The Quick Read: Yes, if the home is your primary residence and you meet the occupancy, payment-history, credit and income tests. The new loan can reach 80% of the home’s appraised (“adjusted”) value. Your cash is what remains after the old mortgage, closing costs and any financed insurance premium come out. Subject to lender guidelines and full file review.
What an FHA Cash-Out Refinance Actually Is
You replace your current mortgage with a larger one and take the difference as cash. The government insures the loan through the Federal Housing Administration. A private lender makes it. Lendmire is a mortgage broker, so it arranges the loan through wholesale lenders and never lends the money itself.
You do not need an existing FHA loan. A conventional mortgage can be refinanced into an FHA cash-out loan if the home qualifies. That surprises people.
This is not a home equity loan or a HELOC. Those sit behind your first mortgage and leave it in place. A cash-out refinance wipes out the first mortgage and writes a new one. The CFPB makes the same distinction. It also notes that payments and loan terms are likely to rise with a cash-out refinance.
Our FHA cash-out refinance program page covers the product in more depth.
How Much Can You Take Out?
The cap is 80% of your home’s adjusted value. That covers the new loan plus any other liens that stay on the home. HUD set the limit in Mortgagee Letter 2019-11, which applies to case numbers assigned on or after September 1, 2019.
Here is the three-step version:
1. Take your appraised value and multiply by 80%. That is the largest new loan allowed.
2. Subtract the payoff on your current mortgage and any other liens you must clear.
3. Subtract closing costs, prepaid items and any upfront mortgage insurance you finance into the loan.
What is left is your cash.
The cap is not 80% of your value in cash. It limits the whole new loan. Your payoff comes out first. A homeowner with a big balance may see little cash. A homeowner with a small balance sees much more.
Equity works the same way in reverse. At the cap, you keep roughly 20% equity in the home after closing. Less than 20% equity today means no cash-out under this program.
Two more points about the amount:
- You can borrow less than the maximum. The ceiling is a limit, not a target.
- Appraisal sets the number. A lower appraisal shrinks everything above, including your cash.
Which ceiling binds first?
FHA has two ceilings. One is the 80% cap. The other is the county loan limit, which changes every year. County loan limits apply here, so check your county’s current figure with a lender. On a modest-priced home in a lower-cost county, the 80% cap usually binds first. On a higher-priced home, the county limit can bind first and shrink your cash, even with plenty of equity.
What mortgage insurance does to your cash
FHA loans carry two kinds of mortgage insurance. The upfront premium is 1.75% of the base loan, and borrowers usually finance it. That raises the balance and counts toward the 80% test, so it trims your cash.
The annual premium runs between 0.15% and 0.75% of the balance, depending on term, loan amount and LTV. LTV means loan-to-value, the loan as a percentage of the home’s value. At 80%, a cash-out loan falls in the lower-leverage group. On a thirty-year loan at or below 90% LTV, the annual premium ends after eleven years. Above 90% it lasts for the term. This is program mechanics, not a price quote. The exact numbers vary by lender and program and follow a full review of property, leverage, and credit.
Can You Qualify?
The tests are straightforward. Think of them as five gates.
| Gate | What the lender checks |
|---|---|
| Occupancy | Primary residence only |
| Ownership | Owned and occupied 12 months before the case number |
| Payment history | Clean record on the current mortgage |
| Credit | Decision score of 580 or higher on the programs Lendmire places |
| Income and ratios | Housing and total debt vs. income, 31/43 up to 40/50 |
Occupancy and ownership. At least one borrower must have owned and lived in the home as a primary residence for the 12 months before the case number. A recent buyer generally cannot do a standard cash-out yet.
Payment history. HUD’s Handbook 4000.1, as industry sources summarize it, sets stricter tests when the loan is newer. Expect all payments to be on time, with the most recent twelve months paid within the month due. Confirm the current wording with your lender and HUD.
Credit. Across the wholesale programs we place FHA files with, the floor is a 580 decision score. HUD itself has a lower tier, but the network does not reach below 580. Some lenders set a higher floor than the program minimum. That is an overlay, a lender’s own add-on rule. Overlays are why one lender says yes and another says no on the same file.
Ratios. The base pair is 31/43. That means housing costs up to 31% of income and total debts up to 43%. Documented compensating factors can stretch the pair to 40/50 at the top tier. The automated underwriting finding governs most files.
Income. Standard documentation applies: income, employment, credit and the new payment. Income from a non-occupant co-borrower cannot be used to qualify on a cash-out. Rental income from an accessory dwelling unit on a one-unit home also cannot count as income.
Special Situations, Quick Answers
- Just bought the home? Usually not yet. The 12-month rule applies, and for homes owned under a year, the loan amount is limited to the lesser of appraised value or the original purchase price.
- Inherited the home? No minimum occupancy period is required, as long as you have not treated it as an investment property. If you rent it out after inheriting, you must first live in it for 12 months.
- Second home or rental? Not eligible for standard FHA cash-out. Occupancy decides the leverage, and FHA requires a primary residence.
