The Quick Read: The underwriter tests the same things at the minimum score as at any other score, but with less room for error. Across the wholesale programs Lendmire places FHA files with, the starting point is a 580 decision score, and a cash-out reaches 80% LTV on a home you have owned and lived in for 12 months. A higher score does not raise that leverage. It widens the ratio options and reduces lender pushback. Exact terms depend on the lender’s guidelines, property type, leverage, and a full review of the borrower’s file.
What Is the Minimum Score, and Who Sets It?
HUD sets a floor. Lenders set their own.
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.
HUD’s Mortgagee Letter 2026-11 lays out a tiered credit score test. A score under 500 is ineligible. A score of 500 to 579 falls in a lower HUD tier that requires a larger minimum investment, and a score of 580 and up reaches the standard tier. Those tiers are HUD’s rules. The wholesale lenders Lendmire works with start at 580, so the lower HUD tier is not something this network reaches. Some lenders set a higher floor still. That is an overlay, and it comes from the lender’s own risk appetite, not from HUD.
Here is the catch for cash-out. Every one of those score tiers sits underneath a separate ceiling. The FHA cash-out cap is 80% LTV regardless of score. A 580 borrower and a 720 borrower get the same maximum leverage on the same appraised value.
Key Terms Defined
Decision score: The single credit score the lender uses to underwrite the file, picked from the credit report by a set method.
Program floor: The lowest score the loan program allows on paper.
Lender overlay: A rule a lender adds on top of the program, such as a higher minimum score.
Adjusted value: The appraised value as adjusted under FHA rules. The 80% cap applies to this number.
Compensating factor: A documented strength in the file, like cash reserves or a low housing ratio, that offsets a weaker area.
Net cash: What is left from the new loan after the old mortgage, other liens and financed costs are paid.
How Is the Decision Score Picked?
The lender pulls a tri-merge credit report, with all three bureaus. Per HUD’s methodology as summarized by Orrick, the lender takes the middle of three differing scores, the lower of two, or the only score reported. Each borrower gets one score from that process. The lowest borrower-level score among all borrowers becomes the decision score for the loan.
That last rule matters on joint files. Picture a couple where one spouse sits at 700 and the other at 585. The file underwrites at 585. The weaker score sets the transaction.
HUD has also formalized VantageScore 4.0 and FICO Score 10T as acceptable models alongside Classic FICO. That applies to case numbers assigned on or after January 1, 2027. The thresholds do not change, tri-merge is still required, and the lowest selected score still governs. Files with earlier case numbers are not under the new method.
The Underwriting Sequence, Step by Step
Here is the order a cash-out file moves through, and where each step can fail.
1. Eligibility screen. Before anything else, the lender confirms you owned and lived in the home as your principal residence for the 12 months before the case number was assigned. Owning for a year while renting the home out does not pass. This step fails files that were never going to qualify, so it comes first.
2. Payment history on the current mortgage. The lender reviews how you have paid the loan being replaced. A recent late payment can stall a file at this step. The exact seasoning tiers depend on how long you have held the loan, so ask the loan officer how they read for your timeline.
3. Credit pull and decision score. The tri-merge report goes in and the decision score is set by the method above. Because a 580 score leaves little margin, the underwriter reads collections, recent lates and high balances closely, not just the number.
4. Automated or manual underwriting. Most files run through FHA’s automated TOTAL Scorecard. A “Refer” finding sends the file to manual underwriting, where a person applies the handbook rules and compensating factors directly. Credit with no scores, or thin traditional credit, also goes manual.
5. Appraisal and adjusted value. A full appraisal is required. Cash-out is fully underwritten, not a streamlined product. The 80% cap applies to adjusted value, not to what you think the house is worth.
6. Maximum loan and net cash. The ceiling is the lower of the LTV cap or the county loan limit. County limits apply and change every year. Net cash is the new loan minus the payoff, other liens and financed costs.
7. Mortgage insurance and disclosures. The upfront premium of 1.75% of the base loan is typically financed into the balance. The annual premium is added on top. Then the standard Loan Estimate and Closing Disclosure apply, as on any consumer mortgage.
What the Underwriter Checks, and Where It Goes Wrong
| Check | Evidence requested | Common failure |
|---|---|---|
| Occupancy | Utility bills, ID, tax records | Home was rented out |
| Payment history | Mortgage statements | Late payment inside the review window |
| Credit | Tri-merge report | Collections, disputes, low score on one borrower |
| Income | Pay stubs, W-2s, tax returns | Gaps or unexplained deposits |
| Value | Full appraisal | Value lands under expectation |
| Ratios | Debt list, new housing cost | Total debt over the allowed tier |
Manual vs. Automated Underwriting by Score
Score changes the ratio room on manual files. HUD’s table caps manual transactions with a decision score under 580, or no score, at 31/43. At 580 and up, 31/43 needs no compensating factors, and a 37/47 tier opens with one compensating factor from HUD’s list.
| Factor | Automated finding | Manual underwriting |
|---|---|---|
| Who decides | The scorecard, then lender review | An underwriter applying the handbook |
| Ratios | Governed by the finding | Base 31/43, higher with factors |
| Documentation | Standard file | Heavier, with factors documented |
| Typical trigger | Most files | “Refer” finding or thin credit |
Past the 37/47 tier, the top tier reaches 40/50, and it requires stronger documented compensating factors than the single factor that opens 37/47. The lender decides which factors count and how many a file needs. At a 580 score, expect the file to lean on the automated finding and the lender’s overlays more than on a stretched ratio.
Compensating Factors at the Floor
- Cash reserves. Verified savings or retirement funds left after closing, shown on recent account statements.
- Low housing ratio. A new housing payment that is small against income, well under the 31 base ratio.
