The Quick Read: The FHA rules are the same whether you apply at a bank or through a broker. The FHA cash-out refinance reaches 80% loan-to-value on a home you have owned and lived in for 12 months before the case number. What changes is who you deal with and how many lenders can look at your file. A bank offers its own product. A broker places your file with one of several wholesale lenders, and that lender underwrites, approves, and funds the loan.
What Is an FHA Cash-Out Refinance?
An FHA cash-out refinance replaces your current mortgage with a new, larger FHA-insured loan. The new loan pays off the old one. You receive the difference as cash, after closing costs and payoffs.
FHA cash-out estimate
Seeded with an example value, a balance to match, and a round cash request; change any field.
Editable benchmark: 7.18% as of November 5, 2026 · Freddie Mac 30-year average via FRED®. A conventional market reference, not an FHA cash-out refinance quote.
Illustrative starting assumptions: a $350,000 home value, a $193,000 current balance, the FHA cap on a principal residence with the upfront premium financed, a thirty-year term at the current Freddie Mac benchmark, and property taxes and insurance estimated at typical national rates. Every field is editable.
An illustration, not a Loan Estimate, an approval, a quote, or a commitment to lend. The rate shown is the weekly Freddie Mac thirty-year conventional benchmark, used as a market reference; an FHA cash-out is priced by the lender at lock, and this is not an FHA cash-out refinance quote. HUD’s cap limits the base loan; the upfront premium is financed on top of the capped base loan; the monthly premium for the first year follows the snapshot’s schedule. Cash available means the base loan the cap permits less the balances retired, before closing costs, which this calculator leaves out. The line figure applies the line program’s combined loan-to-value ceiling to the same value and balance. Taxes and insurance are estimates you can edit. Licensed in sixteen states for consumer mortgages.
Loan-to-value (LTV) compares the loan balance to the home’s value. At 80% LTV, you keep at least 20% equity in the home after the loan closes. The cash comes from equity you already own. Final terms depend on lender guidelines, property type, leverage, and the borrower’s complete credit picture.
This product is for a home you live in. Standard FHA cash-out is for principal residences only, so second homes and rentals are outside it. The 80% limit applies to a home you have owned and occupied for 12 months before the case number.
The program is also not a Streamline. The FHA Streamline refinances an existing FHA loan with no appraisal and a limited credit review, but you take no cash out. If you want cash, you need the cash-out product.
The sections below explain the part that trips people up: what a broker changes and what it does not.
Key Terms Defined
Wholesale lender: A lender that funds loans placed by brokers instead of selling directly to the public.
Overlay: An extra rule a lender adds on top of FHA’s minimums, such as a higher credit-score floor. Overlays are lender policy, not FHA policy.
Direct Endorsement: FHA approval that lets a lender underwrite FHA loans without FHA reviewing each file first.
Adjusted value: The value FHA applies its LTV cap to. It is not always the same as the raw appraised figure.
Case number: The FHA identifier assigned to your loan file. The 12-month ownership and occupancy test is measured back from this date.
Loan Estimate: The standardized form that shows a loan’s terms and costs, so you can compare offers side by side.
What Stays the Same at a Bank and With a Broker
The program rules do not change with the channel. A broker does not get a special FHA product. A bank does not get a stricter one.
HUD’s Handbook 4000.1 is the single policy source for FHA single-family loans. It sets the minimums for every approved lender. It also explains Direct Endorsement, which lets an approved lender underwrite FHA loans and submit them for insurance without FHA’s prior review.
Across the wholesale programs Lendmire places FHA files with, the core tests look like this:
- Occupancy and ownership: You own the home and have lived in it as your principal residence for 12 months before the case number.
- Equity: The loan reaches 80% LTV, so at least 20% equity stays in the home.
- Credit: The wholesale programs we use start at a 580 decision score. HUD itself allows a lower tier with a larger required investment, but the network does not reach below 580.
- Debt ratios: The base pair is 31/43 (housing payment to income, and total debts to income) with no compensating factors. Documented compensating factors can reach 40/50 at the top tier. The automated finding governs most files.
- Appraisal: A new appraisal is part of the cash-out process.
- Mortgage insurance: FHA charges an upfront premium of 1.75% of the base loan, which can be financed, plus an annual premium.
Two more points matter here. County loan limits apply to every FHA loan, and they change each year. Also, a co-borrower who does not live in the home cannot help you qualify on a cash-out, because that is how the program works. Purchase loans allow a non-occupant co-borrower. Cash-outs do not.
Everything above is subject to lender guidelines and full file review. None of it is a commitment to lend.
Who Actually Does What?
A broker and a bank do different jobs, even when the borrower sees one friendly face.
The CFPB explains the difference plainly. A lender makes direct loans. A broker does not lend money. It helps you find and apply for a loan. The CFPB also notes that some institutions act as both, so it is smart to ask whether a broker is involved in your loan.
