The Quick Read: The fee cap is a Texas rule, not a high-cost-state rule. The Texas constitution limits the fees a lender can require on a cash-out loan against your homestead to 2% of the loan amount. The cap leaves out interest and a short list of third-party items. Costly-county loan limits are a separate test that decides loan size, not fees.
Key Takeaways
- The 2% cap comes from state law, and no lender can waive it.
- It counts lender-controlled charges. It does not count the appraisal, the survey, the base title premium, or interest.
- A Texas homestead cash-out stops at 80% of the home’s value once every lien is counted.
- “High-cost” is about conforming loan size. It does not raise the 80% limit or change the fee cap.
- The cap protects you from fee stacking. It does not tell you the loan is a good deal.
Why Does the Title Mix Two Different Rules?
Because people search for both ideas together. A fee cap limits what the lender charges you. A high-cost limit sets how large a loan can be and still sell to the big agencies. They do different jobs.
Picture a homeowner in an expensive Texas county. The loan may be large, and the 2% cap is a percentage of that loan. A bigger loan means a bigger dollar allowance for fees. The cap itself never changes.
Texas treats a cash-out on your primary residence as a special “Section 50(a)(6)” loan, named for its place in the state constitution. State law decides whether your loan falls in that box. The program you pick comes second. If you want the conventional option laid out beside the other loan types, see Lendmire’s cash-out refinance programs page.
How Does the Fee Cap Work?
The constitution bars a lender from requiring you to pay more than 2% of the original loan amount in fees. The fees covered are those needed to originate, evaluate, maintain, record, insure, or service the loan. The Texas administrative rule, 7 TAC §153.5, repeats that language and lists what sits outside it.
In practice, the compliance team adds up every fee you pay. It subtracts the excluded items and tests what remains against 2% of the loan. Pass or fail.
A few details trip people up:
- Charges to service the loan count if you pay them at the start.
- Optional products you choose on your own, such as voluntary credit life insurance, are outside the cap.
- Per diem interest is treated as interest, not a fee.
- Mortgage insurance premiums count as fees with no exclusion. That is one reason some programs are rarely offered on Texas homesteads.
An older version of the cap was 3%. Some websites still say so. The current figure is 2%.
What Counts and What Doesn’t?
Here is the sorting logic, laid out side by side.
| Charge | Treatment |
|---|---|
| Origination, processing, underwriting | Counts toward the cap |
| Fees to service the loan, paid at start | Counts toward the cap |
| Appraiser’s fee (appraiser’s pay only) | Excluded |
| Licensed-surveyor survey | Excluded |
| Base state premium for lender’s title policy | Excluded |
| Title exam costing less than that premium | Excluded |
| Per diem interest, bona fide points | Treated as interest |
| Optional charges you choose | Outside the cap |
One catch deserves a flag. The appraisal exclusion covers what the appraiser is paid. An appraisal-management-company fee is not part of that exclusion. Ask where each appraisal dollar goes.
Worked Example: Passing or Failing the Test
This uses placeholder percentages of the loan amount, not market figures. Say the fees you pay break down like this:
- Origination, processing and underwriting: 1.2% of the loan.
- Recording and document charges the rule treats as covered: 0.3% of the loan.
- Appraisal, survey and base title premium: 1.1% of the loan, all excluded.
- Bona fide interest-type charges: set aside.
Step one: set aside the excluded and interest-type items. Step two: add what is left, which is 1.5% of the loan. Step three: compare it to the 2% limit. The file passes with room to spare.
Now change one line. Suppose a lender adds a fee that pushes the covered total to 2.3%. That file fails. Someone must cure it before closing, by cutting or reclassifying a charge. A failed test is not something a borrower can simply accept.
The cap is a ceiling on one slice of your costs. Your total closing costs can still be higher than 2%, because the excluded items sit on top.
Why Do High-Cost Markets Feel It Differently?
Larger loans give lenders a larger dollar allowance inside the same 2%. Costs that scale with loan size grow along with it. Costs that stay flat, like a survey, matter less as a share. Where the home is expensive, the 80% limit also matters more, because a large existing balance can leave little room for cash.
Separately, the Federal Housing Finance Agency sets conforming loan limits each year. FHFA’s annual release explains that costly counties get a higher ceiling than the national baseline. A loan above your county’s limit becomes a jumbo loan and falls outside the standard agency guidance.
Higher conforming limits do not lift the Texas 80% cap. The loan-size test and the equity test are separate.
How Does the Loan Get Underwritten, Step by Step?
Across the wholesale programs I place conventional files with, the Texas homestead path adds steps to an ordinary cash-out. The order runs like this:
1. Classification. Compliance decides whether state law treats the loan as a Section 50(a)(6) loan. Fannie Mae’s guide says Texas law, not its own definitions, decides that.
2. Notice and timing. The state requires a written disclosure notice before closing. The first payment must also fall due within a set window after closing.
3. Appraisal. A new full interior and exterior appraisal is required. The agency’s Texas underwriting section says it must be attached to your written acknowledgment of fair market value.
4. The 80% test. Every lien against the home counts toward the limit.
5. Credit and income review. Standard conventional rules apply here.
6. Fee-cap tally. The compliance team runs the 2% test.
7. Closing and delivery. Texas has its own closing forms and requirements.
The notice period and the fresh appraisal add steps, so build that into your plans.
Don’t treat an automated “Eligible” finding as the finish line. Fannie Mae states that its underwriting engine does not contain the Texas eligibility rules. A loan can pass the engine and still fail Texas requirements. A loan that fails can become ineligible for sale unless a refinance cures it.
