The Quick Read: HomeReady income limits for a cash-out refinance come with a catch. HomeReady does not offer a true cash-out refinance. It covers purchases and limited cash-out refinances, where you take out only a small, capped amount. The income cap is 80% of the area median income for the property’s location, so it decides whether you can use that limited option. It does not unlock a standard cash-out loan.
Key Takeaways
- HomeReady is a Fannie Mae program for a principal residence. It allows purchases and limited cash-out refinances only.
- The income limit is 80% of area median income (AMI). It follows the property’s location, not where you live now.
- Income from every borrower on the note counts toward the limit, to the extent it is used to qualify.
- If you want real cash from your equity, you need a standard conventional cash-out refinance. That loan has no HomeReady income cap, but it has its own leverage and seasoning rules.
- Every figure here is subject to lender guidelines and full file review. Nothing here is a commitment to lend.
Can HomeReady Really Do a Cash-Out Refinance?
No. Fannie Mae’s Selling Guide defines a HomeReady loan as a purchase or a limited cash-out refinance on a one- to four-unit principal residence. It is a standard product, so no special approval is needed. The 80% cash-out figure you may have seen belongs to a different, standard product. Terms vary by lender guidelines, property type, leverage, credit profile, and full file review.
Cash-out refinance estimate
The starting figures are an example value with a balance and a cash request in proportion. Replace them with yours.
Editable benchmark: 7.32% as of October 22, 2026 · Freddie Mac 30-year average via FRED®. A conventional market reference, not a cash-out refinance quote.
Illustrative starting assumptions: a $350,000 home value, a $193,000 current balance, the agency cap on a one-unit principal residence, a thirty-year term at the current Freddie Mac benchmark, and property taxes and insurance estimated at typical national rates. Every field is editable.
Illustrative estimate only — not a Loan Estimate, approval, quote, or commitment to lend. The rate field carries the weekly Freddie Mac thirty-year conventional benchmark, a market reference and not a cash-out refinance quote; a cash-out loan is priced by the lender at lock. The cash available is the loan the program cap allows less the balances paid off, before closing costs, which are not included. The HELOC line is the program’s combined loan-to-value ceiling applied to the same value and balance. Taxes and insurance are editable estimates. Licensed in sixteen states for consumer mortgages.
Here is the problem with the search term. Several lender pages blur “limited cash-out” with “cash-out.” They are different transactions.
A limited cash-out refinance pays off your existing first mortgage and the closing costs. It can also pay off a purchase-money second lien, which is a second loan taken out when you bought the home. You get only incidental cash back. The agency caps that cash at the greater of a small percentage of the new loan or a flat minimum. Think of it as a rate-and-term loan with a little change in your pocket, not a way to pull out equity. For the current cap, see the Selling Guide section on limited cash-out refinances. Older consumer pages still show a previous, lower cap.
A true cash-out refinance is a different loan. Lendmire arranges these through its cash-out refinance programs, and the conventional version does not carry the HomeReady income test.
| Transaction | HomeReady allowed? | Cash to you |
|---|---|---|
| Rate-and-term refinance | Yes | Little to none |
| Limited cash-out refinance | Yes | Small, capped amount |
| Standard cash-out refinance | No | Equity you can use |
The matrix Fannie Mae publishes lists the standard cash-out limits separately: 80% LTV on a one-unit primary home and 75% on two to four units. LTV, or loan-to-value, is the new loan balance divided by the home’s appraised value. Exact terms depend on the lender’s guidelines, property type, leverage, and a full review of the borrower’s file.
How the 80% Income Limit Works
The cap is simple to state. Your qualifying income must be at or below 80% of the area median income for the property’s location. Fannie Mae’s HomeReady FAQ says this applies to all HomeReady loans, including those in low-income census tracts.
Three details trip people up.
The property sets the number. The limit follows the census tract where the home sits. If you are refinancing the home you live in, that is your own address. Your work address and mailing address do not matter.
The test is pass or fail. A household at 79% of the median passes. A household at 81% does not. No sliding scale exists.
The median moves. Fannie Mae updates area median incomes on a regular cycle. The limit applied depends on the file’s underwriting date. A household sitting near the edge can flip from pass to fail between updates.
Whose Income Counts?
The lender counts income from every borrower who signs the note, to the extent that income is used to qualify. People in your household who are not on the loan do not count.
| Person | Counts toward the cap? |
|---|---|
| Borrower on the note | Yes, if used to qualify |
| Co-borrower on the note | Yes, if used to qualify |
| Spouse or relative not on the note | No |
This cuts both ways. A second earner on the loan can push you over the cap. Leaving that person off the loan can bring you under it, though their income then can’t help you qualify. Weigh that trade-off before you apply, not after.
How the File Is Underwritten, Step by Step
The process follows the same path on most files Lendmire arranges.
1. Pick the purpose. If you want meaningful cash, you are in standard cash-out territory and HomeReady is off the table. If you only want a better loan structure with minimal cash back, HomeReady’s limited option is in play.
2. Look up the area median income. The lender enters the full property address into Fannie Mae’s AMI lookup, or the underwriting system does it. The tool returns the median and the 80% figure.
