The Quick Read: Credit score does not unlock more leverage on an FHA cash-out refinance. On an owner-occupied home, the loan reaches 80% of the home’s appraised value, and that ceiling stays flat across credit tiers. Your score decides whether the file qualifies and how it is underwritten, not how far up a ladder you climb. Subject to lender guidelines and full file review, the dollars you receive come from the 80% cap minus your payoff and costs, with the financed premium added on top of the base loan.
Key Takeaways
- The FHA cash-out cap is 80% of value for an owner-occupied home, at any credit score the wholesale network reaches.
- The wholesale programs Lendmire places FHA loans with start at a 580 decision score.
- The 96.5% and 97.75% figures belong to purchase and rate-and-term loans, not cash-out.
- The financed upfront premium sits on top of the base loan and does not count toward the 80%.
- Cash to you is the maximum loan minus your payoff, closing costs, and prepaids.
Is There a Credit-by-LTV Ladder on FHA Cash-Out?
No. Many borrowers expect tiers where a better score buys a higher loan-to-value. That ladder exists on purchase loans. It does not exist on cash-out.
On a purchase, the wholesale programs Lendmire works with allow maximum financing of 96.5% with a 3.5% minimum investment at a decision score of 580 or higher. HUD’s rules also describe a lower-score tier at 500-579 with a 10% minimum investment, but the wholesale network does not reach below 580. Those tiers govern purchases.
Cash-out is different. HUD Mortgagee Letter 2019-11 lowered the maximum loan-to-value and combined loan-to-value on cash-out refinances to 80% of adjusted value. The old cap was 85%, and before 2009 it was 95%. Because 80% sits below every credit-based purchase cap, it controls for owner-occupants at any score.
Older pages that still say 85% are out of date.
What Does Each Tier Actually Look Like?
Here is the side-by-side. Every figure is tied to its own program and purpose.
| Program | Max financing | Credit entry point |
|---|---|---|
| FHA purchase | 96.5% | 580 decision score |
| FHA rate-and-term (appraisal) | 97.75% | 580 decision score |
| FHA cash-out | 80% | 580 decision score |
| FHA Streamline | No cash out | Limited credit review |
Read the table this way. The credit column is an entry point, not a lever. A 580 and a 760 both reach the same 80% on cash-out. What differs is pricing, how comfortably the automated underwriting finding comes back, and whether a lender adds its own stricter floor.
The rate-and-term row requires a principal residence you have occupied for the previous twelve months. The cash-out row requires a home you have owned and occupied for 12 months before the case number is assigned.
Key Terms Defined
Adjusted value: The appraised value HUD uses to size the loan, after its adjustments.
Base loan amount: The loan before the financed upfront premium is added.
Loan-to-value (LTV): The base loan amount divided by the adjusted value.
Decision credit score: The single score FHA underwriting uses, taken as the median of three bureau scores, the lower of two, or the only score available.
Overlay: A lender’s own rule that is stricter than HUD’s minimum.
Section 247: HUD’s Hawaiian Homelands program, which is exempt from the 80% cap.
How Is the Loan Sized, Step by Step?
The mechanics are the same on nearly every file. Here is the order a loan runs in.
1. Eligibility. The home must be your principal residence. Across the wholesale programs, that means owned and occupied for 12 months before the case number.
2. Credit. The lender sets your decision score. With three bureau scores it uses the median. With two it uses the lower. With one, that one.
3. Appraisal. The appraised adjusted value sets the dollar ceiling. A weak appraisal lowers the cash, no matter your credit.
4. Payoffs. The lender gets payoff statements for every existing mortgage. Those balances come out of the new loan first.
5. Sizing. Base loan equals 80% of adjusted value at most. County loan limits apply too, and you can look up your county on HUD’s FHA mortgage limits tool.
6. Underwriting. Most files run through FHA’s automated scorecard. Some go to manual review.
7. Closing. The upfront premium is usually financed into the loan. That raises the balance but not the LTV.
The HUD Handbook glossary defines LTV on the base loan amount. That detail is why the financed premium does not eat into your 80%.
How Much Cash Do You Actually Get?
Take a home appraised at 100 units of value. In plain percentages, the maximum base loan is 80 of those units. Now subtract what you owe on the existing mortgage, then closing costs and prepaids. What remains is your cash.
That is the whole formula. Maximum loan, minus payoff, minus costs, minus prepaids.
Two things shrink the number that borrowers miss. First, the 80% is a share of the home’s value, not of your equity. If you owe 70% of value, only about 10% of value is left before costs. Second, the upfront premium is 1.75% of the base loan, and it is financed. It raises what you owe without raising your cash.
You do not have to borrow the maximum. A smaller base loan means a smaller premium and a smaller balance. If you only need a set amount, size to that.
Why Doesn’t a Higher Score Raise the Cap?
Credit measures the chance you repay. HUD already handled that risk by cutting the cap itself. HUD said the change was meant to reduce risk to the FHA Insurance Fund from rising insured balances on cash-out loans. Cash-out is treated as riskier than a purchase because you are pulling equity out, so the cushion is fixed at 20% regardless of score.
