The Quick Read: There is no special condo equity number. A conventional cash-out on a one-unit primary residence generally caps at 80% of the appraised value, so about 20% equity has to remain after the new loan, with financed costs counted. The condo adds a second gate: the building itself has to pass a conventional project review, and an FHA approval does not carry over. Details are subject to lender guidelines and full file review.
That 80% cap is measured against the new loan, not the old FHA balance. The new loan is the FHA payoff, plus any financed closing costs, plus the cash you take out. All of it has to fit under the cap. Below, the mechanics run in the order a file moves through them.
What Does “Equity” Mean on a Cash-Out?
Equity is the appraised value minus what is owed. For a cash-out, the number that matters is the equity left after the new loan closes. That is the same thing as loan-to-value (LTV): value on one side, the total new first mortgage on the other.
Under Fannie Mae’s Eligibility Matrix, a cash-out on a one-unit principal residence tops out at 80% LTV. For two to four units the cap is 75%. The matrix also notes that lower ratios may apply to condos depending on the type of project review the lender performs. Exact terms depend on the lender’s guidelines, property type, leverage, and a full review of the borrower’s file.
Here’s the catch most borrowers miss. “I have 20% equity” does not mean “I can pull out 20%.” Cash available is 80% of value, minus the FHA payoff, minus financed costs. A borrower who already owes close to 80% has little to take out.
Key Terms Defined
- LTV (loan-to-value): the new loan amount divided by the appraised value of the unit.
- CLTV/HCLTV: the same test, but counting any second liens (and, for HCLTV, home equity lines at their full limit).
- Cash-out refinance: a new first mortgage larger than the payoff, with the difference paid to the borrower.
- Project review: the lender’s check that the condo building meets conventional standards, separate from the borrower and the unit appraisal.
- Seasoning: the minimum time a loan or ownership must exist before a cash-out is allowed.
How Is the Equity Test Run, Step by Step?
The equity test is one of several passes. In the order a file usually moves:
1. Appraisal sets value. The appraiser values the unit using condo comparables and building condition.
2. The new loan is stacked. Payoff of the FHA mortgage, plus financed costs, plus cash out.
3. That total is compared to the cap. For a one-unit primary residence, the stack must be at or under 80% of value.
4. Seasoning is checked. Under the Fannie Mae Selling Guide on cash-out refinances, a 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. Exceptions exist for things like inheritance and divorce awards. Fannie Mae announced the 12-month rule for note dates on or after April 1, 2023.
5. The borrower is underwritten. Credit, income, debt-to-income, and reserves. On loans run through Fannie Mae’s automated system, a debt-to-income ratio above 45% calls for six months of reserves.
6. The building is reviewed. More on that next. It is the step that stalls condo files.
7. The new loan pays off the FHA mortgage. Disclosures follow the standard consumer process, with a Loan Estimate and Closing Disclosure.
If a unit is listed for sale, it has to come off the market on or before disbursement. That one trips up borrowers who tested the market first.
Why Does the Condo Change the Answer?
The condo changes the answer because the building is underwritten along with you. Fannie Mae states that the project review is in addition to the borrower, transaction, and unit appraisal reviews. Your equity can be perfect and the file can still stall on the HOA.
The lender has to confirm the project meets conventional requirements before delivering the unit loan, and keep the project documents in the file. Those can include the condo questionnaire, the association budget, and insurance evidence.
On a Full Review, lenders use Fannie Mae’s Condo Project Manager tool and keep the unexpired certification. Two details matter in practice:
- No more than 15% of units may be 60 or more days past due on HOA fees. Fannie Mae’s project standards FAQ says fee delinquencies and special-assessment delinquencies are calculated separately.
- Fannie Mae does not review insurance policies, even when the tool returns an approval message. The lender has to verify and document the insurance requirements.
Fannie Mae’s release notes list the project flags that cause trouble: critical repairs, delinquent assessments, legal-document problems, non-minor litigation, and inadequate reserves. Any one can stop a deal.
Does FHA Condo Approval Carry Over?
