The Quick Read: A conventional cash-out refinance on a home you live in comes down to five tests: equity, seasoning, occupancy, credit and ratios, and a clean file. On a one-unit primary home, the new loan can reach 80% of the appraised value, and 75% on a two- to four-unit home. The first mortgage you are paying off must be at least 12 months old. At least one borrower must have been on title for 6 months. Everything here is subject to lender guidelines and full file review, and nothing is a commitment to lend.
The Checklist at a Glance
Run these in order. Each one is pass or fail, and each has a fix if you fall short.
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: 7.32% as of October 22, 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.
| Test | What it asks | If you fall short |
|---|---|---|
| Equity | Is the new total loan at or under 80% (1 unit) or 75% (2-4 units)? | Wait, pay down, or take less cash |
| Loan age | Is the mortgage being paid off 12+ months old? | Wait for the anniversary |
| Title time | Has a borrower been on title 6+ months? | Wait, or check for an exception |
| Occupancy | Do all borrowers live in the home? | Restructure who is on the loan |
| Credit | Is the decision score at least 620? | Build the score first |
| Ratios | Is total debt-to-income within the ceiling? | Pay off debts, add income, or borrow less |
| Appraisal | Does the value support the loan amount? | Take less cash |
Programs vary by lender, and some lenders set tighter overlays than the agency minimums. The figures above are the conventional envelope across the wholesale programs Lendmire places files with. Lendmire’s cash-out refinance programs follow this same envelope.
What Counts as a Cash-Out Refinance?
A cash-out refinance is a new first mortgage that pays off your existing loan and puts the rest of the proceeds in your hands. The Fannie Mae Selling Guide says the new loan must pay off the existing first mortgage, or be placed on a home with no mortgage lien. The money can go to any purpose.
Here is what trips people up. Several situations get cash-out treatment even when you don’t plan to walk away with a check:
- Paying off a second lien that wasn’t used to buy the home
- Taking more cash back than the small incidental amount a limited cash-out allows
- Refinancing a home you own free and clear
A home with no mortgage is still a cash-out. That surprises many owners who assume “no loan” means “simple refinance.”
The other lane is a limited cash-out, which the industry also calls a rate-and-term refinance. It pays off the first mortgage, closing costs and a purchase-money second lien, with only incidental cash back. It reaches 95% LTV on a one-unit primary home, versus 80% for cash-out. If you only want a different term or a lower payment and don’t need cash, that lane usually reaches further.
Step 1: Equity and the Leverage Cap
The cap applies to the total new loan, not to the cash you receive. That distinction matters more than any other line on the checklist.
Lenders divide the new loan amount, plus any remaining liens, by the appraised value. On a one-unit primary home, the Fannie Mae Eligibility Matrix caps that at 80%. On a two- to four-unit primary home, the cap is 75%. Manufactured housing is restricted, with a much lower limit.
Walk through the order of operations. Say a home appraises at 100 units of value and you owe 60% of it. The 80% cap leaves room for the new loan to go 20 points higher. Closing costs financed into the loan, and any second lien paid off, come out of that room first. What remains is your cash.
Now run the low-appraisal version. If the same home appraises 5% lower, the cap shrinks with it, and the shortfall comes straight out of your cash. The effect is close to dollar for dollar. Borrowers who budget the whole cash amount before the appraisal lands are the ones who get surprised.
Two practical notes:
- At the cap, you keep at least 20% of the home’s value as equity. A CFPB guide on using home equity describes lenders typically wanting 10% to 20% left, so the agency cap lines up with that cushion.
- Some wholesale lanes reach 89.99% LTV with no mortgage insurance. That lane needs a 680 score and a 50% ratio on a thirty-year fixed, a primary residence, a conforming balance, and its own six months of seasoning. It is not available everywhere. In Texas, a cash-out on the homestead is capped by the state constitution at the agency figure, and that lane is not written there.
If you are in a two- to four-unit home, Lendmire’s piece Conventional Cash-Out Refinance Requirements on a 2-4 Unit Primary Home covers that cap in more detail.
Step 2: The Two Seasoning Clocks
Most people think there is one waiting period. There are two, and they run separately.
| Clock | What it measures | The rule |
|---|---|---|
| Loan age | The first mortgage being paid off | At least 12 months old, note date to note date |
| Title time | A borrower’s time on title | At least one borrower for 6 months |
The 12-month loan-age rule came through Fannie Mae announcement SEL-2023-01, which also sets the six-month title rule.
Why it matters: a recent buyer may pass the title test but fail the loan-age test. A recent refinancer may own the home for years and still wait because the new loan is too young. Both clocks have to be satisfied.