Where your score does show up on a working file:
- Whether the automated finding approves or refers to manual review.
- The ratio room you get. The base pair is 31/43 with no compensating factors. Documented compensating factors can reach 40/50 at the top tier.
- Pricing, which this article does not quote.
- Lender overlays, which can set a higher floor than 580 on some files.
A 580 is the floor the wholesale programs start at. It is not a promise. Some lenders set a higher minimum, and a file that clears HUD’s rule can still fall short of a lender’s.
Where Does the General Rule Break?
A few edge cases change the answer.
Occupancy. FHA cash-out is for a home you live in. Occupancy decides leverage. A second home or rental is not eligible for this program.
Ownership clock. The 12-month owned-and-occupied requirement is where files get kicked back. A shorter history is more restrictive, and limited exceptions exist, such as inherited property. Confirm yours with the lender early.
Payment history. Recent mortgage payments need to meet FHA standards. A late payment in the past year can stop a file even with a strong score.
Section 247. Hawaiian Homelands loans are exempt from the 80% cap.
Existing loan type. Your current loan does not have to be FHA. A conventional loan can be paid off with an FHA cash-out.
Streamline. The FHA Streamline refinances an existing FHA loan with no appraisal and a limited credit review. It requires a net tangible benefit and takes no cash out at all.
Pending changes. HUD revises its handbook periodically. Check the current text on hud.gov before you rely on any figure here.
What Does the Premium Do to the Balance?
The upfront premium is 1.75% of the base loan, and HUD confirms it applies to purchases and refinances. The annual premium is collected monthly and runs between 0.15% and 0.75% of the balance, depending on term, loan amount, and LTV. This is a program fact, not a price quote.
Duration matters. On a thirty-year loan above 90% LTV, the annual premium lasts for the term. At or below 90%, it ends after eleven years. Because cash-out tops out at 80%, the shorter duration is the one that applies to most cash-out loans. The exact numbers vary by lender and program and follow a full review of property, leverage, and credit.
The new loan replaces your old one, so you take on a new term and a larger balance. Direction matters more than any one number here: more cash out means a bigger balance and more premium.
Can Improving Credit Raise Your Cash?
Not through the cap. Raising your score from the 580 range to a higher one does not move 80%. It can change how easily the file clears, how much ratio room you have, and what a lender offers.
If your score falls short of 580, the wholesale network cannot reach you on FHA at all. Waiting helps there. Credit events carry HUD waiting periods, such as two years from a chapter 7 discharge and three years from a foreclosure. Those are HUD’s rules, not the network’s promises.
A better lever is the appraisal and your payoff. Paying down the current balance before applying raises the cash you can take, because the cap is measured against value and your payoff comes out first.
FHA Cash-Out vs. Other Ways to Tap Equity
| Option | Your first loan | What changes |
|---|---|---|
| FHA cash-out | Replaced | New term, new balance |
| Home equity loan | Stays | Second lien added |
| HELOC | Stays | Second lien, variable draw |
The CFPB notes that a cash-out refinance replaces the original mortgage, while home equity loans and HELOCs leave it in place. That is the deciding difference. If your current loan is one you want to keep, a second lien may fit better.
Proceeds are not limited to home improvements. CFPB research found that more than half of cash-out borrowers surveyed between 2014 and 2019 cited paying off other bills or debts. Be careful with that use. Moving unsecured debt into mortgage debt puts your home behind it.
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
Does a higher credit score get me a higher FHA cash-out loan?
No. The cap is 80% of appraised value for owner-occupants at any score. Your score affects whether the file clears, the ratio room available, and lender overlays, but not the ceiling.
What is the minimum credit score for FHA cash-out?
The wholesale programs Lendmire places FHA loans with start at a 580 decision score. HUD’s own rules describe a lower tier, but the network does not reach below 580. Individual lenders may set a higher floor, and every file is subject to full review.
Is the financed premium counted in the 80%?
No. LTV is measured on the base loan amount, so the financed 1.75% upfront premium sits on top. It does raise your balance and lower your net cash.
Does my current loan need to be FHA?
No. A conventional or other loan type can be paid off with an FHA cash-out, as long as you meet the occupancy and ownership requirements.
Can I use FHA cash-out on a rental or second home?
No. Occupancy decides the leverage, and this program is for a home you own and live in as your principal residence.
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. Start with the FHA cash-out refinance program page, and read Lendmire’s piece FHA Cash-Out Refinance Rules: Occupancy, Loan-to-Value, and Credit. 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 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 FHA Mortgage Limits Lookup
3. HUD Handbook 4000.1 Glossary
4. HUD FHA Answers: Mortgage Insurance Premium structure
5. CFPB: cash-out refinance borrowers, 2013 to 2023
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 Appraisal Requirements for Value and Repairs · How Much FHA Cash-Out Insurance Costs Versus Conventional by Equity · FHA Cash-Out vs Conventional Cash-Out to Pay Off Credit Cards
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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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.