The Quick Read: A ready FHA cash-out file proves four things: you owned and lived in the home for 12 months before the case number, you have at least 20% equity left after the new loan, your payment history is clean, and every document explains itself. The new loan tops out at 80% of the home’s value, and that limit has to cover your old payoff, financed costs, and the upfront premium. Cash is what remains. Missing proof can slow a file just as much as the math can, so gather documents early.
What an FHA Cash-Out Refinance Actually Is
A cash-out refinance replaces your current mortgage with a larger one and hands you the difference. The CFPB notes that you often pay closing costs on it, which is different from a HELOC or home equity loan, since those sit beside your first mortgage instead of replacing it.
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.
On FHA, the new loan reaches 80% LTV on a home you have owned and occupied for 12 months before the case number. You do not need an existing FHA loan. A conventional mortgage can be paid off with a new FHA loan.
Plain version: it is a bigger first mortgage, with a ceiling, and a cash payout from what is left under that ceiling.
Key Terms Defined
Case number: The FHA identifier assigned to your file. The 12-month ownership and occupancy clock runs back from this date, not from your application date.
Adjusted Value: The value the 80% cap is measured against. It is not always the raw appraisal figure.
CLTV (combined loan-to-value): The total of all liens divided by value. Any second lien counts toward the 80% limit.
Seasoning: How long you have owned and lived in the home before the case number is assigned.
UFMIP: The upfront mortgage insurance premium. On the programs Lendmire places, it is 1.75% of the base loan and is typically financed.
Decision score: The credit score the lender uses to evaluate the file. The wholesale programs Lendmire works with start at 580.
Before You Start: The Self-Screen
Run these tests before anything else. A “no” on any row is worth fixing before an application is submitted.
| Test | What it means | Proof to have ready |
|---|---|---|
| Ownership | Owned 12 months before case number | Deed, closing statement |
| Occupancy | Lived there as principal residence | Utility bills, ID, mail |
| Equity | 20% remains after new loan | Recent value estimate, payoff |
| Payment history | No late payments, last 12 months | Mortgage statements |
| Credit | Decision score of 580 or higher | Credit report review |
Two of these deserve extra attention. The first is occupancy: owning a home for 12 months while renting it out does not meet the test. An inherited home that has been rented does not qualify until you have lived in it as a principal residence for 12 months. The second is a home owned less than 12 months. A standard cash-out is generally unavailable there. A rate-and-term refinance on a home occupied for the previous twelve months reaches 97.75% on the programs Lendmire places, but it pays out no cash beyond costs.
Standard FHA cash-out is for principal residences only. If the home is a rental or second home, occupancy decides the leverage, and this loan is not the fit.
Step by Step: How the File Is Built
1. Check the equity. Maximum new loan is 80% of Adjusted Value. HUD Mortgagee Letter 2019-11 set that cap for case numbers assigned on or after September 1, 2019. It applies to the whole new loan and to combined liens, not just to the cash you take.
2. Assemble ownership and occupancy proof. Gather the deed and settlement statement, then two or three items showing you at the address: utility bills, ID, mail. Lenders set their own document lists, so ask for theirs early.
3. Review your payment history. Expect a clean record over the last 12 months on the mortgage being paid off. Pull your own statements first. A late payment you forgot about is cheaper to learn about now than during underwriting.
4. Apply and read the Loan Estimate. The CFPB’s Loan Estimate explainer says to check the estimated cash to close and confirm it matches what you expected. Closing costs are the upfront charges to get the loan and transfer ownership.
5. Prepare for the appraisal. The appraised value drives the cap. Because the payoff stays fixed while the cap multiplies a lower value, a low appraisal shrinks your cash faster than it shrinks the home’s value.
6. Move through underwriting. The lender reviews credit, debt-to-income, income, and assets. Across the wholesale programs Lendmire places files with, the base ratio pair is 31/43 (housing and total), and documented compensating factors can reach 40/50 at the top tier. The automated finding governs most files. County loan limits apply as a second ceiling.
7. Compare the Closing Disclosure. Line it up against the Loan Estimate before signing: cash to you, closing costs, and the loan terms. Total closing costs and cash to close are different figures.
How the Equity Math Works
Think in percentages. Start with the home’s value. Take 80% of it. That is the most the new loan can be. Now subtract three things from that ceiling: the payoff of your old mortgage, any costs you finance, and the financed upfront premium. What remains is your cash.
The consequence: financed costs eat cash dollar for dollar, because they sit inside the same cap. A borrower with 30% equity does not walk away with 30% of value. At 80% LTV, the maximum cash is bounded by the gap between your current balance and that ceiling, minus everything financed. A borrower already near 75% LTV has little room left. Final terms depend on the lender’s guidelines, the property type, and the borrower’s complete credit picture.
The premium structure matters here too. Beyond the 1.75% upfront premium, an annual premium applies, ranging from 0.15% to 0.75% of the balance depending on term, loan amount, and LTV. On a thirty-year loan above ninety percent LTV, the annual premium lasts the term. At or below ninety percent it ends after eleven years. Cash-out at 80% falls in the second group. These are program mechanics, subject to lender guidelines and full file review, not a price quote.
