The Quick Read: To qualify, you need a home you own and live in as your primary residence, at least 12 months of ownership and occupancy before the FHA case number is assigned, and enough equity to stay at or under 80% loan-to-value after the new loan pays off your old one. You apply through a lender, get a full appraisal, and go through full credit and income underwriting. The new loan replaces your current mortgage, and you receive the leftover cash at closing. Everything here is subject to lender guidelines and full file review, and nothing is a commitment to lend.
What Is an FHA Cash-Out Refinance?
An FHA cash-out refinance is a new FHA-insured mortgage that pays off your existing mortgage and hands you part of your equity in cash. You keep the house. You don’t need to sell, and you don’t need to be in an FHA loan today. A conventional mortgage, a VA loan, or a home owned free and clear can all be refinanced into an FHA cash-out.
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.
The key point is that it is a replacement loan. The federal consumer-finance regulator describes the difference this way: a cash-out refinance takes the place of the original mortgage, while a home equity loan or HELOC leaves the original first lien intact. So the new terms apply to your whole balance, not only the cash you pull out.
Lendmire is a mortgage broker. It arranges these loans through wholesale lenders and does not lend directly.
Key Terms Defined
- Cash-out refinance: A new mortgage larger than what you owe, with the difference paid to you at closing.
- LTV (loan-to-value): The new loan amount divided by the home’s appraised value, shown as a percentage.
- CLTV (combined LTV): The same test, but counting every lien on the home, including a second mortgage.
- Adjusted value: The value HUD rules derive from the appraisal. The 80% cap is measured against it.
- Case number: The FHA identifier assigned to your loan. The 12-month ownership clock is counted back from this date.
- Mortgage insurance premium (MIP): FHA’s insurance charge, paid as an upfront premium and an annual premium. Ask your lender or a qualified insurance professional for the current amounts that apply to your loan.
- Underwriting: The lender’s full review of your credit, income, debts, assets, and the property.
The Leverage Cap: 80%
FHA cash-out has its own leverage ceiling, separate from any DSCR program. That comes from HUD Mortgagee Letter 2019-11, which lowered both the LTV and CLTV limits and measures them on the adjusted value. HUD’s press release on the change says the cap was cut from 85 to 80 percent and now matches the Fannie Mae and Freddie Mac cash-out maximum. Older guides that still say 85% are out of date. Every figure here varies by lender and program — guidelines, property type, leverage, and credit profile all apply.
Two practical consequences follow.
First, at least 20% equity stays in the home after closing. That is by design.
Second, the cap counts every lien. If you have a second mortgage, it is part of the combined test. It gets paid off or counted, and either way it eats into the cash available.
Compare this with the other FHA lanes. Across the wholesale programs Lendmire places files with, the FHA rate-and-term refinance reaches 97.75% on a principal residence occupied for the previous twelve months. The Streamline refinances an existing FHA loan with no appraisal and a net tangible benefit. Those lanes pay little or no cash. The 80% cap belongs to the cash-out lane only.
Who Qualifies? The Eligibility Checklist
| Requirement | Why it matters | How it’s verified |
|---|---|---|
| Primary residence | Standard FHA cash-out is for owner-occupied homes only | Occupancy documents, mailing history |
| 12 months owned and occupied | Counted back from case number assignment | Deed, closing records, bills |
| 80% max LTV/CLTV | Caps total debt against adjusted value | Appraisal |
| Clean recent payment record | Shows the existing mortgage is paid as agreed | Mortgage statements, payoff statement |
| Credit and income | Full underwriting, not a streamline | Credit report, income documents |
| County loan limits | Loan can’t exceed the limit for the county | Lender lookup |
Each row can decide the file. Here is how they play out.
Ownership and occupancy. At least one borrower must have owned the home and lived in it as a principal residence for the 12 months before the case number. Manufactured homes carry a separate installation rule. If you bought recently, the standard route is generally unavailable until that clock runs out. A second home or a rental doesn’t qualify for standard FHA cash-out, because the program is limited to owner-occupied principal residences.
Payment history. Lenders want a clean recent record on the mortgage being refinanced. HUD’s archived guidance also requires a current payoff statement in the file and that the borrower be current for the month due. Your loan officer can tell you how a particular lender reads the payment record on your file.
