The Quick Read: Credit score does not raise or lower the FHA cash-out cap. The maximum is one flat 80% of the home’s adjusted value for every borrower, per HUD Mortgagee Letter 2019-11. Score decides whether a lender will take the file, how it is underwritten, and how much debt you can carry. So the “tiers” you meet are underwriting tiers, not draw tiers.
The Short Version of How the Draw Works
The maximum draw is a ceiling on the new loan, not a payout. Take 80% of the appraised (adjusted) value. That is the most the new first mortgage can be, including any financed upfront premium. Your cash is what is left after the old mortgage is paid off, closing costs are covered, and any other liens are cleared.
A score of 620 and a score of 760 hit the same ceiling. The 760 file may get an easier underwriting path. It does not get a bigger loan-to-value.
Here is the plain formula:
1. Appraised value sets the base.
2. Multiply by 80% to get the maximum new loan.
3. Subtract the payoff of your current mortgage.
4. Subtract closing costs and any liens that stay.
5. What remains is your cash.
That is why equity matters more than score for the size of the draw. You must keep at least 20% equity after closing. Lendmire’s FHA cash-out refinance program page covers the program basics for homeowners in the 16 states where Lendmire arranges consumer loans.
Why People Expect Credit Tiers (and Where the Idea Comes From)
Many loan types step leverage up or down by score. Borrowers carry that picture over to FHA. It does not fit here.
The old FHA cap was higher. HUD cut it from 95% to 85% in 2009, then to 80% for cash-out refinances, per its press release on the change. The stated aim was to line FHA up with the cap Fannie Mae and Freddie Mac use. Some web pages still show 85%. That figure is out of date for case numbers assigned on or after September 1, 2019.
So if a page promises a bigger cash-out at a higher score, treat it with suspicion. Score is not the lever. Equity and appraised value are.
What Credit Score Does Change
Score still matters. It just works on other parts of the file.
Whether the file is eligible at all. HUD uses the Minimum Decision Credit Score. Below 500, a loan is not eligible for FHA insurance. A score of 500 to 579 limits financing to 90% LTV. At 580 and above, maximum financing is available. That is per HUD’s FHA Resource Center. Terms depend on the lender’s guidelines, the property type, the leverage, and a full review of the credit profile.
The 90% limit on the low tier sits above the 80% cash-out cap. So the cash-out cap is the one that binds at every score. We have not found a HUD page that states this in one sentence. It follows from reading the two rules together. The exact numbers vary by lender and program and follow a full review of property, leverage, and credit.
Where the network actually starts. HUD sets the insurable floor. Lenders add their own overlays. Across the wholesale programs Lendmire places FHA files with, the starting point is a 580 decision score. HUD’s 500 to 579 tier is a HUD rule that this network does not reach below 580. Some lenders set a higher floor still, so a 580 is a starting line, not a promise.
How the file is underwritten. Most files run through FHA’s automated scorecard. If the file cannot be scored, or the scorecard returns a “refer” result, a human underwriter reviews it manually. Manual review uses stricter ratios. HUD’s earlier framework for this is in Mortgagee Letter 2014-02.
How much debt you can carry. The base pair of ratios is 31/43: housing cost to income, and total debt to income. With no compensating factors, that is the limit. Documented compensating factors can lift the pair as far as 40/50 at the top tier. The automated finding governs most files.
The Tiers You Actually Meet
Here is how it looks side by side. The leverage column is the same on every row. That is the point.
| Factor | Lower scores | Mid scores | Higher scores |
|---|---|---|---|
| Cash-out cap | 80% of value | 80% of value | 80% of value |
| HUD insurable floor | 500 | 500 | 500 |
| Network starting point | 580 | 580 | 580 |
| Underwriting route | More often manual | Automated or manual | Usually automated |
| Debt-ratio room | Base 31/43 | Some room with factors | Up to 40/50 with factors |
| Annual premium | Set by term, amount, LTV | Same | Same |
Treat the underwriting and ratio rows as tendencies, not rules. Every file is reviewed on its own facts, subject to lender guidelines.
Does Score Change the Mortgage Insurance?
Not directly. The upfront premium is 1.75% of the base loan, and it can be financed. The annual premium runs between 0.15% and 0.75% of the balance. It depends on loan term, loan amount and LTV, not on credit score. HUD explains the structure in its mortgage insurance premium article.
Because a cash-out starts at or below 80% LTV, a thirty-year loan should land in the tier where the annual premium ends after eleven years. Above 90% LTV, it lasts for the term. Confirm the current duration table with your loan officer, since HUD updates its premium schedules. Final terms depend on the lender’s guidelines, the property type, and the borrower’s complete credit picture.
One more point. Reaching 20% equity later does not remove FHA mortgage insurance on its own. Cancellation follows the original schedule.
The financed upfront premium counts toward the 80% cap. That trims your cash a little. It is one reason the draw you see on paper shrinks by closing.
Other Limits That Cap the Draw
Several things can pull the draw below the 80% ceiling. Watch these.
- Occupancy. You must have owned the home and lived in it as your principal residence for the 12 months before the FHA case number is assigned. Lenders look for proof such as employment records or utility bills.
- Payment history. Lenders look at how the current mortgage has been paid. Recent late payments can stop a file. Exact seasoning wording sits in the HUD handbook, so ask your loan officer to confirm it for your case.
- Appraisal. The FHA appraisal sets value. A low appraisal lowers the 80% ceiling dollar for dollar.
- County loan limits. FHA limits are set by county and change every year. County loan limits apply to the new loan, and a high-value home can hit that limit before it hits 80%.
- Debt ratios. Even with room under the cap, the debt ratios must work for the new payment.