Named exceptions exist:
- Delayed financing. A borrower who bought with cash can refinance without waiting out the six-month title clock. The guide requires an arm’s-length original purchase and documented purchase funds. The borrower can have bought as an individual, through an eligible revocable or land trust, or through an LLC or partnership the borrower wholly owns.
- Inheritance and legal awards. These are recognized exceptions to the title-time rule.
Those are narrow doors. If you don’t clearly fit one, plan to wait.
Step 3: Occupancy and Who Is on the Loan
Every borrower on a primary-residence cash-out must live in the home.
This hits one common situation: a parent or relative added as a co-borrower to help the file. If that person doesn’t live in the home, the structure may not work for a cash-out. The fix is usually to take that person off the loan and qualify on the occupying borrowers’ income alone. That only works if the numbers hold without the extra income.
Occupancy also sets leverage. A second home or investment property is capped lower than a primary home on a cash-out, and those are outside this checklist. If you are thinking of renting the property, occupancy decides the leverage, so settle that question before you apply.
Step 4: Credit, Ratios and Reserves
The wholesale conventional programs start at a 620 decision score. A higher score generally helps pricing, and it can open lanes such as the 89.99% LTV option that requires 680.
Debt-to-income (DTI) is your monthly debts divided by your gross monthly income. The debts include the new mortgage payment, plus other long-term debts and significant short-term ones. Per Fannie Mae’s DTI rules:
- Automated findings allow a total ratio up to 50%, and Fannie Mae notes the cash-out maximum may be lower on some files.
- Manually underwritten loans run 36%, extendable to 45% when the score and reserve factors in the Eligibility Matrix are met.
The 50% ceiling is not universal. It applies to automated files. Manual underwriting is stricter.
A key catch: the new payment goes straight into your DTI. A bigger balance means a bigger payment, and that payment is the number weighed against the ceiling. If new debts or credit changes surface before closing and push the ratio over the limit, the loan can become ineligible. Hold off on financing a car or opening cards until after closing.
Reserves are the savings left after closing. The Eligibility Matrix document says minimum reserves apply on automated cash-out files with DTI above 45%. The exact months depend on the file and the lender, so ask early.
Consolidating debt at closing can lower your DTI, because paid-off debts leave the calculation. Some installment loans with only a few payments left may not need to count at all, depending on the guidelines.
Step 5: Income and Employment
Lenders verify that you can afford the larger loan, not just that you have equity. Salaried borrowers typically document with pay stubs and tax forms. Self-employed borrowers typically document with traditional personal-income documentation and a profit-and-loss picture.
The edge cases cause the most trouble:
- A recent job change. A move within the same field often works. A move to a new field or to commission pay gets more scrutiny.
- Variable pay. Bonus, overtime and commission income is usually averaged over a history, so a short history may not count in full.
- Self-employment. Lenders look at what the return shows after deductions, not your gross receipts. Heavy write-offs lower qualifying income.
If income is the weak point, a smaller cash-out lowers the payment and the ratio. Sometimes the right fix is simply asking for less.
Step 6: Appraisal, Title and Pricing
The appraised value drives your LTV, which drives both eligibility and pricing.
Pricing on a cash-out includes loan-level adjustments from the agencies. Think of them as built into the cost of the loan, and they tend to be heavier at higher leverage and lower scores. Your Loan Estimate will show the actual costs. This article states no prices.
Mortgage insurance is the other lever. It is required above 80% LTV. A standard cash-out at the 80% cap generally doesn’t carry it, which is one reason the cap sits where it does.
The loan also has to fit under the conforming loan limit, which the FHFA sets each year. Above that, the jumbo lanes take over, with their own score and leverage rules.
Document Checklist
Gather these before you apply.
Everyone
- Government photo ID
- Most recent mortgage statement
- Homeowners insurance declaration page
- Property tax bill and any HOA statement
- Recent bank and asset statements
Salaried borrowers
- Recent pay stubs
- Recent W-2s
- Recent traditional personal-income documentation, if requested
Self-employed borrowers
- Personal and business income documentation
- Profit-and-loss statement
- Business license or proof of ownership, if requested
Missing paperwork is one of the most avoidable delays in any file.
If You Don’t Pass: Match the Failure to the Fix
| What failed | Typical fix |
|---|---|
| Over the leverage cap | Take less cash, or wait for more equity |
| Loan under 12 months old | Wait for the anniversary |
| Under 6 months on title | Wait, or check delayed financing |
| Non-occupant co-borrower | Remove that borrower if income allows |
| Score below 620 | Build credit before applying |
| DTI too high | Pay off debts, or reduce the loan amount |
| Low appraisal | Reduce the cash taken |
For most borrowers, the leverage cap and the seasoning clocks are the ones that actually block a file. Credit and ratios can usually be improved over time.
