The Quick Read: To qualify, you need to have owned and lived in the home for at least 12 months before the case number is assigned, a clean recent payment history, a credit and debt-to-income profile that fits FHA’s guidelines, and enough appraised value to stay within FHA’s loan-to-value limit for cash-out refinances. A cash-out replaces your entire first mortgage, so the new loan’s terms apply to the whole balance, not just the cash. For many locked-in owners, that is the real test, more than the qualification itself. Every figure here is subject to lender guidelines and full file review, and nothing here is a commitment to lend.
Who This Fits (and Who Should Look Elsewhere)
An FHA cash-out fits a homeowner who lives in the home as a principal residence, needs a meaningful lump sum, and has a profile that works better under FHA’s flexible credit and ratio standards than under other programs.
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.
It fits less well if you need a small amount of cash and your current first mortgage is one you want to keep. In that case, a second lien or home equity line leaves the first loan alone. The Federal Reserve’s refinancing guide suggests weighing a home equity loan against a cash-out refinance for this reason.
Second homes and investment properties don’t qualify for standard FHA cash-out. Occupancy decides the leverage, and FHA cash-out is for the home you live in.
What Is an FHA Cash-Out Refinance?
An FHA cash-out refinance is a new, larger mortgage that pays off your current loan and hands you the difference in cash. The CFPB describes it the same way: you use part of the new loan to pay off the old mortgage and keep the rest. It also warns that the payoff period may lengthen and the monthly obligation may rise.
You do not need an existing FHA loan. A conventional loan, a VA loan, or a home with no mortgage at all can be refinanced into an FHA cash-out, as long as the other tests are met.
How the Loan Is Underwritten, Step by Step
Across the wholesale programs placed on these files, the sequence is consistent. Each step either clears or stops the file.
1. Ownership and occupancy screen. The lender confirms you owned and occupied the home for the 12 months before the case number. Utility bills, ID and employment records at the address are the usual proof.
2. Payment history review. The lender looks at your current mortgage record. Think of it as a clean, on-time recent history. Confirm the exact late-payment standard with your loan officer, since lender guidelines and full file review determine it.
3. Credit and income. Most files run through FHA’s automated scoring. Files that come back as a “refer” result, or that have thin credit, go to manual underwriting. Across these programs, a decision score of 580 or higher is the starting point. HUD is updating how it calculates that score, per HUD’s minimum credit score answer, which notes the current policy applies to case numbers assigned before a set 2027 date. Confirm current terms before you rely on any number.
4. Ratios. The base pair is 31/43 (housing to total debt) with no compensating factors. Documented compensating factors can stretch that as far as 40/50, the top tier. The automated finding governs most files.
5. Appraisal. The 80% cap is measured against HUD’s Adjusted Value, not your contract price and not an online estimate.
6. Mortgage insurance and disclosures. Upfront and annual premiums apply to the new loan. You then receive a Loan Estimate and, before closing, a Closing Disclosure.
The 80% Cap and How the Cash Gets Calculated
The maximum is 80% of appraised value, and it applies to combined loan-to-value too. HUD set that limit in Mortgagee Letter 2019-11, cutting the old 85% cap for case numbers assigned on or after September 1, 2019. HUD’s press release says the change aligned FHA with the Fannie Mae and Freddie Mac cash-out maximum, and that cash-out loans made up 64% of FHA-insured refinances.
The structure is simple:
- New loan = payoff of your current mortgage + financed costs + any financed upfront premium + cash to you.
- The base loan must stay at or under 80% of Adjusted Value.
- Anything financed uses room under the cap, which reduces your cash.
Here’s the catch on a low appraisal. Because the cap is a percentage of value, a low appraisal shrinks your cash faster than it shrinks the value. A home appraised 5% lower can cut proceeds by far more than 5%.
The cap does not move with your credit score. A stronger score doesn’t buy a higher LTV on a cash-out.
Mortgage Insurance: What Attaches to the New Loan
FHA charges an upfront premium of 1.75% of the base loan, which is commonly financed into the balance. The HUD premium appendix lists that upfront figure. There is also an annual premium between 0.15% and 0.75% of the balance, depending on term, loan amount and LTV.
Duration matters. On a thirty-year loan above 90% LTV, the annual premium lasts for the full term. At or below 90%, it ends after eleven years. Since a cash-out refinance sits well below the 90% threshold, the second case is the one that applies to a thirty-year cash-out loan. These are program facts, not prices, and your Loan Estimate shows what applies to your file. Final terms depend on lender guidelines, property type, leverage, and the borrower’s complete credit picture.
If your current loan is FHA and under three years old, ask about HUD’s refund credit on the old upfront premium.
Where the General Rule Breaks
Most of the rules above are firm. These cases are where they bend.
Free-and-clear homes. HUD’s archived refinance guide allows a cash-out on a home owned with no mortgage. The 12-month ownership and occupancy test still applies.
Inherited homes. The same archived guide allows a cash-out within 12 months of an inheritance if you have lived in the home since. If you rent it out after inheriting, you generally have to occupy it for 12 months first. That guide is archived, so have your loan officer confirm current handbook wording.
An existing second lien or HELOC. Combined LTV is capped at 80% too, so a second lien does not add leverage. Expect the second lien to be paid off, or to stay in place only if the combined total fits under the cap and the second lender agrees to subordinate. Files stall here when the subordination request goes out late.
The “six months” myth. Six months of payments shows up in some HUD material as a payment-history figure. It does not replace the 12-month ownership and occupancy test.