Credit. Across the wholesale programs Lendmire places FHA loans with, the starting point is a decision score of 580 or higher. Lenders set their own floors, and some sit higher. A lower score doesn’t automatically end the conversation, but it narrows the options.
Debt-to-income ratios. The base pair is 31/43 (housing / total) with no compensating factors. Documented compensating factors can stretch that, reaching 40/50 at the top tier. The automated underwriting finding governs most files, so the ratios above are a frame, not a promise.
Co-borrowers. A non-owner-occupant co-borrower may not be added just to meet FHA credit guidelines. Don’t plan on a family member fixing a weak file.
County loan limits. FHA limits are set by county and change every year. For most homeowners the 80% test binds first, but the limit still applies.
How the Loan Is Underwritten, Step by Step
Here is the sequence a cash-out file follows.
1. Eligibility clock check. The lender confirms 12 months of ownership and principal-residence occupancy before the case number is assigned. If you’re a few weeks short, waiting is the safer course, since the file won’t meet the requirement until the clock runs out.
2. Payment history review. The lender pulls your mortgage record and orders a payoff statement. Late payments on the loan being refinanced can weigh against the file, so check your own record first.
3. Case number and full appraisal. Unlike a Streamline, a cash-out needs a full appraisal. The 80% cap is applied to the adjusted value that comes out of it.
4. Maximum loan calculation. The cash you receive is roughly the capped loan amount, minus the payoff of existing liens, minus costs. A low appraisal shrinks your cash faster than it shrinks your home value, because the cap sits on top of the payoff.
5. Full credit and income underwriting. Expect a full review: credit report, income and debt documents, and any lender overlays. HUD’s floor isn’t necessarily the lender’s floor.
6. Mortgage insurance. FHA charges an upfront premium of 1.75% of the base loan, usually financed into the balance. 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 with an LTV above the program’s cutoff, the annual premium lasts the full term. At or below that cutoff, it ends after eleven years. Since cash-out loans reach 80% at most, the eleven-year schedule is the one most files see. That is a program fact, not a quote.
7. Closing. The new FHA loan pays off the old mortgage and any other liens. The remainder goes to you. As a consumer mortgage, the file carries a Loan Estimate and Closing Disclosure under TRID, so review both before signing.
What the Cash Actually Looks Like After Costs
Here is the arithmetic in words. Take the adjusted value and apply the 80% cap. That’s your ceiling for the new loan. Subtract what you owe on all existing liens. Subtract closing costs. The financed upfront premium also sits inside the loan, so it reduces the cash too.
The point: gross equity isn’t spendable equity. A home with only 20% equity yields no cash at all, because the cap leaves that 20% untouched by design. The new loan has to cover the payoff, the costs, and the financed premium before any cash reaches you. Equity of 30% or 40% gets you real proceeds. Equity near 20% gets you very little.
Closing costs apply to the whole new loan, not only the cash portion. Be wary of a “no-cost” refinance. The costs are not gone. They are built into the rate or the balance.
Application Steps and Documents
1. Self-check first. Count your ownership months. Estimate your equity against the 80% cap. Look at your credit and your total monthly debts.
2. Talk to a broker or lender. Lendmire arranges FHA cash-out loans through wholesale lenders in the 16 states where it holds consumer lending licenses. A broker can compare programs before you commit to one.
3. Submit the application and documents. Expect the Loan Estimate to follow.
4. Appraisal. Be ready to give the appraiser access and a list of improvements.
5. Respond to underwriting conditions. Underwriters often ask for further documents at this stage. Answer fast, with complete documents.
6. Review the Closing Disclosure, sign, and receive funds. Because you are refinancing your primary residence, a right-of-rescission period applies before funds are released. Your lender will explain it.
- W-2 employees: recent pay stubs, W-2s, and bank statements.
- Self-employed borrowers: tax returns and business income records.
- Retirees: award letters for Social Security or pension, plus asset statements.
- Everyone: photo ID, current mortgage statement, homeowners insurance declaration, and any other lien statements.
Where the General Rule Breaks
- Free-and-clear homes. HUD’s archived guide says properties owned free and clear may be refinanced as cash-out transactions. No payoff, so the cap leaves more cash.
- Recent purchases. Older HUD guidance used the lesser of appraised value or original sales price for homes bought within 12 months. That predates the current 12-month occupancy rule. Treat it as history.
