the new loan or $2,000 at Fannie Mae, and the greater of 1% of the new loan or $2,000 at Freddie Mac. If you want a lower payment or a shorter term but not cash, that lane is usually the better fit.
Can Reserves and Compensating Factors Help?
Yes, within limits. Reserves are the months of mortgage payments you hold in savings after closing. A larger cushion, a lower loan-to-value, a longer job history or a higher score can offset a borderline ratio on a manually underwritten file. The Eligibility Matrix ties the allowed ratio, 36% or 45%, to those reserve and score factors.
None of this pushes a file past a hard floor. A compensating factor helps a close call. It does not erase a failed test.
What Do Three Borrower Profiles Look Like?
Think of these as self-checks. They are not predictions of how any lender will rule.
Profile one: strong. A salaried borrower has a decision score well above 620 and a DTI near 35% with the new payment. The home has been owned for years, and the loan is well past 12 months old. The ask is 70% of value, below the cap. This file clears every test on paper.
Profile two: borderline. A self-employed borrower with two years of returns sits near the score floor. The DTI is close to 48% with the new payment. The lender may ask for reserves, and the file may need a smaller loan amount. This one might work, depending on how the automated finding comes back.
Profile three: fix first. A salaried borrower with a recent foreclosure inside the agency waiting period wants 80% of value. The waiting period, not the income, blocks this file. Waiting or documenting extenuating circumstances is the only route.
What If You Don’t Qualify Yet?
Pick the failing test and attack that one first.
- Score too low. Pay card balances down before the lender pulls credit. Utilization moves scores faster than almost anything else. Dispute real errors, and stop opening new accounts.
- Ratio too high. Pay off a small installment loan, or ask for a smaller cash-out so the new payment shrinks. Using cash-out proceeds to pay debts at closing can also drop those payments from the ratio.
- Seasoning short. Wait for the clock, or check whether delayed financing or another named exception fits.
- Income hard to document. Gather two years of returns and transcripts early, and make sure the deductions on them match what you want counted.
- Equity thin. A smaller loan, or a limited cash-out refinance, may fit better than a full cash-out.
(A decline is information, not a verdict. Ask the broker which test failed and fix that one.)
A federal CFPB report found credit scores rose after the refinance and then slipped as balances crept back. The honest read is that cash-out only helps if the spending habit changes too.
What Documents Should You Gather?
- Government photo ID and Social Security number
- Recent pay stubs and the last two years of W-2s, if salaried
- Two years of personal and business income documentation, if self-employed, plus a signed IRS transcript request
- Award letters or statements for retirement, Social Security or pension income
- Recent statements for bank, retirement and investment accounts
- Your current mortgage statement and homeowner’s insurance declaration
- Proof of other debts: loan statements and any divorce or support documents
- A signed legal agreement if you are buying out a co-owner
Missing papers slow files more than weak credit does. A short explanation letter for any gap or credit blemish helps too.
Key Terms Defined
DTI (debt-to-income ratio): Your total monthly debt payments divided by your gross monthly income.
LTV (loan-to-value): The new loan balance divided by the home’s appraised value.
Seasoning: The waiting period a lender requires, here for how long you have owned the home and how old your current mortgage is.
Limited cash-out refinance: A refinance that pays off the first mortgage and costs with only incidental cash back.
Reserves: Savings left after closing, counted in months of mortgage payments.
Decision score: The credit score the lender uses to decide your file, usually the middle of your reported scores.
Frequently Asked Questions
What credit score do I need for a cash-out refinance?
Most conventional wholesale programs start at a 620 decision score. The no-mortgage-insurance cash-out lane asks for 680, and the jumbo lanes start at 660. Some lenders add their own higher floor, so the number depends on the program and the lender.
Can I qualify if I am self-employed?
Yes, but the documentation is heavier. Lenders usually want two years of personal and business income documentation, and sometimes one year if the business has existed five years. The income they count is net, after deductions.
How is DTI calculated for a cash-out refinance?
Add your new total housing payment, with taxes and insurance, to your other monthly debt payments. Divide by gross monthly income. Debts you pay off at closing can drop out of the ratio.
Does a cash-out refinance hurt my credit?
The application adds a credit inquiry, and the new loan replaces an old account. Paying down cards with the proceeds can lower utilization. Scores can then slip if the balances return.
Can I cancel after I sign?
On a refinance of your primary residence, you generally have a federal right to cancel until midnight of the third business day. If you cancel, you still owe the original loan.
Tax treatment can depend on your situation; borrowers should speak with a qualified tax professional before relying on any deduction or credit.
Weighing It Against the Loan You Have
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. Call 828-256-2183 to talk through your file before you apply.
For your own numbers, request a scenario review with Lendmire.
For current guidelines and terms, see Lendmire’s refinance programs page.
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. Fannie Mae Announcement SEL-2023-09
2. Fannie Mae Selling Guide B2-1.3-03 Cash-Out Refinance Transactions
3. Fannie Mae Eligibility Matrix
6. CFPB: CFPB Report Finds Cash Out Mortgage Refinance Borrowers Improve Credit Scores
This article is part of Lendmire’s cash-out refinance program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: Best Cash-Out Refinance Program With Reserve Requirements After Closing · Cash-Out Refinance Lenders for Any Purpose With No Restrictions on Use · Cash-Out Refinance Lenders After a Change in Household Income
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
Legal disclosures. Lendmire (NMLS# 2371349) is a state-licensed mortgage brokerage that arranges financing through wholesale lender relationships. Lendmire is not a direct lender, depository institution, or registered financial advisor. The discussion above is general informational content about real estate financing — it is not financial, legal, or tax advice, and readers should consult licensed professionals for guidance on their individual circumstances. Loan inquiries are subject to lender underwriting; this article does not represent a commitment to lend. Loan terms, rates, and qualification standards vary by borrower, property, and state, and are subject to change at any time. Equal Housing Opportunity. NMLS Consumer Access: nmlsconsumeraccess.org.