Edge Cases Where the Rule Bends
- Delinquent property taxes. Taxes more than 60 days delinquent can be included in the new loan, and an escrow account generally has to be set up.
- Student loan cash-out. Fannie Mae waives the loan-level price adjustment when proceeds pay off eligible student loans and other conditions are met.
- Ineligible transactions. The guide lists loans with a temporary rate buydown, HomeStyle Energy loans, payoffs of installment land contracts, and certain PACE-lien cases.
- Limited cash-out cash back. The incidental cash allowance has changed recently, so ask your loan officer for the current figure.
Is It the Right Move?
A cash-out is a tool, and the CFPB flags real tradeoffs. In its report on cash-out borrowers, more than half of borrowers in most years used the money for other debts, and card and auto balances fell afterward. Credit scores rose at first, then drifted down, though they stayed above pre-refinance levels. The same report warns that using mortgage debt to pay other debt can raise foreclosure risk, because unsecured debt becomes debt secured by your home.
Ask yourself:
- Does the new loan replace a mortgage I’d be happy to keep as it is?
- Is the cash going toward something that builds value or lowers cost?
- Would a home equity line or loan do the job without resetting my whole first mortgage?
A cash-out resets the entire balance, so if your current mortgage is a good one, a separate equity product may cost less overall. Tax treatment can depend on your situation; borrowers should speak with a qualified tax professional before relying on any deduction or credit.
You also have a right to cancel. The CFPB says you generally have three business days to cancel a refinance, and waiving that right is limited to a bona fide personal financial emergency.
Key Terms Defined
LTV (loan-to-value): The new loan amount, plus any remaining liens, divided by the appraised value.
Seasoning: The minimum age of a loan or time on title before a new loan is allowed.
DTI (debt-to-income): Your monthly debts, including the new mortgage payment, divided by gross monthly income.
Limited cash-out: A refinance that pays off the first mortgage and costs with only incidental cash back, at higher leverage than a cash-out.
Delayed financing: An exception that lets a cash buyer refinance without waiting out the title clock.
Reserves: Savings left after closing, counted as a backstop on the file.
Frequently Asked Questions
How long do I have to own my home before a cash-out refinance?
At least one borrower must be on title for 6 months. Separately, the mortgage being paid off must be at least 12 months old, counted note date to note date. Exceptions cover delayed financing for cash buyers, inheritance, and legal awards.
Do all borrowers have to live in the home?
On a primary-residence cash-out, yes. A co-borrower who doesn’t occupy the home can block the structure. The usual fix is removing that person from the loan, provided the occupying borrowers qualify alone.
Does the 80% cap apply to the cash I get?
No, it applies to the total new loan. Your payoff, financed closing costs and any second lien come out of that room first, and the remainder is your cash. A low appraisal shrinks the room, and your cash drops with it.
Is a home I own free and clear still a cash-out?
Yes. A new loan on a home with no mortgage is treated as a cash-out, so the same leverage cap and file review apply.
What debt-to-income ratio do I need?
It depends on how the file is underwritten. Automated findings allow up to 50%, though the cash-out maximum may be lower. Manual underwriting runs 36%, extendable to 45% when score and reserve factors are met. Lender overlays can be tighter than either.
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.
For your own numbers, request a scenario review with Lendmire.
About Lendmire
Lendmire, NMLS# 2371349, is a mortgage brokerage with consumer lending licenses in 16 states. FHA, VA, conventional and jumbo purchase and refinance loans are arranged through wholesale lending partners, and each application is reviewed individually by the lender. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
For the program’s current guidelines, see conventional loan programs.
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References
1. Fannie Mae Selling Guide B2-1.3-03, Cash-Out Refinance Transactions
2. Fannie Mae Eligibility Matrix
3. CFPB: Using your home equity guide
4. Fannie Mae announcement SEL-2023-01
5. Fannie Mae Selling Guide B3-6-02, Debt-to-Income Ratios
6. Fannie Mae Eligibility Matrix (incorporated document)
7. FHFA
8. CFPB: CFPB Report Finds Cash Out Mortgage Refinance Borrowers Improve Credit Scores
9. CFPB Ask CFPB: waiving the right to rescind
This article is part of Lendmire’s cash-out refinance program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: Conventional Cash-Out Refinance Closing Cost Limits for a Primary Home · Freddie Mac Cash-Out Refinance vs HELOC for a Primary Home · Freddie Mac Cash-Out Refinance Requirements for a Primary Home
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
- Mortgage Loan Originator · NMLS# 1129696 · Verify on NMLS Consumer Access
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- 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.