No. FHA condo approval and conventional project eligibility are two separate systems. HUD’s Handbook 4000.1 governs FHA project approval. Fannie Mae and Freddie Mac run their own standards.
A building that financed your FHA loan can fail the conventional review. Typical causes are high delinquencies, critical repairs, or reserves that are too thin. Freddie Mac runs project standards of its own as well, and lenders can add overlays on top of either one. Treat the exact test as lender-specific until the lender confirms it.
The practical read: ask the association early. Request the budget, the reserve study, the questionnaire, and the master insurance evidence before you count on the equity math.
Where the Review Rules Have Shifted
Fannie Mae has retired its lighter Limited Review. Per Lender Letter LL-2026-03, loans with application dates on or after August 3, 2026 are not eligible for sale under it. Established attached-unit condos that used to pass on the lighter test now need a Full Review or a waiver.
The stated reason is practical. Fannie Mae saw a link between underfunded reserves and projects needing critical repairs, and it wants fewer surprise special assessments for owners. The same letter strengthens reserve-study expectations and raises replacement reserve requirements. Exact new percentages should come from the lender, not from this article. Higher reserve requirements are phasing in. Every figure here varies by lender and program — guidelines, property type, leverage, and credit profile all apply.
Waivers still exist. Detached condo units, where no walls, ceilings, or floors are shared, are waived from project review. The same letter expands the waiver to projects of ten or fewer units, with an added condition for five to ten units: the project cannot be part of a master association or larger development. One waiver does not help here. A Fannie Mae-to-Fannie Mae limited cash-out refinance at 80% LTV or less is waived, but an FHA payoff is not a Fannie Mae-owned loan. Final terms depend on lender guidelines, property type, leverage, and the borrower’s complete credit picture.
FHA Cash-Out vs. Conventional Cash-Out on a Condo
The two ceilings now look alike. HUD Mortgagee Letter 2019-11 cut the FHA cash-out maximum from 85% to 80% of adjusted value. Across the wholesale programs Lendmire works with, the FHA cash-out reaches 80% LTV on a home owned and occupied for 12 months before the case number. Those figures are subject to lender guidelines and full file review.
| Factor | FHA cash-out | Conventional cash-out |
|---|---|---|
| Max LTV, one-unit primary | 80% | 80% (Fannie Mae matrix) |
| Seasoning | Owned and occupied 12 months | Existing first 12 months old; 6 months on title |
| Mortgage insurance | Upfront and annual premium | PMI depends on LTV and lender |
| Condo review | FHA project approval | Conventional project review |
The equity number is not the deciding difference. The building and the insurance structure are. For more on the FHA side, see Lendmire’s FHA cash-out refinance program page.
What Happens to the FHA Mortgage Insurance?
Leaving FHA is how many borrowers end the annual premium. On the programs Lendmire places, FHA carries an upfront premium of 1.75% of the base loan, which is financed, plus an annual premium that varies by term, loan amount, and LTV. On a thirty-year loan above 90% LTV, the annual premium runs the full term. At or below 90%, it ends after eleven years. HUD’s Mortgagee Letter 2013-04 set that duration rule. These specifics are subject to lender guidelines and a full review of property, leverage, and credit.
That means equity growth alone does not drop the premium on a newer FHA loan. Many borrowers who believe it falls off at 78% are thinking of conventional PMI. HUD’s FHA answer on cancellation says the 78% rule applies only to loans with case numbers before June 3, 2013.
Conventional PMI works differently. Under the federal Homeowners Protection Act, as the CFPB’s examination procedures describe, a borrower can request cancellation at 80% of original value, and termination is automatic at 78%. A cash-out at the 80% maximum starts at or near that request line. Whether PMI applies at all, and how it is structured, depends on the lender and the loan.
Worked Example in Percentages
Take a one-unit condo, lived in as the primary residence, appraised at 100% of value. The FHA balance and payoff costs sit at 65% of that value. Financed closing costs add about 3 points more.
- Ceiling: 80% of value.
- Already stacked: roughly 68%.
- Room for cash out: about 12% of value, before any other costs.