- Hawaiian Home Lands. The 80% change does not apply to mortgages insured under section 247 of the National Housing Act, per HUD Mortgagee Letter 2019-11.
- Manufactured homes. They have their own installation rule, and the 12-month test applies to the installation.
- Inherited homes. Some sources describe an exception to the occupancy test. Ask your loan officer rather than assuming it applies.
- Second homes and rentals. Not eligible for standard FHA cash-out. Occupancy decides the leverage.
Common Reasons Files Stall, and Fixes
- Short ownership clock. Wait until the 12 months pass.
- Late payment on the current mortgage. Get current, and ask what record the lender needs.
- Low appraisal. Gather recent nearby sales and improvement records, and ask your loan officer about a reconsideration request.
- High debt ratios. Pay down revolving balances before applying, or document compensating factors.
- Second lien surprises. Get payoff statements early so the combined test doesn’t change late in the file.
- Missing documents. Send everything underwriting asks for in one pass.
When Not to Do This
Don’t do it if your current loan is better than a replacement. Because the new loan replaces the old one, you give up your existing terms on the whole balance. If you only need a modest amount, a home equity loan or HELOC leaves your first mortgage untouched.
| Option | First mortgage | Best fit |
|---|---|---|
| FHA cash-out refinance | Replaced | Credit is fair, equity is solid, and a new loan makes sense |
| Home equity loan or HELOC | Left in place | You like your current first mortgage |
| Conventional cash-out | Replaced | Stronger credit; also capped at 80% |
Borrowing against your home puts it at risk, and the goal here is to keep it. The CFPB’s guide to using home equity notes that a cash-out refinance may extend the time to pay off your mortgage, and your monthly payment may rise because the new loan is larger.
How you use the money matters. The CFPB found that borrowers often use cash-out proceeds to pay down other debts, particularly credit card and auto loan debt. Scores improved sharply at first, then worsened gradually. Paying down cards with home equity only helps if the balances stay down.
Tax treatment can depend on your situation; borrowers should speak with a qualified tax professional before relying on any deduction or credit.
What the Decision Looks Like in Practice
Picture a homeowner who has lived in the house for several years, with a clean payment record and a mid-tier credit score. Her equity sits comfortably above 20%. Her current loan is conventional, and a repair project and some card balances need funding. FHA cash-out is a candidate. She checks her ownership months, requests payoff statements, and asks a broker to compare FHA against conventional cash-out at the same 80% cap. The decision then comes down to credit, mortgage insurance, and how the new terms treat the whole balance.
Now picture an owner who bought nine months ago. The standard route isn’t open. The honest answer is to wait or look at a different structure.
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. Handbook language covers refinancing any mortgage. Conventional, VA, and free-and-clear homes can all qualify. Only the Streamline lanes are tied to an existing FHA loan.
How soon after buying can I do it?
Generally not until you have owned and occupied the home as your principal residence for 12 months before the case number is assigned. Older guidance that allowed earlier timing predates that rule.
Does it require a new appraisal?
Yes. The 80% cap is measured on the adjusted value derived from the appraisal. Streamline refinances skip the appraisal but pay no meaningful cash.
Can I qualify with imperfect credit?
Possibly. Across the wholesale programs Lendmire places FHA loans with, the starting point is a decision score of 580. Some lenders set higher floors, and the full file still has to pass underwriting. HUD’s waiting periods after events like a chapter 7 discharge (two years) or a foreclosure (three years) are HUD rules, not network promises.
Can I use FHA cash-out on a rental or second home?
No. Standard FHA cash-out is limited to the principal residence.
What can I use the money for?
Cash-out proceeds are not limited to specific purposes. Common uses are debt paydown and home improvements, though the money is borrowed against your home.
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.
Get Started
Ready to find the right loan for you?
See your offer in seconds. No credit pull, no obligation.
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: A look at cash-out refinance mortgages and their borrowers
2. HUD Mortgagee Letter 2019-11
3. HUD Archives press release on FHA cash-out risk
4. CFPB: Using home equity guide
5. CFPB: CFPB Report Finds Cash Out Mortgage Refinance Borrowers Improve Credit Scores
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: Can You Get Approved for an FHA Cash-Out Refinance Without Selling the House? · Does an FHA Cash-Out Refinance Make Sense as a Down Payment on Another House? · Can You Get Approved for an FHA Cash-Out Refinance Twice in a Row?
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
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.