Which limit binds first? Usually it runs in this order: the 80% cap, then the county limit, then your ratios. On a modest-value home with a big existing balance, the 80% cap and the payoff do most of the damage. On a high-value home, the county limit may bite first.
Where the General Rule Breaks
A few edge cases change the picture.
Recently acquired homes. If you bought the home less than 12 months ago, the 12-month ownership and occupancy test usually keeps you out of cash-out. Some lenders also calculate value more strictly on newer ownership.
Inherited homes. Some guidance says the residency requirement can be handled differently for an inherited property. Do not count on it. Ask your loan officer to check the handbook for your facts.
Second homes and rentals. Occupancy decides the leverage, and FHA cash-out is for a principal residence only.
Co-borrowers. Lenders use the lowest representative score among borrowers on the file. One weak score can drag the file, so adding a borrower is not always a help. Some lenders also limit non-occupant co-borrowers on cash-out, even though they can help on an FHA purchase.
Hawaiian Home Lands. The 80% change does not apply to Section 247 loans on Hawaiian Home Lands.
Refinancing a recent FHA loan. If your current loan is FHA and fairly new, a prorated credit toward the new upfront premium may apply. HUD or the FHA Resource Center publishes the schedule.
Borderline scores. A score just under 580 is the tricky one. In this network, that file does not reach the program. A few months of on-time payments and paying down card balances can move it. Check your report for errors before you apply. A lender pulls its own version of your score, and it may differ from the one on your banking app.
FHA Versus Other Cash-Out Paths
The tiers differ by loan type, so keep them separate in your head.
| Path | How the cap works | Where score shows up |
|---|---|---|
| FHA cash-out | One flat 80% cap | Eligibility, route, ratios |
| Conventional cash-out | Lender and agency tiers may apply | Often tied to leverage |
| Home equity loan or line | Sits on top of your first mortgage | Often tied to limits |
A cash-out refinance replaces your first mortgage. A home equity loan or line leaves it in place, as the CFPB’s research blog explains. In both cases the home is collateral, and missed payments can lead to foreclosure.
For a broader look at score floors across loan types, see Lendmire’s article What Is The Minimum Credit Score For A Cash Out Refinance.
What the Decision Looks Like in Practice
Picture a homeowner with a 620 score, a home they have lived in for years, and about 35% equity. The 80% cap leaves room, because they would still keep 20% after closing. The cash they walk away with depends on the payoff, costs, and the financed premium. The score does not change the cap. It changes how closely the file gets reviewed and how much debt the ratios allow.
Now picture a second homeowner with a 760 score and only 15% equity. That score does not help. The 80% cap leaves no room for cash. Equity decides.
Before you apply, run through this list:
1. Check your equity honestly against the 80% cap, using a realistic value. 2. Pull your credit report and fix errors. 3. Confirm 12 months of owner occupancy and a clean payment history. 4. Gather proof of occupancy such as pay stubs or utility bills. 5. Ask what a new loan does to your payment, term and rate. The new loan replaces your current rate and terms, and a larger balance can extend the payoff timeline.
The CFPB’s research on cash-out and non-mortgage debt warns that turning other debt into mortgage debt can put the home at risk if payments become hard to keep up. Paying off debts is a common use of the cash, with home repairs second. Think through whether the swap helps your budget over time.
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
Adjusted value: The appraised value, as FHA adjusts it, that the 80% cap is applied to.
Minimum Decision Credit Score (MDCS): The score FHA underwriting uses to judge the file, based on the lowest representative score among borrowers.
Upfront premium: A one-time FHA mortgage insurance charge of 1.75% of the base loan, which can be financed.
Annual premium: The ongoing FHA mortgage insurance charge, set by term, loan amount and LTV.
Overlay: A rule a lender adds on top of the agency minimum, such as a higher score floor.
Maximum draw: In a refinance, the one-time lump sum of cash you can take out. It is not a revolving line.
Frequently Asked Questions
Does a higher credit score let me take more cash out of my home?
No. The FHA cash-out cap is 80% of adjusted value at every score. A higher score can ease underwriting and give more debt-ratio room, but it does not lift the ceiling.
What is the lowest score for an FHA cash-out refinance?
HUD’s insurable floor is 500, and a 500 to 579 score limits financing to 90% LTV. Pricing and available terms vary by lender, borrower profile, property type, and full underwriting review. Approval is never certain at any score.
Is the FHA cash-out cap still 85%?
No. HUD lowered it to 80% for case numbers assigned on or after September 1, 2019. Older pages that still show 85% are out of date.
Does my score change the FHA mortgage insurance?
Not directly. The upfront premium is 1.75% of the base loan, and the annual premium depends on term, loan amount and LTV. Score is not one of the factors.
What if I only bought my home recently?
The 12-month ownership and occupancy rule usually blocks a cash-out on a recent purchase. An FHA rate-and-term refinance may be an option instead, subject to lender guidelines.
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 broker licensed for consumer lending in 16 states. Lendmire arranges FHA, VA, conventional and jumbo purchase and refinance loans through wholesale lenders; every file is underwritten by the lender under the applicable program guidelines. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
For the program’s current guidelines, see FHA loan programs.
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References
1. HUD Mortgagee Letter 2019-11
2. HUD press release PR 19-114
4. HUD FHA Resource Center, mortgage insurance premium structure
5. CFPB Office of Research blog on cash-out refinances
6. CFPB’s research on cash-out and non-mortgage debt
This article is part of Lendmire’s FHA Loan series — every loan program’s qualification details, guidelines, and scenarios live on the loan options page.
Related reading: FHA Cash-out Refinance Credit Requirements: The Floor And The Overlays Above It · Can a Texas Homeowner Get an FHA Cash-Out Refinance? · Conventional vs FHA Cash-Out for a Homeowner Based on Credit and DTI
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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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.