What Leverage and Credit Does a Conventional Texas Cash-Out Use?
The 80% cap matches the general conventional cash-out limit on a one-unit primary residence.
On the files I see, the usual conventional building blocks apply on top:
- Leverage up to 80% on a one-unit primary residence.
- Mortgage insurance is not needed at or below 80% leverage, so a cash-out at the cap avoids it.
- A 620 decision score is the wholesale floor, subject to lender guidelines.
- The automated finding governs most files, with a 50% total ratio ceiling.
- The mortgage being paid off must be at least 12 months old, measured note date to note date.
- At least one borrower must have been on title for six months. Delayed financing, inheritance and legal-award exceptions exist.
- Higher ratios can call for extra reserves, depending on the file.
The wholesale lane that reaches 89.99% leverage with no mortgage insurance is not written on a Texas homestead. The state constitution caps this loan at 80% leverage instead. Terms depend on the lender’s guidelines, the property type, the leverage, and a full review of the credit profile.
Refinancing an existing Texas equity loan means requalifying in full, even with the same servicer. And some “no cash” refinances of these loans still stay Texas equity loans.
Where the General Rule Breaks
Once an equity loan, always an equity loan. A later refinance of a Texas equity loan generally produces another one, even if you take no cash. Have counsel confirm the details for your file.
HELOCs. The agency does not permit HELOC subordinate financing behind a Texas equity loan.
Occupancy. The homestead product applies to your primary residence. Occupancy decides leverage everywhere else: second homes and rentals carry different, lower cash-out limits.
Government programs. FHA mortgage insurance counts toward the 2% cap, and some lenders decline FHA on Texas equity loans for that reason. Conventional is often the practical path.
Failed compliance. If a defect surfaces, the loan can lose its eligibility to sell unless a refinance cures it. That is why careful lenders test the cap before closing, not after.
How Do You Check Your Own File?
Start with the Loan Estimate, then compare it to the Closing Disclosure. Look at the origination, services-you-cannot-shop-for and services-you-can-shop-for sections. The lender’s own charges and the services you cannot shop for face the tightest limits on how much they can rise between estimate and closing. Services you can shop for get somewhat more room, so shopping around matters there.
Ask your loan officer five questions:
- Which charges are you counting toward the 2%?
- Which are excluded, and why?
- Is there an appraisal-management fee on top of the appraiser’s pay?
- Are any of the lender-side pricing charges bona fide, meaning they are genuinely tied to the loan’s pricing?
- What is the total covered amount as a percentage of the loan?
If the answer is a shrug, keep asking. A lender who can’t show the tally hasn’t finished it.
What Does the Decision Look Like in Practice?
Compare the cash you need with the lien you would take on. A cash-out replaces your current first mortgage with a new, larger one. The term resets, and the payment changes with the balance. Closing costs can be built into the loan, which lowers your cash at closing but raises the balance.
Because the 80% test counts every lien, a homeowner with a large existing balance may be able to take out little cash. Run that math first. If the cash you would net after costs is small, a cash-out may not be worth the new lien. Keeping the loan you have is a real option.
Tax treatment can depend on your situation; borrowers should speak with a qualified tax professional before relying on any deduction or credit.
Key Terms Defined
Section 50(a)(6) loan: A Texas home equity loan, governed by the state constitution, that lets you borrow against your homestead.
Fee cap: The 2% limit on covered lender fees, measured against the original loan amount.
Combined loan-to-value (CLTV): All the liens on the home added together, divided by its appraised value.
Conforming loan limit: The yearly maximum loan size the agencies will buy, set higher in costly counties. The exact numbers vary by lender and program and follow a full review of property, leverage, and credit.
Cure: A fix, such as cutting a fee, that brings a failed loan back into compliance.
Frequently Asked Questions
Is the Texas fee cap 2% or 3%?
It is 2% for loans made under the current constitutional language. The old 3% limit was replaced by amendment, though some older pages still show it.
Does the 2% cover all my closing costs?
No. The appraiser’s fee, the survey, the base title premium and interest sit outside it. Your total closing costs can run above 2% of the loan.
Do high-cost counties raise the 80% limit or the fee cap?
No. Higher conforming limits only allow larger loans to stay in the agency system. The 80% equity limit and the 2% fee cap stay the same.
Can I use a no-cash refinance to escape the Texas rules?
Usually not. A refinance of a Texas equity loan generally stays one, unless it meets the constitution’s exception for a different category. A lender and counsel should confirm that for your file.
Does an “Eligible” automated finding mean my Texas loan is fine?
No. The automated engine does not test the Texas rules. Eligibility also depends on the 80% test, the fee tally and the state’s procedural requirements.
Next Step
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 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.
Get Started
Ready to find the right loan for you?
In about 30 seconds you can review financing options available for your home or investment property. No commitment required.
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. 7 TAC §153.5, Texas Administrative Code
2. FHFA conforming loan limit announcement
3. Fannie Mae Selling Guide B5-4.1-02: Texas Section 50(a)(6) Loan Eligibility
4. Fannie Mae Selling Guide B5-4.1-03: Texas Section 50(a)(6) Underwriting, Collateral and Closing
5. Fannie Mae Selling Guide B5-4.1-01: Texas Section 50(a)(6) Loans
This article is part of Lendmire’s Conventional Loans series — every loan program’s qualification details, guidelines, and scenarios live on the loan options page.
Related reading: Can a Homeowner Take Cash Out With a Conventional Refinance? · How to Get a Texas Conventional Cash-Out Refinance as a Lock-in Homeowner · How to Close a Conventional Cash-Out on a Living Trust in a High-Cost State
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.