The Quick Read: Usually yes, if you live in the home, have owned it long enough, keep about 20% equity after the new loan, and clear the credit and debt-ratio tests. On a one-unit primary residence, conventional cash-out tops out at 80% loan-to-value. The first mortgage you pay off must be at least 12 months old, and a borrower must have been on title for 6 months. Final eligibility depends on lender guidelines and a full file review.
What Does “Qualify” Actually Mean Here?
Qualifying means passing six tests at once: occupancy, time on title, age of the current loan, equity after closing, credit and debt-to-income (DTI), and loan size. Miss one and the others rarely rescue the file. Pass all six and you are in a strong position.
A cash-out refinance replaces your current mortgage with a larger one and hands you the difference. Freddie Mac defines it as a mortgage with no specific restrictions on how the proceeds are used. Fannie Mae’s Selling Guide says the new loan can pay off your existing first mortgage and any subordinate liens, finance closing costs, and put cash in your pocket for any purpose. It can also place a first lien on a home you own free and clear. Paying off a home you own outright is still a cash-out refinance, with its own seasoning tests.
Lendmire arranges conventional loans through wholesale lenders in the 16 states where it holds consumer mortgage licensing. Across those programs, the same six tests decide most files. Here is how each one works.
The Quick Self-Test
Answer yes or no to each:
1. Do you live in the home as your primary residence? 2. Has at least one borrower been on title for 6 months or more? 3. If you are paying off a first mortgage, is it at least 12 months old? 4. After the new loan, will you still owe 80% or less of the home’s value (75% or less on a two- to four-unit home)? 5. Is your credit score at or above the wholesale floor of 620, and ideally well above it? 6. Is your total debt-to-income ratio at or under 50% once the new payment is counted? 7. Is the new loan amount under the conforming loan limit for your county and unit count?
Seven yeses put you in solid shape. One or two no answers do not end the conversation, and the “If You Don’t Qualify Yet” section below covers the fixes.
Occupancy: Do You Have to Live There?
Yes, for the best terms. Freddie Mac requires every borrower on a primary-residence cash-out loan to occupy the property. The tests below assume a primary residence.
Occupancy also sets leverage. Across the programs Lendmire places, a one-unit primary residence reaches 80% on a cash-out. Two- to four-unit primary residences, second homes, and investment property sit at 75%. If the property you are refinancing is not your main home, the occupancy type decides the cap, and that is the whole story for this article.
Time on Title and Loan Age: The Two Clocks
Two separate clocks run, and people often blur them together.
Clock one: time on title. At least one borrower must have been on title for 6 months before the note date. Fannie Mae applies a similar six-month test, measured to the new loan’s disbursement date. The exceptions are real. Delayed financing, inheritance, and legal awards (such as a divorce decree) can shorten or waive the wait.
Clock two: age of the loan being paid off. If a first mortgage is being refinanced, it must be at least 12 months old, measured from note date to note date. Freddie Mac’s version of this rule has applied to settlements since March 2023 (Bulletin 2022-25). The 12-month rule does not apply to a co-owner equity buyout or to paying off a HELOC, per Freddie Mac’s Guide.
Here is the catch: the two clocks do not overlap neatly. You could own the home for years and still fail the loan-age test if you refinanced eight months ago. Proof comes from the credit report or the title commitment, so lenders see it either way.
Delayed financing. Say you bought a home with cash. You can generally refinance before the six-month mark if the original purchase was arm’s-length and documented. Fannie Mae’s checklist spells out which borrower and title structures work. It is a narrow door, and the paperwork has to be clean.
How Much Equity Do You Need After Closing?
About 20% on a one-unit primary residence. The Fannie Mae Eligibility Matrix caps cash-out refinances on a one-unit principal residence at 80% LTV, CLTV, and HCLTV. For two- to four-unit principal residences the cap is 75%. Exact terms depend on the lender’s guidelines, property type, leverage, and a full review of the borrower’s file.
The cap applies to the total new loan, not just the cash you receive. Picture a home appraised at a round $100 of value. At 80%, the new loan can reach $80 in total. Out of that $80, the lender first pays off your old mortgage, any liens, and any financed closing costs. Whatever remains is your cash. Homeowners who owe a lot already see the least cash. Homeowners who owe little see the most.
Equity is never fully accessible. The CFPB’s equity guide notes that none of the equity-access options turns 100% of your equity into cash.
One wholesale option to know about. Some of the programs Lendmire works with reach 89.99% LTV with no mortgage insurance. The conditions are tight: a 680 score, a 50% ratio, a thirty-year fixed rate, a primary residence, a conforming balance, and six months of seasoning. It is not written on Texas homesteads, where the state constitution caps cash-out at the agency figure. Treat it as an exception to ask about, not a baseline to plan around. Every figure here varies by lender and program — guidelines, property type, leverage, and credit profile all apply.
