The Quick Read: An FHA cash-out refinance on a Texas homestead has to clear two sets of limits at once, FHA’s and Texas’. Both cap borrowing at 80%, and the lower result controls. Texas also adds a fee cap, a waiting period, a closing-location rule and a one-loan-at-a-time rule. Whether an FHA cash-out is available on a Texas homestead at all depends on the lender, so confirm that before you plan around the cash.
Why Texas Treats Cash-Out Differently
Texas protects the home you live in. Its constitution allows only certain kinds of debt to be secured by a homestead, and a cash-out refinance is one of them. The rule that governs it is Section 50(a)(6) of Article XVI, and people call the result a “Texas equity loan.” You can read the text on Justia’s copy of the Texas Constitution.
Texas FHA cash-out estimate
Seeded with an example value, a balance to match, and a round cash request; change any field.
Editable benchmark: 7.32% as of October 22, 2026 · Freddie Mac 30-year average via FRED®. A conventional market reference, not an FHA cash-out refinance quote.
Illustrative starting assumptions: a $285,000 home value, a $157,000 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 rates for Texas. 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 inside the Texas homestead cap; 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 a Texas homestead the state constitution caps the whole loan, financed premium included, at the FHA figure and adds a waiting period, a prescribed closing location, and a fee cap.
A refinance counts as a Texas equity loan when you take cash beyond your payoff and closing costs. That is the trigger. The loan program on top of it, FHA in this case, does not change the trigger.
Think of it as two gatekeepers. FHA decides whether the loan is insurable. Texas decides whether the lien on your home is valid. You need a yes from both.
Can an FHA Cash-Out Work on a Texas Homestead?
It can be tight, and it is not offered everywhere. Some lenders say FHA cash-out is simply not available on a Texas homestead. Others treat it as workable if every Texas rule is met. Neither HUD’s cash-out rules nor the constitution text answers the question in one clean sentence, and that gap is why you see conflicting advice online.
What decides it in practice is whether a specific lender and its title partner will deliver the loan inside both rule sets. Ask that first, before you order an appraisal or count on any cash.
Three things usually settle it:
- Lender appetite. Some wholesale lenders don’t offer the product in Texas. Others do.
- The fee cap. FHA’s mortgage insurance is a real pressure point under Texas’s fee limit (more on that below).
- Your own timing. FHA and Texas each run their own clocks, and yours has to clear both.
Across the wholesale programs Lendmire places FHA files with, the first conversation is availability, not cash amounts. If the loan can’t be delivered, the rest is academic. Lendmire’s FHA cash-out refinance program is the loan this article describes, and that page lays out how the product works when it is offered.
The Two 80% Ceilings
FHA lets a cash-out refinance reach 80% of the home’s adjusted value. That is the appraised value, adjusted under FHA’s rules. HUD lowered the cap from 85% to 80% in Mortgagee Letter 2019-11, citing risk to the FHA insurance fund. HUD has since folded that rule into its consolidated FHA policy, so the 80% cap still stands.
Texas runs its own 80% test. Your total liens on the homestead, counting every loan and not just the new one, can’t exceed 80% of the home’s fair market value when the loan is made.
When ceilings overlap, the lower one wins. Here is a labeled hypothetical, in percentages only:
- Your home is worth 100% (call it the baseline).
- You owe 55% of value on the current mortgage.
- Room under the cap is 25 points of value.
- Subtract financed costs, including the FHA upfront premium, and what’s left is your cash.
The upfront premium is 1.75% of the base loan, and borrowers usually finance it. Financing it raises the balance inside the same ceiling. A second lien, such as an old home equity loan, also sits inside the 80% and must be paid off or counted.
One more point. FHA’s cash-out reaches 80% LTV (loan-to-value, the loan as a share of the home’s value) on a home you’ve owned and lived in for 12 months before the case number. The 96.5% figure you see online belongs to purchases, not cash-out. FHA gives you no leverage advantage here. Its value is flexibility on credit and debt ratios, and the price is mortgage insurance. Final terms depend on lender guidelines, property type, leverage, and the borrower’s complete credit picture.