Here is the chain on a brokered FHA cash-out:
1. You apply with the broker. The broker gathers your documents, reviews the scenario, and matches it to a program.
2. The broker places the file with a wholesale lender. That lender is FHA-approved and holds Direct Endorsement authority.
3. The lender underwrites. It reviews credit, income, debt ratios, payment history, and the appraisal.
4. The lender approves and funds. The loan decision and the money both come from the lender, not the broker.
5. You receive standard disclosures. A Loan Estimate and a Closing Disclosure apply, because this is a consumer mortgage.
Lendmire is a mortgage broker. It arranges the loan but does not lend, underwrite, or approve. A broker cannot override HUD, and it cannot override the lender’s rules. What it can do is steer the file to a lender whose rules fit your situation.
Bank vs. Broker: Side by Side
| Factor | Bank | Broker |
|---|---|---|
| Who lends | The bank itself | A wholesale lender |
| Who underwrites | The bank | The wholesale lender |
| Programs reachable | One institution’s menu | Several lenders’ menus |
| Overlays | One set | Varies by lender chosen |
| Your contact | Often the bank’s loan officer | The broker, start to finish |
| Paid by | The bank, through loan pricing | The lender or you; shown on the Loan Estimate |
| If declined | You start over elsewhere | The file can be re-placed |
The FHA rules are identical down the middle. The differences sit in access, overlays, and who you talk to.
Where Overlays Change the Answer
An overlay is why two lenders can give the same file two different answers.
HUD sets the minimums. Each lender then decides whether to add its own rules on top. One lender might set a higher credit-score floor than another. Another might look harder at a recent late payment, or at a mortgage that is less than a year old.
That is why a bank decline does not always mean an FHA decline. The bank may have said no under its own overlay. The borrower’s file might fit the FHA rules and another lender’s policy just fine.
The reverse is also true. A broker cannot create eligibility that the FHA rules do not allow. If you have owned the home for eight months, no lender can give you a standard FHA cash-out, because the 12-month test is HUD’s. A different lender will not change that.
Picture a homeowner whose credit sits comfortably above the FHA minimum but just below one bank’s internal floor. The bank declines. A broker looks at the same file, sees a lender whose floor fits, and places it there. Same FHA program, different lender policy. Now picture a homeowner who bought ten months ago. The broker has nothing to re-place, because the rule being applied is HUD’s.
Running the loan through FHA’s automated underwriting or underwriting it manually also matters. Manual files face tighter ratio limits at lower scores, and each lender chooses how it handles them.
How the Loan Is Underwritten, Step by Step
1. Eligibility screen. The lender confirms the home is your principal residence and that you have owned and lived in it for 12 months before the case number. It also checks your payment history on the current mortgage. Lenders look closely at recent late payments on a cash-out, and some add their own seasoning rules.
2. Appraisal. The 80% cap applies to adjusted value, per the handbook. The appraisal sets the starting point for how much equity you can reach. A low appraisal shrinks the available cash. Sometimes it removes the cash-out entirely.
3. Credit and income. The lender checks your decision score, your income, and your debts. This is where the 31/43 base ratios and the higher compensating-factor ratios come in.
4. Mortgage insurance. The new loan carries the upfront premium and an annual premium. The annual premium runs between 0.15% and 0.75% of the balance, depending on term, loan amount, and LTV. On a thirty-year loan above 90% LTV it lasts for the term. At or below 90% LTV it ends after eleven years. HUD’s Mortgagee Letter 2023-05 lowered the annual premium for most new loans, effective March 20, 2023. Because a cash-out tops out at 80% LTV, it falls in the at-or-below-90% band, so the annual premium ends after eleven years on a thirty-year loan.
5. Final review and disclosures. The lender issues the Loan Estimate and, before closing, the Closing Disclosure. Compare the Loan Estimate to any other offers you have gathered.
Variations and Edge Cases
The general rule is simple. These are the places it bends or breaks.
You bought the home recently. Under 12 months of ownership and occupancy means no standard FHA cash-out. Waiting is the only fix.
You already have an FHA loan and want cash. The Streamline does not pay out cash. If you want to lower your payment without taking cash, a Streamline needs a net tangible benefit. Within the program, there is also an FHA rate-and-term refinance with an appraisal, which reaches 97.75% on a principal residence occupied for the previous twelve months. It is not a cash-out.
You want to use a co-borrower’s income. A person who does not live in the home cannot help you qualify on a cash-out. If you need their income to make the ratios work, this program will not fit.
Your mortgage is under a year old. If the loan you are refinancing has a short history, the payment-history test gets stricter. Lenders may layer on their own seasoning overlays.
You have a past credit event. HUD’s waiting periods apply. That means two years from a Chapter 7 discharge and three years from a foreclosure. These are HUD rules, not a promise from any lender or broker.
The home is not your primary residence. Second homes and rentals do not qualify for standard FHA cash-out. Leverage depends on occupancy, so this product is out.