Credit and DTI: Where Most Files Get Decided
Credit sets your door, and DTI sets how far through it you can walk.
On credit, the wholesale conventional programs start at a 620 decision score. That is a floor, not a target. Higher scores generally improve pricing, and a cash-out loan carries its own pricing adjustments on top of the base. The Fannie Mae LLPA Matrix lays out loan-level price adjustments by loan purpose, credit score, and LTV. Those adjustments are built into pricing rather than shown as a separate line, so the practical effect is simple. A lower score or a higher LTV costs more. Keeping your LTV well below the cap is one of the few levers fully in your hands.
Credit events carry agency waiting periods. They run four years from a chapter 7 discharge, seven years from a foreclosure, and four years from a short sale or deed-in-lieu. Documented extenuating circumstances can shorten them.
On DTI, the answer depends on how the file is underwritten. Per Fannie Mae’s DTI rules, loans run through Desktop Underwriter can go to a 50% total ratio. Manually underwritten loans cap at 36%, extendable to 45% when your credit score and reserves meet the Eligibility Matrix tiers. The same guide notes that the maximum for cash-out loans run through automated underwriting may be lower than the headline figure. So “50%” is a ceiling, not a promise.
DTI counts the new payment, including taxes, insurance, and association dues, plus your other recurring debts. Installment debts with only a few payments left may not need to be counted. Lenders also re-check debts before closing, so a new car loan taken out mid-process can force a second look.
Loan Size: The Conforming Limit
Your new loan must stay under the conforming limit for your county and number of units. The limit is not the same for everyone, and it is higher in designated high-cost areas. The FHFA publishes the current values each year. Check your county’s figure before you plan the amount.
A loan above the limit is a jumbo loan. It sits outside Fannie Mae and Freddie Mac programs and follows different rules. The jumbo lanes Lendmire places start at a 660 decision score, reach 90% leverage, and go to $5,000,000, with a 50% ratio ceiling on the fixed lanes. That is a separate product, so the tests above do not carry over one for one. Final terms depend on lender guidelines, property type, leverage, and the borrower’s complete credit picture.
How the Process Works, Step by Step
1. Pre-screen. Check occupancy, time on title, the age of your current loan, and a rough LTV and DTI.
2. Application and automated underwriting. The file runs through Desktop Underwriter or Loan Product Advisor.
3. Documents. Expect income, asset, and debt verification.
4. Appraisal. Value sets your LTV. LTV in turn drives the maximum loan, the price adjustments, and the credit and reserve tiers. Do not assume an appraisal can be skipped on a cash-out.
5. Pricing. Loan-level price adjustments apply to cash-out loans by LTV and score.
6. Disclosures and closing. You receive a Loan Estimate and a Closing Disclosure.
7. Rescission and funding. After you sign a refinance of your primary residence, you have a three-business-day written right to cancel. Saturdays count. The CFPB explains that notice must be in writing, since a phone call is not enough, and that money paid must be returned within 20 calendar days of the lender receiving notice. Rescinding cancels only the refinance. You still owe your original loan.
Funds then go to pay off the old loan, any liens, and costs, and you receive the balance.
Odd Cases That Change the Answer
- Free and clear. No mortgage to pay off does not mean no rules. It is still cash-out, with title-seasoning tests.
- Delinquent property taxes. Taxes more than 60 days past due can be rolled into the new loan, and an escrow account is required unless law prohibits it.
- Student loans. Fannie Mae waives the cash-out price adjustment when the transaction meets its student-loan payoff requirements.
- Ineligible transactions. A temporary interest-rate buydown, paying off an installment land contract, HomeStyle Energy transactions, and certain PACE-lien situations are excluded. Rules change, so ask a loan officer to confirm against the current guide.
- Government loans. FHA, VA, and USDA loans follow their own frameworks and sit outside this one.
Cash-Out or Rate-and-Term? Pick the Right Product
If you only want a lower payment or a better term and need little cash, a limited cash-out (rate-and-term) refinance may fit better. Here is how the two compare:
| Factor | Cash-Out | Rate-and-Term |
|---|---|---|
| Max LTV, one-unit primary | 80% | 95% (97% in some cases) |
| Cash back | Any amount, within LTV | Only incidental |
| Loan-age test | 12 months on paid-off loan | Not the same test |
| Mortgage insurance | Rarely, given the cap | Required above 80% |
Mortgage insurance, where it applies, can be requested off at 80% of original value with good payment history and no subordinate liens. The servicer must terminate it automatically at 78%. Lower leverage is the reason cash-out rarely carries it.
Government loans offer their own streamlines. The FHA Streamline and VA IRRRL apply only to existing FHA and VA loans, and neither pays you cash. Treat them as a different path, not a cheaper version of this one.