The Document Checklist, Grouped by Who Supplies It
From you, on income:
- Recent pay documentation and employment history
- Self-employed borrowers: the business and tax documents the lender lists
- Written explanations for gaps or changes
From you, on assets:
- Statements for any account used to cover costs or show reserves
- Explanations for large, unusual deposits (the quiet file killer)
From you, on the property:
- Homeowners insurance declarations
- Current mortgage statement showing the payoff balance
- Details on any second lien or HELOC, since it counts toward CLTV
From you, on ownership and occupancy:
- Deed and settlement statement
- Utility bills, ID, and mail at the address
- If title changed through inheritance, divorce, or transfer, the paper trail showing how and when
From the lender side:
- Loan Estimate, appraisal, payoff demand, and title work
The ownership section is where first-timers stall. A deed that shows your name from 14 months ago, paired with utility bills from the same stretch, makes the occupancy test easy to read. A file with no proof invites questions.
First-Timer File Killers and the Fix
Unexplained deposits. A large deposit with no paper trail forces a letter of explanation or a pulled document request. Fix: document the source before applying, and avoid moving money around mid-file.
A late payment you did not know about. Fix: review twelve months of statements first.
New debt during underwriting. A new car loan or card changes the ratios the file was approved on. Fix: hold off on new credit until closing.
Occupancy that cannot be shown. Fix: collect the bills and mail now.
An old lien nobody mentioned. A second lien or HELOC counts toward the 80% limit. Fix: list every lien at the start.
Counting on a high appraisal. Fix: plan the math with a cushion and treat any bonus value as upside.
Where the General Rule Breaks
- Owned less than 12 months. Standard cash-out is generally unavailable.
- Rented out or inherited and rented. Months of renting do not count toward the occupancy test. Only time lived there as your principal residence counts.
- Home owned free and clear. A new loan on it is still treated as cash-out.
- Hawaiian Home Lands (Section 247). The 80% change did not apply to these mortgages.
- Existing FHA loan. The FHA Streamline refinances an existing FHA loan with no appraisal, a limited credit review, and a net tangible benefit, but it does not pay cash out. If cash is the goal, Streamline is the wrong tool.
- Co-borrower who does not live there. Allowed on a purchase, but whether that income counts on a cash-out is a question to put to the lender before relying on it.
- Credit events. HUD’s waiting periods are two years from a chapter 7 discharge and three years from a foreclosure. Those are HUD’s rules, applied by each lender.
Why the Cap Is 80%
HUD set this limit at 95% before 2009, lowered it to 85% in 2009, then cut it to 80% in 2019. HUD’s press release says the 80% cap aligns with the cash-out limit set by the GSEs, Fannie Mae and Freddie Mac. The stated purpose was to strengthen the equity position behind these loans and reduce losses if a borrower defaults.
Anyone planning around “85%” or “95%” is working from rules that no longer apply.
What the Decision Looks Like in Practice
Cash-out is one choice among several. A short comparison:
| Option | Replaces first mortgage? | Cash out? |
|---|---|---|
| FHA cash-out | Yes | Yes, up to 80% LTV |
| FHA Streamline | Yes | No |
| FHA rate-and-term | Yes | No, 97.75% max |
| HELOC / home equity loan | No, adds a second loan | Yes |
Ask three questions before applying. Do you need a lump sum, or only a line to draw on? Would the new first mortgage replace one with better terms than you can get now? And will the larger loan fit your budget? The CFPB warns that a cash-out refinance may lengthen the time it takes to pay off the mortgage and may raise the monthly payment because the loan is larger.
How borrowers use the cash matters too. The CFPB’s research on cash-out borrowers found that many pay down credit card and auto debt. Credit scores rose after the refinance and then gradually worsened, and card balances drifted back toward earlier levels without fully returning. Paying off debt with home equity only helps if the spending habits behind it change.
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.
Frequently Asked Questions
Do I need an existing FHA loan to get an FHA cash-out refinance?
No. What matters is that you owned and occupied the home as your principal residence for the 12 months before the case number, and that the new loan stays within the 80% limit.
How much cash can I actually take out?
Less than the equity you see on paper. The new loan caps at 80% of Adjusted Value, and the payoff of your old mortgage, financed closing costs, and the financed upfront premium all come out of that ceiling first. A low appraisal cuts the cash faster than it cuts the home’s value.
Can I use a home I inherited and rented out?
Not right away. The occupancy test requires you to live in the home as a principal residence for the 12 months before the case number. Owning it while renting it out does not meet the test, so the clock starts when you move in.
Does a paid-off home qualify?
Yes. A new loan on a home owned free and clear is still treated as a cash-out refinance, so the same 80% limit and the same occupancy and payment history tests apply.
What if I already have a HELOC or second lien?
It counts. The 80% limit applies to combined loan-to-value, so every lien on the home is added in. List all liens at the start so the equity math is accurate from day one.
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.
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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. CFPB: loans similar to a HELOC
2. HUD Mortgagee Letter 2019-11
3. CFPB Loan Estimate explainer
4. 80% change
5. HUD press release PR 19-114
6. CFPB
7. CFPB’s research on cash-out borrowers
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: FHA Cash-Out Refinance Requirements to Go Fixed · How an FHA Cash-Out Works on a Fourplex With a Low First Mortgage · How FHA Cash-Out Counts Rental Income on a High-DTI Borrower
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
Disclosure information. Lendmire is a state-licensed mortgage brokerage under NMLS# 2371349. Lendmire is not a depository institution, direct lender, or financial advisor — all loans referenced are placed through wholesale lender partners and are subject to each lender's underwriting standards. This article is provided for general informational purposes and is not a commitment to lend, nor does it constitute financial, legal, or tax advice. Loan programs, terms, rates, and qualification standards change without notice and depend on borrower profile, property type, and the state in which the subject property is located. Equal Housing Opportunity provider. NMLS Consumer Access: nmlsconsumeraccess.org.