Handbook changes. HUD revises Handbook 4000.1 periodically. Program details can shift, so a lender’s current guidelines control your file.
How Broker Pay Works, and How to See It
Brokers are paid in one of two ways. Either the lender pays the broker, or you pay the broker directly. The compensation shows on your Loan Estimate.
The federal rule on loan originator pay, Regulation Z, sets limits. If you pay the broker directly, the broker cannot also collect compensation from the lender on that loan. A broker’s pay also cannot vary based on the loan’s interest rate or other terms. Lender-paid compensation is generally recovered through the loan’s pricing, so “no fee to you” does not mean no cost. The cost is built into the loan.
That is why the CFPB advises that fees are loan-specific. A bank is not automatically cheaper, and a broker is not automatically cheaper either. Neither claim is established. What you can do is compare the full Loan Estimates, line by line.
When a Bank Makes More Sense
A broker is not the right choice for everyone. A bank can be the better fit when:
- You have a clean file and your credit, ratios, and payment history sit well inside any lender’s guidelines.
- You already have a banking relationship you value and want a single point of contact.
- You prefer to deal with the institution that will hold your loan.
- You have already received a bank’s Loan Estimate and the terms are what you wanted.
A broker earns its place when your file sits near a lender’s overlay, when you want several lenders to look at the same scenario, or when a decline has left you unsure whether the problem lies with your file or with one lender’s rules.
The best program for your situation depends on your credit profile, your equity, the home’s value, and your debt ratios. No channel wins on every file.
What Your Decision Looks Like in Practice
Start with the eligibility test. Do you have 12 months of ownership and occupancy? If not, nothing else matters.
Next, check equity. Your lender will cap the loan at a percentage of the home’s value, which means you must keep a portion of the equity in the home. Subtract your current balance from that capped amount. The calculation is simple arithmetic you can do on a notepad. These specifics are subject to lender guidelines and a full review of property, leverage, and credit.
Then think about the cost of the cash. A cash-out resets your loan term and increases your balance. FHA mortgage insurance is added on top. Your monthly cost will almost certainly change. Ask whether the purpose of the cash justifies it.
Finally, compare. Get Loan Estimates from at least two sources if you can, one bank and one broker. Put them side by side. Look at the loan amount, the insurance, the closing costs, and any broker compensation line.
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 broker get me a better FHA program than a bank?
No. The FHA rules and the mortgage insurance structure are the same in both channels. A broker may reach more lenders, and lenders differ in their overlays. That gives your file more places to fit, but it does not change the program itself.
Can a broker approve my FHA cash-out?
No. The wholesale lender underwrites, approves, and funds the loan. A broker takes your application, matches it to a program, and places the file. Lendmire is a mortgage broker, so it does not lend.
If my bank said no, is an FHA cash-out off the table?
Not necessarily. The decline may have come from the bank’s own overlay instead of FHA’s rule. A broker can look at whether another lender’s policy fits your file. If the reason was HUD’s own rule, such as the 12-month ownership test, a different lender will not change it.
How much equity do I have to leave in the home?
At least 20%. The FHA cash-out reaches 80% LTV, and the cap applies to the home’s adjusted value. That value is based on the appraisal, so a lower appraisal means less available cash. Terms depend on the lender’s guidelines, the property type, the leverage, and a full review of the credit profile.
Can I use a Streamline to get cash out?
No. A Streamline refinances an existing FHA loan with no appraisal and a limited credit review, and it pays no cash. It also requires a net tangible benefit. If you want cash from your equity, you need the cash-out refinance.
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. All terms 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 that arranges FHA, VA, conventional and jumbo home purchase and refinance financing in 16 states through wholesale lenders. Every option is subject to the lender’s guidelines and full underwriting. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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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. HUD Handbook 4000.1 (archive)
3. HUD Mortgagee Letter 2023-05
This article is part of Lendmire’s FHA cash-out refinance program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: How the FHA Cash-Out Seasoning Period Works for an Heir · How a Non-Occupant Co-Borrower Works on an FHA Cash-Out Card Payoff · How an FHA Cash-Out Works When Heirs Refuse to Sell
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
- Mortgage Loan Originator · NMLS# 1129696 · Verify on NMLS Consumer Access
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- North Carolina Insurance Producer · License# 19053198 · Property, Casualty, Life, Health · Verify on NAIC SBS
- Lendmire LLC · Firm NMLS# 2371349 · Verify firm licensure
Important disclosures. Lendmire (NMLS# 2371349) is a licensed mortgage brokerage. Lendmire is not a direct lender, depository institution, or financial advisor. All loan inquiries are subject to lender underwriting; this article does not constitute a commitment to lend. Rates, terms, and program guidelines are subject to change without notice and vary by borrower profile, property type, and state. Information in this article is general in nature and is not financial, legal, or tax advice. Equal Housing Opportunity. NMLS Consumer Access: nmlsconsumeraccess.org.