3. Total the qualifying income. The lender adds income from each borrower on the note and compares it with the cap.
4. Run the file through automated underwriting. Fannie Mae’s system, Desktop Underwriter (DU), weighs credit, ratios and equity. On most conventional files the automated finding governs. The wholesale programs start at a 680 decision score, with a total debt-to-income ceiling of 50%.
5. Confirm loan ownership if leverage is high. Above 95% LTV on a limited cash-out, the lender must tell DU that Fannie Mae owns or securitizes your existing loan. DU often confirms this itself. If it can’t, the lender documents it.
6. Order the appraisal. Value drives LTV. LTV drives whether mortgage insurance applies and how the file is priced.
7. Close with costs rolled in if needed. Closing costs can be added to the new balance. Cash back still stays inside the cap.
Mortgage insurance applies above 80% LTV. You can ask to cancel it at 80% of the original value with good payment history and no second liens. The servicer must end it automatically at 78%. Every figure here varies by lender and program — guidelines, property type, leverage, and credit profile all apply.
A Worked Example, No Dollar Signs
Say a homeowner wants to refinance a one-unit primary home. The lender’s AMI lookup for the property’s tract returns a median that we will call 100 units. The cap is 80 units.
The homeowner earns 72 units. A spouse not on the loan earns 30. The household total is 102, but only the 72 counts. The file passes the income test.
Now add the spouse to the loan. The counted income becomes 102, which is above 80. The file fails, even though nothing about the house or the credit changed.
Different borrower, same house. The household earns 85 units on the note. It fails by five. A raise doesn’t help, and neither does a bigger down payment. This borrower moves to a standard refinance, which has no HomeReady cap.
The numbers are modeled, not market data. The lesson is real: who is on the note matters as much as how much they earn.
Where the Rule Breaks: Edge Cases
High-leverage band, 95.01% to 97% LTV. The limited cash-out gets narrower here. The loan generally must be fixed-rate, one-unit, owner-occupied by all borrowers, and run through DU. Adjustable-rate and high-balance loans are out. Fannie Mae must own your existing loan. Lenders verify these conditions against the live guide, so confirm before you count on this band.
Two- to four-unit homes. These are eligible for HomeReady as principal residences, as long as you live in one unit. Standard cash-out leverage drops to 75% for them, versus 80% on one unit.
Manufactured homes. HomeReady allows them. The standard cash-out limit for manufactured housing is much lower than for site-built homes, so check the matrix first.
Community Seconds. These are agency-approved community or government second liens. Fannie Mae’s matrix says they are not permitted with cash-out refinances. Occupancy rules also bite here: a non-occupant co-borrower is generally not available on the highest-leverage band.
Loan not owned by Fannie Mae. Above 95% LTV, the HomeReady limited cash-out is unavailable. At or below 95%, the ownership requirement does not apply. Lenders confirm the exact boundary in the guide. Final terms depend on lender guidelines, property type, leverage, and the borrower’s complete credit picture.
Second homes and rentals. HomeReady is for principal residences only. Occupancy decides the leverage, and a second home or rental falls outside this program.
Freddie Mac’s version. Freddie Mac’s sister program has the same shape. Its Home Possible fact sheet lists purchases and no-cash-out refinances, with no true cash-out option. Freddie also has a separate refinance program with a higher income ceiling, so a household over the HomeReady cap may fit there. Ask your loan officer to check.
What If You Are Over the Limit or Want More Cash?
If your income is over 80% of the median, or you want real cash, you have other conventional paths. Most borrowers in this spot want equity, not the HomeReady label.
| Option | Cash to you | Income cap? |
|---|---|---|
| Standard cash-out | Yes, to 80% LTV (one unit) | No |
| Rate-and-term refinance | Little | No |
| No-MI wholesale cash-out lane | Yes, to 89.99% LTV | No |
| Keep current loan | None | Not applicable |
Standard cash-out refinance. This is the main path. On a one-unit primary home, the limit is 80% LTV. Two- to four-unit homes cap at 75%. For the full leverage picture, see Lendmire’s piece on conventional cash-out LTV limits for a primary home. These specifics are subject to lender guidelines and a full review of property, leverage, and credit.
Seasoning rules apply. The first mortgage you pay off must be at least 12 months old, measured from note date to note date. You generally must have been on title for six months. Exceptions exist for delayed financing, inheritance and legal awards. A cash-out file with a high debt-to-income ratio may also trigger reserve requirements, meaning savings the lender wants to see after closing.
A higher-leverage wholesale lane. One wholesale lane reaches 89.99% LTV with no mortgage insurance. It needs a 680 score, a 50% ratio ceiling, a thirty-year fixed rate, a primary residence and a conforming balance. It carries its own six months of seasoning. It is not written in Texas, where a homestead cash-out is capped by the state constitution at the agency figure. Terms depend on the lender’s guidelines, the property type, the leverage, and a full review of the credit profile.
Rate-and-term refinance. If you want a better structure and no real cash, this is simpler. Conventional rate-and-term runs to 95% LTV on a one-unit primary home. The exact numbers vary by lender and program and follow a full review of property, leverage, and credit.