Streamline is not cash-out. An FHA Streamline refinances an existing FHA loan with no appraisal, a limited credit review and a net tangible benefit. It does not give you cash. The FDIC’s streamline summary covers the difference.
Special programs. Hawaiian Home Lands (Section 247) loans are exempt from the 80% change, and Native American Section 184 loans have their own rules. If that is your loan, ask before you assume anything above applies.
Lender overlays. A wholesale lender may require more than HUD does, such as a higher credit score. County loan limits apply too, and they change every year.
The Locked-In Decision: Replace the Loan or Borrow Beside It?
A cash-out replaces the entire first mortgage. The new terms hit the whole balance, whichever lender does it. So the choice isn’t “cash-out versus nothing.” It’s “replace everything” versus “leave the first loan alone.”
Run it as a break-even check, with your own numbers:
1. Write down your current balance and how many years remain on it.
2. Write down how much cash you actually need.
3. Ask for a Loan Estimate on the cash-out and a quote on a second lien or HELOC for the same cash.
4. Compare total monthly obligation, upfront costs and mortgage insurance on each path.
5. Ask what happens to the cost of the whole balance on the cash-out path, since the new terms apply to all of it.
Generally, the bigger the cash need relative to your balance, the more a cash-out can make sense. The smaller the need, the more the new terms on the old balance drag.
Doing nothing is also a path. If the cash need is optional, waiting is a legitimate answer.
Where Files Get Denied (and the Fix)
These are the problems that most often stop a cash-out file:
- Ownership clock short. The 12 months haven’t run. The fix is to wait, and no workaround exists.
- Late payments. A recent late payment on the current mortgage can stop the file. Wait for the history to clean up.
- Low appraisal. Cash drops sharply. Ask about appraisal reconsideration with recent comparable sales and condition documentation, or take a smaller amount.
- Ratios too high. Pay down debt before applying, or document compensating factors for a manual review.
- Credit below the lender’s floor. Some wholesale lenders set a higher floor than HUD. Another lender in the network may differ.
- Occupancy doesn’t fit. The home isn’t your principal residence. Standard FHA cash-out won’t apply.
What happens to the cash matters, too. The CFPB found cash-out borrowers often paid down credit card and auto debt. Their scores rose at first and then gradually worsened, as card balances drifted back. The Federal Reserve cautions that you swap unsecured debt for debt secured by your home.
Pre-Application Checklist
Gather these before you talk to a loan officer:
- Proof of ownership and occupancy for the last 12 months
- Twelve months of mortgage payment history
- Current payoff statement
- Recent income documents
- A list of monthly debts
- Any second lien or HELOC statements
- Your honest cash need, with a number
Key Terms Defined
Adjusted Value: The appraised value HUD uses to measure the loan cap, not the contract price or an online estimate.
Case number: The FHA ID assigned to your loan; the 12-month ownership clock counts back from it.
Combined LTV: All liens on the home added together, divided by value.
Subordination: A second lender agreeing to stay behind the new first loan in lien position.
Mortgage insurance premium (MIP): FHA’s insurance charge, with an upfront piece and an annual piece.
Seasoning: The time you must hold and live in a home before a loan option opens up.
Frequently Asked Questions
Do I need an existing FHA loan to get an FHA cash-out?
No. You can refinance a conventional, VA or other loan into an FHA cash-out. The 12-month ownership and occupancy test and the 80% cap apply regardless of what your current loan is.
Will I lose my low rate if I do a cash-out?
Yes, because the cash-out replaces your whole first mortgage. The new loan’s terms apply to the full balance, not only the cash. If you want to keep your first loan, a second lien or home equity line leaves it untouched.
Can I use FHA cash-out on a rental or second home?
No. Standard FHA cash-out is for a principal residence you own and occupy. Occupancy decides the leverage, so a different property type calls for a different program.
Does a lower credit score allow a higher LTV?
No. The 80% cap doesn’t change with your score. Your score affects eligibility and how the file is reviewed. Across the wholesale programs used here, 580 is the starting point, and HUD’s credit-score methodology is being updated, so confirm current terms.
Is closing “free” if I roll the costs in?
No. Costs get rolled into the balance, taken out of your proceeds, or built into the loan terms. “Cash to close” and “cash to you” are different numbers, and your Closing Disclosure shows each separately.
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 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.
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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. Federal Reserve refinancing guide
2. CFPB guide to using home equity
3. HUD FHA Answers: minimum credit score
4. HUD Mortgagee Letter 2019-11
5. HUD press release PR 19-114
6. HUD mortgage insurance premium appendix
7. HUD Archives Refinance Reference Guide p. 2-19
9. 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: How an FHA Cash-Out Lender Reads Condo Litigation · How an FHA Cash-Out Works With a Non-Borrowing Spouse · FHA Cash-Out vs Selling an Inherited Home as a Retiree
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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- North Carolina Insurance Producer · License# 19053198 · Property, Casualty, Life, Health · Verify on NAIC SBS
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Disclosures. The information presented in this article is general market commentary, not financial, legal, or tax advice. Lendmire is a mortgage brokerage (NMLS# 2371349) — not a direct lender or depository institution — and loan placement is subject to lender underwriting. Nothing in this content represents a commitment to lend. Loan terms, pricing, and program availability vary based on borrower qualifications, property characteristics, and state of subject property, and are subject to change at any time. Lendmire complies with Equal Housing Opportunity requirements. Consumer access: nmlsconsumeraccess.org.