- Two- to four-unit home you live in? Eligible in principle. Multi-unit homes can carry extra requirements, so confirm current rules with the lender.
- Late payments or a recent bankruptcy or foreclosure? HUD sets its own waiting periods: two years from a chapter 7 discharge, three from a foreclosure. These are HUD rules, not a promise from any lender.
- Already have an FHA loan and only want a lower payment or term change? The FHA Streamline can do that without an appraisal, but it cannot deliver cash.
How the Process Runs
1. Compare lenders. Look at the Loan Estimate from each one. It lays out terms and costs side by side.
2. Apply and document. Expect to provide pay stubs, W-2s, bank statements, and your current mortgage statement.
3. Appraisal. The appraised value sets your ceiling.
4. Underwriting. The lender reviews credit, income, occupancy and payment history.
5. Closing. You sign, and the lender discloses final terms on the Closing Disclosure.
6. Rescission and funding. On a primary residence, you get a short right-of-rescission window to cancel after signing. Funds are released once it passes. That is why cash does not arrive at the closing table.
Is It the Right Move?
Run the trade-offs before you commit. A cash-out refinance resets the whole balance, not just the cash portion. If your current mortgage carries a low interest rate, you give that up on the entire loan. Add mortgage insurance, and the new loan may cost noticeably more per month.
The CFPB also warns that rolling credit card or other unsecured debt into a mortgage puts the home behind that debt. Miss payments, and foreclosure becomes the risk. Closing costs can be substantial too, and the cash comes from equity you could have used later.
| Option | What changes | Watch for |
|---|---|---|
| FHA cash-out | Replaces first mortgage; up to 80% LTV | Mortgage insurance; lost existing terms |
| Home equity loan or HELOC | Adds a second lien; first stays | Second payment; HELOC terms may reset |
| FHA Streamline | Same balance, new terms; no cash | Needs an existing FHA loan |
| Conventional cash-out | Replaces first mortgage; similar cap on one-unit homes | Stricter credit expectations |
On a one-unit primary residence, FHA does not let you borrow more than conventional. HUD’s announcement said the move to 80% aligned FHA with the cash-out limit set by Fannie Mae and Freddie Mac. HUD’s stated goal was more equity in the loan and less loss if a borrower defaults.
FHA often fits best when a conventional lender’s credit expectations are the obstacle. It fits poorly when your existing loan is cheap, your balance is already near 80%, or you only need a small amount of cash.
A scenario in plain terms. Say you owe about 60% of your home’s value and want cash for a repair. At the 80% cap, roughly 20% of the value is available before costs and premiums come out. Say instead you owe 75%. Little remains after costs, and the refinance may not make sense. The calculation turns on your own appraisal and payoff.
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 HUD’s rules adjust it, used to set the 80% cap.
CLTV (combined loan-to-value): Your new loan plus any other liens left on the home, as a percentage of value.
UFMIP: The upfront mortgage insurance premium, 1.75% of the base loan, usually financed.
Overlay: A lender’s own rule that is stricter than the program minimum.
Rescission: A short window after signing on a primary residence when you can cancel the loan.
Seasoning: The time you have owned and lived in the home before the case number is assigned.
Frequently Asked Questions
Do I need an existing FHA loan to get an FHA cash-out refinance?
No. A conventional mortgage can be refinanced into an FHA cash-out loan. The home must be your primary residence, and you must meet the ownership, payment-history, credit and income tests. Existing FHA borrowers have the separate Streamline option, but it provides no cash.
Can I do an FHA cash-out refinance more than once?
Generally yes, if you meet the requirements again. Each refinance is a new loan that must qualify on its own. The 12-month ownership and occupancy test and the payment-history review apply each time, and the 80% cap does not stretch.
Is a down payment required?
No. There is no down payment on a refinance. The test is equity: the new loan plus any other liens cannot exceed 80% of adjusted value, so you must keep about 20% equity.
What can I use the money for?
Most borrowers use it for home repairs, debt payoff or other large expenses. Keep in mind that paying off unsecured debt with a mortgage turns it into debt secured by your home.
Can I cash out on a second home or rental?
No. Standard FHA cash-out requires the home to be your principal residence. Occupancy decides the leverage, so a second home or rental falls outside this program.
For your own numbers, request a scenario review with Lendmire.
About Lendmire
Lendmire (NMLS# 2371349) is a mortgage brokerage serving homeowners and home buyers in 16 states. FHA, VA, conventional and jumbo purchase and refinance loans are arranged through wholesale lending channels; Lendmire brokers the financing and the lender underwrites each application. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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References
1. CFPB Office of Research blog on cash-out refinances
2. HUD Mortgagee Letter 2019-11
3. CFPB, Cash-Out Refinances and Paydown Behavior of Non-Mortgage Debt Balances
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: How Much More Payment an FHA Cash-Out Allows on the Same Income · FHA Cash-out Refinance Credit Requirements: The Floor And The Overlays Above It · How to Document a Manually Underwritten FHA Cash-Out Refinance
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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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.