- Low total debt. Few other monthly obligations, so the total ratio sits well below the allowed tier.
- Stable income. A long, documented history with the same employer or in the same line of work.
- Minimal payment increase. A new housing cost close to what the borrower already pays on the current loan.
- Clean recent credit. A recent record free of new lates, even if the score itself is low.
- Additional documented income. Income that is verified and likely to continue, but not already used to qualify.
One factor may be enough to open the 37/47 tier. Reaching 40/50 takes more, and the lender decides which factors it accepts. Each one needs paper behind it. A factor that is claimed but not documented does not count.
How the Score, Appraisal and 80% Cap Interact
This is the sizing math that surprises people. The cap is a percentage of value, so a lower appraisal cuts the loan ceiling by 80 cents for every dollar of value shortfall. A home you expected to appraise high that comes in light can take net cash from meaningful to near zero, especially once the payoff and financed premium come out.
HUD cut the cash-out cap to 80 percent to align with the GSE cash-out maximum. Earlier it had stood at 85 percent, and older lender sheets still show that figure. Disregard it. The score tier does not move this cap.
Financing the upfront premium raises the total loan above the base loan. That uses part of your 80% room. So the net cash you receive is smaller than the headline ceiling suggests.
Where the General Rule Breaks
A few named edge cases change the picture.
Rental history on the home. If you rented the home out during the year, the occupancy test fails. An inherited property that was rented generally needs a period of occupancy first.
A home with no mortgage. HUD permits cash-out on a home owned free and clear. The same 80% cap and occupancy test apply.
A non-FHA existing loan. You do not need an FHA loan to start. A conventional loan can be refinanced into an FHA cash-out.
A non-occupant co-borrower. On a purchase, the program allows one. Cash-out is stricter. Assume that income from someone who does not live in the home may not count toward qualifying, and confirm with the lender.
Higher-score lender overlays. Some lenders sit above 580. A file that fits the program can still be declined by a lender whose floor is higher. This is why shopping matters, covered below.
Streamline instead. If your current loan is already FHA and you want a lower payment, not cash, the FHA Streamline is a different product. It has no appraisal, a limited credit review and a net tangible benefit test. It pays out no cash.
What Mortgage Insurance Does to the Loan
The upfront premium is 1.75% of the base loan, financed. The annual premium runs between 0.15% and 0.75% of the balance, depending on term, loan amount and LTV. How long it lasts depends on the loan term and the LTV: on a thirty-year loan above ninety percent LTV it lasts for the term, and at or below ninety percent it ends after eleven years. A cash-out capped at 80% LTV sits below that ninety percent line. These are program facts, not prices, and the actual figures on your file come from the lender’s disclosures.
What This Means for Your Monthly Budget
The new loan replaces your first mortgage entirely. It is not a second lien. The CFPB’s housing guide notes a cash-out refinance may extend the time to pay off the mortgage, and the monthly payment may increase because the new loan is larger. Your old loan terms are gone.
Paying off credit cards with the cash is the use that gets the most caution. The Federal Reserve’s consumer guide says many financial advisers caution against cash-out refinancing to pay down unsecured debt. The reason is mechanical: you turn short-term debt into debt secured by your home and stretch it over decades. Tax treatment can depend on your situation; borrowers should speak with a qualified tax professional before relying on any deduction or credit.
A Pre-Application Checklist
Do these before the case number is assigned.
- Pull your own credit reports and check for errors or disputes.
- Pay down card balances that are dragging the score.
- Confirm 12 months of ownership and occupancy as your principal residence.
- Gather mortgage statements showing a clean payment record.
- Collect income documents and reserves statements.
- Decide how much cash you need and what it is for.
Finding the Right Program for Your Situation
The best program for your situation depends on your score, equity, occupancy and what the cash is for. A broker shops multiple wholesale lenders and matches the file to the program, which matters at the minimum score because lender overlays differ. Lendmire is a mortgage broker, not a lender, and every program figure here is subject to lender guidelines and full file review. Nothing here is a commitment to lend.
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. For your own numbers, request a scenario review.
Frequently Asked Questions
Does a higher credit score let me borrow more on an FHA cash-out?
No. The 80% LTV cap applies at every score tier. Score changes eligibility, ratio room on manual files and how much a lender’s overlays get in the way, but not the leverage. Final terms depend on lender guidelines, property type, leverage, and the borrower’s complete credit picture.
Why would a lender decline me if I meet HUD’s minimum?
Lenders can add overlays above the program floor. A file that fits HUD’s rules can still miss a lender’s higher minimum, which is why matching the file to the right lender matters.
What happens if the appraisal comes in low?
The loan ceiling falls with it, because the cap is a percentage of adjusted value. Every dollar of shortfall cuts the ceiling by 80 cents, and net cash shrinks first.
Can I do a cash-out on a home I rented out last year?
Not on that basis. The property must be owned and occupied by at least one borrower as a principal residence for the 12 months before the case number. Rental use during that window fails the test.
Which score decides the file when there are two borrowers?
The lowest borrower-level score among all borrowers. Each borrower’s score is picked from their three bureau scores, and the weakest of those becomes the decision score.
For current guidelines and terms, see Lendmire’s FHA loan programs page.
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.
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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 Mortgagee Letter 2026-11
2. Orrick InfoBytes summary of ML 2026-11
3. HUD Archives press release 19-114
4. CFPB housing guide on using home equity
5. Federal Reserve consumer guide to refinancing
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 Lenders Underwrite an FHA Cash-Out Refinance to Pay Off Credit Card Debt · How Lenders Underwrite an FHA Cash-Out Refinance When the 30-Year Term Starts Over · How Lenders Underwrite an FHA Cash-Out Refinance Without Selling the House
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.