Now run the low-appraisal version. The unit comes in 5% below the expected value, so the ceiling falls to 80% of 95%, which is 76% of the original expected value. The stack stays at 68%, so the room shrinks to about 8% of the original expected value. Cash out is limited by the lower number, not the one you hoped for.
Condo appraisals lean on unit comparables and building condition. A building with deferred repairs can pull the value down and stall the project review in the same file.
Other Edge Cases
- Two to four units: the cap drops to 75%.
- Second homes and investment properties: separate limits apply, and occupancy decides the leverage. This article covers primary residences.
- Limited cash-out: a different category. It allows limited cash back and higher LTV on a one-unit primary residence, with its own requirements. It is not the same as a cash-out.
- Delayed financing: applies to cash purchases, so it does not matter for an FHA payoff unless the property was bought with cash.
- Manufactured housing in a condo project: the Full Review has special provisions.
What If You Don’t Have Enough Equity?
Run the options in plain terms. You can wait while the balance falls or values rise. You can take a smaller cash amount that fits under the cap. You can keep FHA and look at the cash-out refinance on that side, which reaches the same 80% ceiling. Or you can look at a rate-and-term refinance, which is a different test with a different leverage limit.
The CFPB’s Office of Research notes that most cash-out refinances now sit below 80% LTV, and that cash-out volume has declined since early 2022. Most borrowers do not run to the ceiling.
Pre-Application Checklist
Gather these before the appraisal is ordered:
- FHA payoff information and the original note date
- Date you took title, and proof you live in the unit
- HOA budget, reserve study, and condo questionnaire
- Master insurance evidence for the building
- Any special assessment notices or pending litigation letters
Tax treatment can depend on your situation; borrowers should speak with a qualified tax professional before relying on any deduction or credit.
Frequently Asked Questions
Can I cash out conventional on an FHA condo?
Yes, if the unit and building meet conventional standards. The new loan generally has to fit at or under 80% of value on a one-unit primary residence. The FHA mortgage has to be at least 12 months old, and title seasoning applies. The lender decides final eligibility.
Does my condo need to be FHA-approved for a conventional refinance?
No. FHA approval is a separate system and does not transfer. The building has to pass a conventional project review instead, or qualify for a waiver such as the detached-unit waiver.
How is equity calculated on a condo?
Appraised value minus the total new loan, including financed closing costs. The appraiser values the unit from condo comparables, so building condition and recent unit sales matter.
Does the building review change how much equity I need?
The matrix notes that lower ratios may be required for condos depending on the review type. With the Limited Review retired, most established buildings now face a Full Review. A building that fails it can stop the loan no matter how much equity you hold.
Will my FHA mortgage insurance go away?
Paying off the FHA loan ends its premium. Conventional PMI may apply depending on LTV and the lender, and it can be canceled under federal rules at set balance thresholds.
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. Lendmire is a mortgage broker, and nothing here is a commitment to lend.
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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References
1. Fannie Mae Eligibility Matrix
2. Fannie Mae Selling Guide B2-1.3-03, Cash-Out Refinance Transactions
3. Fannie Mae Cash-Out Eligibility Announcement
4. Fannie Mae B4-2.1-01 Project Standards
5. Fannie Mae Project Standards FAQs
7. Fannie Mae Lender Letter LL-2026-03
8. HUD Mortgagee Letter 2019-11
10. FHA answer on cancellation
11. CFPB Homeowners Protection Act Examination Procedures
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 and Conventional Cash-Out Requirements for a Condo Primary Home · Can a Condo Owner Get an FHA Cash-Out Without Project Approval? · How to End Mortgage Insurance After an FHA Cash-Out on a Condo
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
Required disclosures. Lendmire (NMLS# 2371349) operates as a licensed mortgage broker, not a direct lender or depository. The discussion in this article is general in nature and should not be relied upon as financial, legal, or tax advice — every investment scenario is unique and should be reviewed by a qualified professional. Any loan inquiry is subject to lender underwriting, and this article is not a commitment to lend or a guarantee of approval. Mortgage rates, loan terms, and program guidelines vary by borrower, property, and state, and may change without notice. Equal Housing Opportunity. Verify licensure at NMLS Consumer Access.