The Texas Rules at a Glance
| Rule | What it says | What it means for FHA cash-out |
|---|---|---|
| 80% lien cap | Total liens up to 80% of fair market value | Matches FHA’s cap; lower one controls |
| Fee cap | 2% of principal on lender-side costs | FHA premium is the pressure point |
| Waiting period | Closing on or after the 12th day after application or notice | Plan cash needs around it |
| Final disclosure | Itemized terms at least one business day before closing | Closing can’t be rushed |
| One loan at a time | Only one equity loan on the home | Existing equity loan must be paid off |
| One-year spacing | A new one generally can’t close within a year of the last | Second clock after FHA’s 12 months |
| Consent | Every owner and spouse must agree | One missing signature stalls the loan |
| Closing place | Lender, attorney or title company office | No closing at your kitchen table |
The one-business-day final disclosure is also described in the Texas Finance Commission’s rule packet for 7 TAC Chapter 153, which is the state’s interpretation of Section 50. Check the other rows against the constitution text, since Texas rules get interpreted over time. Lender guidelines and your title company’s practice also matter.
How the Deal Works, Step by Step
Here is the order that tends to work.
1. Confirm availability. Ask whether the lender offers FHA cash-out on a Texas homestead. If the answer is vague, move on.
2. Check your FHA basics. The wholesale programs Lendmire works with generally start at a 580 decision score. Ratios start at 31/43 (housing to total debt as a share of income) and can reach 40/50 with documented compensating factors, such as reserves. The automated finding governs most files. County loan limits apply.
3. Confirm ownership and occupancy. FHA wants 12 months of owning and living there before the case number. There is a documented exception for inherited homes, but confirm the details with your lender.
4. Get the appraisal. FHA uses an FHA appraisal for adjusted value. Texas also needs a fair market value finding. The lender reconciles the two.
5. Receive the Texas notice. The 12-day clock starts at the later of your application or delivery of the notice.
6. Review the final terms. You get the itemized disclosure at least one business day before closing.
7. Close at an approved office. Every owner and spouse attends.
8. Wait out rescission. Funds move after the window ends.
Because this is a consumer mortgage, you also get a Loan Estimate and a Closing Disclosure. Compare them line by line.
The 2% Fee Cap and the FHA Premium
Texas caps what the lender and its agents can charge to originate, evaluate, maintain, record, insure or service the loan at 2% of principal. Some items sit outside the cap, such as a third-party appraisal, a survey and the base title premium.
Texas’ own rules treat mortgage insurance fees as capped items. That is why FHA is the tricky program here. The upfront premium is 1.75% of the base loan. That alone takes most of a 2% cap before any other lender charge is counted. The annual premium runs between 0.15% and 0.75% of the balance depending on term, amount and LTV. On a thirty-year loan above 90% LTV it lasts for the term. At or below 90% it ends after eleven years. These specifics are subject to lender guidelines and a full review of property, leverage, and credit.
How a lender fits those pieces under the cap is a file-level question, and it is a big reason some lenders pass on the product. Ask for the Loan Estimate early and see how each charge is classified.
Where the General Rule Breaks
A few situations change the picture.
A rate-and-term refinance. If you take no cash beyond the allowed items, it can be exempt from the equity-loan rules. Any incidental cash back can turn it into a cash-out. The line is thin, so ask the lender how they treat it.
An existing Texas equity loan. The loan carries that status with it. A later refinance of it generally keeps the same restrictions unless it meets the Texas conditions for refinancing a home equity loan, which include timing, limits on added funds, and an 80% cap.
An existing FHA loan. An FHA Streamline refinances an existing FHA loan with no appraisal, a limited credit review and a net tangible benefit. It is a different product, not a cash-out, and it keeps the mortgage insurance premium going. If you don’t need cash, it may fit better.
Occupancy and units. Texas equity rules apply to a homestead, meaning your primary residence. A second home or rental is outside them. Occupancy also decides leverage in FHA’s own rules.
Acreage. Homesteads in Texas can include land. Excess acreage can complicate the appraisal, so raise it at the start.
Co-borrowers and spouses. A non-occupant co-borrower is allowed on FHA purchases, but Texas requires consent from every owner and spouse. A guarantor can count as prohibited additional collateral, so don’t assume a co-signer fixes a thin file.
Inheritance. FHA has an exception to the 12-month occupancy test for inherited homes. Get the exact wording from your lender.
Closing Day and the Rescission Window
Everyone on title, and every spouse, attends the closing. If one owner can’t make it, the closing doesn’t happen. Plan this early, because a power of attorney is not a safe fallback.
After you sign, federal law gives you time to cancel. Regulation Z sets three business days, counted from the last of three events: closing, delivery of the disclosures, and delivery of the cancellation notice. The CFPB’s right-to-cancel explainer covers refinance borrowers in plain terms. If the lender misses the notice or key disclosures, that right can run up to three years.