If You Don’t Qualify Yet
Each failed test has a fix, an alternative, or both.
| Failed test | Likely fix | Alternative |
|---|---|---|
| Equity under 20% | Wait, pay down, or borrow less | Smaller cash-out or a different equity product |
| DTI too high | Pay off small debts, add a co-borrower | Smaller loan amount |
| Credit too low | Pay down balances, correct report errors | Wait, then reapply |
| Under 6 months on title | Wait, or check the exceptions | Delayed financing if bought with cash |
| First mortgage under 12 months | Wait until it seasons | Review the HELOC and equity-buyout exceptions |
| Above conforming limit | Reduce the amount | Jumbo lane, with its own tests |
Honestly, a more affordable fix is often time. Several of these clocks simply expire.
Three Sample Borrowers
The clear pass. A homeowner has lived in the home for years, refinanced two years ago, and owes well under 60% of value. Credit sits comfortably above the floor, and DTI is moderate. All six tests pass, and the question becomes how much cash to take.
The borderline. A homeowner owes about 72% of value and wants cash that would push the loan to the 80% line. DTI is near the automated ceiling. This file may qualify, but it is sensitive. A slightly lower appraisal or one new debt can tip it. Borrowing less than the maximum often improves pricing here.
The fail. A homeowner refinanced nine months ago and wants cash now. Equity is ample, and credit is strong. The loan-age test blocks the file until the 12-month mark. Waiting solves it.
What a Cash-Out Costs You, Beyond the Fees
A cash-out replaces your current rate and terms and can lengthen your payoff timeline. The CFPB notes it may also raise your monthly payment. Closing costs can be financed into the loan, which Fannie Mae’s Selling Guide permits, but financing them also grows the balance.
Debt consolidation deserves caution. The CFPB’s research found that paying off other bills is the most common reason people cash out, and it warns that swapping non-mortgage debt for mortgage debt can raise foreclosure risk. Your home secures the new balance.
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
LTV (loan-to-value): The new loan balance divided by the home’s appraised value.
CLTV / HCLTV: Combined LTV counts all liens on the home, and HCLTV adds the full credit line on any HELOC.
DTI (debt-to-income): Your monthly debts, including the new housing payment, divided by your gross monthly income.
Seasoning: The minimum time you must have owned the home or held the loan before refinancing.
LLPA (loan-level price adjustment): A pricing add-on based on loan purpose, credit score, and LTV, built into the loan’s pricing.
Conforming limit: The maximum loan size Fannie Mae and Freddie Mac will buy, set by county and unit count. These specifics are subject to lender guidelines and a full review of property, leverage, and credit.
Frequently Asked Questions
Can I do a conventional cash-out refinance with a low credit score?
Possibly, if you clear the 620 wholesale floor, but a lower score raises pricing and can shrink your options. Scores below 620 generally need a different program. If you are near the line, improving your score before applying often matters more than changing lenders. Eligibility is subject to lender guidelines and full file review.
Does paying off my home mean no cash-out rules apply?
No. A paid-off home is still a cash-out refinance, with title-seasoning tests. At least one borrower must typically have been on title for 6 months. Delayed financing covers recent cash purchases, with documentation of the original arm’s-length purchase.
How much cash can I actually take out?
Less than your full equity. On a one-unit primary residence, the new total loan is capped at 80% of value. From that, the lender subtracts your payoff, any liens, and financed costs. What is left is your cash. Two- to four-unit homes cap at 75%.
What if my mortgage is under a year old?
You will usually need to wait. The first mortgage being paid off must be at least 12 months old, note date to note date. Exceptions include paying off a HELOC and a co-owner equity buyout under Freddie Mac’s Guide.
Can I cancel after I sign?
Yes, on a refinance of your primary residence you have three business days to cancel in writing. Saturdays count as business days. Rescission cancels only the new loan, and you still owe your original mortgage.
The 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. Start with the cash-out refinance programs page. For a deeper look at leverage, Lendmire’s piece What Is The Maximum LTV For A Conventional Cash Out Refinance? walks through the cap in detail. Reach the team at 828-256-2183.
The strongest files tend to pair a long-held home, a clean payoff history, and a borrowing amount that stays comfortably under the cap.
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.
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References
1. Freddie Mac Guide Section 4301.5
2. Fannie Mae Selling Guide B2-1.3-03: Cash-Out Refinance Transactions
3. Fannie Mae Eligibility Matrix
6. Fannie Mae Selling Guide B3-6-02: Debt-to-Income Ratios
7. FHFA
8. CFPB Ask CFPB: right of rescission
This article is part of Lendmire’s Conventional Loans series — every loan program’s qualification details, guidelines, and scenarios live on the loan options page.
Related reading: How to Prepare a Conventional Cash-Out Refinance for a Clean Close · 6 Myths About the Cost of a Conventional Cash-Out Refinance · Conventional Cash-Out Refinance Electronic Verification Rules
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.