Larger loans. If your balance runs above the conforming limit, jumbo lanes take over.
Then there is the plainest option: keep the loan you have. Pulling equity out means a bigger balance. The monthly payment usually rises, and the payoff timeline can stretch. Using cash-out to pay off other debt turns unsecured balances into debt secured by your home. That can reduce a monthly burden, but it also raises the stakes if money gets tight later.
Outdated Advice to Ignore
Search results are a patchwork. Here is what to discard.
- “Low-income tracts have no income limit.” That exception was removed. The 80% cap now applies everywhere.
- “HomeReady allows cash-out.” It allows limited cash-out. Those are different loans.
- “The cap uses where I live now.” It uses the property’s location.
- “Only the main earner counts.” Everyone on the note counts.
- “HomeReady is for first-time buyers only.” First-time status is not required.
- “Cash back is the lesser of 2% or a flat minimum.” That is the old rule. The current rule is the greater of 1% or the flat minimum.
- “Any Fannie loan can go to 97%.” Above 95% LTV, Fannie Mae must own the existing loan. Final terms depend on the lender’s guidelines, the property type, and the borrower’s complete credit picture.
Common Mistakes
Borrowers lose time in a few predictable ways.
They assume “cash-out” means cash. They count household income that isn’t on the note. They use a ZIP code or county median instead of the tract lookup. They add a co-borrower late and push the file over the cap. They apply before checking whether their existing loan is Fannie-owned.
Most of these are avoidable with a five-minute check up front.
What Your Decision Looks Like
Start with the purpose. Ask what you need the money for, and how much.
If you need only a loan restructure, check your income against the cap for the property’s tract. If you pass, HomeReady’s limited cash-out may fit, and mortgage insurance rules depend on your LTV. If you are over, a standard rate-and-term refinance does the same job without the cap.
If you need cash, skip HomeReady. Compare a standard cash-out refinance against keeping your current loan. Weigh the larger balance and the seasoning rules against what the money will do for you.
Your 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. Lendmire is a mortgage broker, so the loan is arranged through wholesale lenders and every program is subject to lender guidelines and full file review.
Key Terms Defined
Area median income (AMI): The midpoint household income for a defined area, set by tract for HomeReady.
Limited cash-out refinance: A refinance that pays off your first mortgage and costs, with only a small capped amount of cash back.
LTV (loan-to-value): Your loan balance divided by the home’s appraised value.
Seasoning: The waiting period a loan or ownership must reach before a refinance is allowed.
Desktop Underwriter (DU): Fannie Mae’s automated system that reviews credit, income, ratios and equity.
Principal residence: The home you live in as your main address.
Frequently Asked Questions
Can I use HomeReady to take cash out of my home?
Only a small amount. A limited cash-out refinance allows incidental cash back, capped by the agency. If you want real equity, a standard conventional cash-out refinance is the loan to look at, and it carries no HomeReady income test.
Does the 80% limit use my current address?
No. It uses the property being financed. The lender looks up the area median income for that property’s census tract and applies 80% of it.
If I add a co-borrower, does their income count?
Yes. Income from every borrower on the note counts, to the extent it is used to qualify. A higher-earning co-borrower can push you over the cap. A person left off the loan does not count either way.
What if my income is just over the cap?
The income test is pass or fail, so even a small overage disqualifies the file. Your options are a standard rate-and-term refinance, a standard cash-out refinance, or waiting for a change in the area median or your income. A loan officer can check which fits.
Are second homes or rentals eligible?
No. HomeReady is for principal residences only. Occupancy decides the leverage on any conventional loan, so a second home or rental is financed under different rules.
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.
For the program’s current guidelines, see conventional loan programs.
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References
1. Fannie Mae Selling Guide B5-6-01: HomeReady Mortgage Loan and Borrower Eligibility
2. Fannie Mae Selling Guide B2-1.3-02: Limited Cash-Out Refinance Transactions
3. Fannie Mae Eligibility Matrix
5. Freddie Mac Home Possible Mortgage Fact Sheet
This article is part of Lendmire’s cash-out refinance program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: How Much a 2-4 Unit Primary Home Conventional Refinance Can Finance · How to Refinance Out of PMI After Buying at the Wrong Time · Refinance vs PMI Cancellation on a 2-4 Unit Primary Home
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
- Mortgage Loan Originator · NMLS# 1129696 · Verify on NMLS Consumer Access
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- Lendmire LLC · Firm NMLS# 2371349 · Verify firm licensure
Legal disclosures. Lendmire (NMLS# 2371349) is a state-licensed mortgage brokerage that arranges financing through wholesale lender relationships. Lendmire is not a direct lender, depository institution, or registered financial advisor. The discussion above is general informational content about real estate financing — it is not financial, legal, or tax advice, and readers should consult licensed professionals for guidance on their individual circumstances. Loan inquiries are subject to lender underwriting; this article does not represent a commitment to lend. Loan terms, rates, and qualification standards vary by borrower, property, and state, and are subject to change at any time. Equal Housing Opportunity. NMLS Consumer Access: nmlsconsumeraccess.org.