Waiving the window is allowed only for a genuine personal financial emergency. It must be your own dated, signed statement, not a pre-printed form. So if you need cash by a hard deadline, add the waiting period, the final disclosure day and the rescission window together before you commit.
Why These Loans Stall
Most delays come from a short list:
- A missing signature. One owner or spouse isn’t at the closing.
- Lien math. An old equity loan or second lien pushes total debt past 80%.
- Occupancy timing. You haven’t owned and lived in the home for 12 months yet.
- Spacing. A prior equity loan closed too recently.
- Fee cap problems. Costs plus the FHA premium don’t fit under 2%.
- Appraisal gaps. FHA’s adjusted value and Texas’s market value come out apart.
The fix for most of these is to find them before you apply. Lien math and fee classification are the two that rewrite the plan.
A noncompliant Texas equity lien can be unenforceable until the lender cures it, and the lender can lose foreclosure rights. That risk falls mainly on the lender, which is why careful ones say no instead of pushing a loan through.
If FHA Cash-Out Isn’t the Right Fit
| Option | Best when | Tradeoff |
|---|---|---|
| FHA Streamline | You have FHA and need no cash | No cash out |
| Rate-and-term refinance | You want a new term only | No cash beyond allowed items |
| Conventional cash-out | Your credit and ratios are strong | Different rules and insurance |
| Separate home equity loan | You want to borrow in pieces | Same Texas rules apply |
Veterans have another route with its own mechanics. Lendmire’s piece Is a VA Cash-Out Refinance Allowed Under Texas Home Equity Rules? covers it. Honestly, if you don’t need much cash, a smaller product often beats a full cash-out. Texas’ rules add friction to the biggest option.
Key Terms Defined
Homestead: the home you live in as your primary residence, which Texas protects from forced sale except for listed debts.
Section 50(a)(6) loan: a Texas equity loan, meaning a cash-out loan secured by a homestead.
Adjusted value: the appraised value after FHA’s adjustments, used to set FHA’s 80% cap.
LTV: loan-to-value, the loan balance as a percentage of the home’s value.
Rescission: your legal right to cancel certain refinances after closing, within a window that depends on the loan type and the specific file.
Mortgage insurance premium: FHA’s upfront and annual charges, which protect the lender if you default.
Frequently Asked Questions
Can I get an FHA cash-out refinance on my Texas home?
It depends on the lender. Some don’t offer it on a Texas homestead, and others do within strict limits. Ask for availability up front, and confirm the lender can meet the Texas rules.
How much cash can I take out?
Up to the lower of the two 80% ceilings, minus every lien and financed cost. In percentage terms, you start from 80% of value and subtract what you owe and the costs rolled in. Your appraisal and fee structure set the final number.
Does a refinance with no cash back still count as a Texas equity loan?
Often not, if you take no cash beyond the allowed items. Incidental cash back can change that. If the loan replaces an existing Texas equity loan, restrictions generally carry over unless Texas’ refinance conditions are met.
Can I use an FHA cash-out for a second home or rental?
No. Texas equity rules apply to your homestead, and FHA’s cash-out is for the home you occupy. Occupancy decides the leverage.
What happens if one owner can’t attend the closing?
The closing generally can’t proceed. Every owner and spouse has to consent and attend at an approved office, so schedule everyone before you apply.
Where to Start
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. Program figures are subject to lender guidelines and full file review, and nothing here is a commitment to lend.
For your own numbers, request a scenario review with Lendmire.
About Lendmire
Lendmire is a mortgage brokerage (NMLS# 2371349) licensed for consumer mortgage lending in 16 states, arranging FHA, VA, conventional and jumbo purchase and refinance loans through a wholesale lending network. Eligibility is determined by the lender on each file. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
For the program’s current guidelines, see FHA loan programs.
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References
1. Texas Constitution, Article XVI, Section 50
2. HUD Mortgagee Letter 2019-11
3. Regulation Z, Section 1026.23 (CFPB)
4. CFPB Right to Cancel explainer
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 Choose an FHA No-Cash-Out Refinance Over FHA Cash-Out? · Conventional vs FHA Cash-Out Refinance for Maximum Equity Access · FHA Cash-Out Refinance vs Home Equity Loan for Maximum Cash
Guides: FHA Cash-Out Refinance in Texas
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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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.