How to Sign and Close an FHA Cash-Out on a Texas Homestead

The Quick Read: On a Texas homestead, there is generally no FHA cash-out to sign, because the loan is not practically offered there. Texas treats any cash-out against a homestead as a special equity loan with its own constitutional rules, and FHA’s costs don’t fit inside them. The signing day you can actually reach is for a conventional Texas equity loan, or for an FHA refinance that pays out no cash.

Why Is There No FHA Cash-Out Signing Day in Texas?

Texas treats every cash-out against a homestead as a home equity loan under its state constitution. That loan type carries a fee cap and a total-debt cap, and FHA’s mortgage insurance doesn’t fit inside the fee cap without a large lender credit. So the product isn’t offered in practice.

Be precise about the reason, because many consumer sites get it wrong. Some say Texas law flatly bans FHA cash-out. The state’s formal legal opinion is narrower. The Texas Attorney General’s Opinion KP-0183 describes a “Texas Cash Out” loan as a Section 50(a)(6) home equity loan. It confirms the 80% limit and concludes that the constitution bars VA cash-out loans.

That opinion addresses VA, not FHA. FHA’s problem is arithmetic. Its upfront mortgage insurance premium is 1.75% of the base loan and is typically financed. The annual premium runs between 0.15% and 0.75% of the balance, depending on term, amount, and LTV. Texas limits what the lender can charge on an equity loan, and those insurance costs squeeze that limit. Across the wholesale programs we place files with, FHA cash-out on a Texas homestead is not something that comes to the table.

Some borrowers get stuck on the product name. To see how the product works outside Texas, Lendmire’s FHA cash-out refinance program page lays out the structure.

What Does an FHA Cash-Out Normally Require?

Outside the homestead problem, an FHA cash-out follows a fixed set of rules. The loan reaches up to 80% LTV (loan-to-value, the loan as a share of the home’s value). You must have owned and lived in the home for 12 months before the case number is assigned. The home must be your principal residence. Every figure varies by lender and follows a full review of property, leverage, and credit.

The mortgage insurance described above comes on top. HUD cut the annual premium in a mortgagee letter on mortgage insurance premiums. The premium is charged monthly on the whole new balance, not just the cash you take out. That detail matters when you compare paths.

Underwriting ratios compare your housing cost and total debt to income. The base pair is 31/43. Documented compensating factors can stretch it toward 40/50 at the top tier. The automated finding governs most files. Every figure here is subject to lender guidelines and full file review.

What Closes Instead?

Four paths are realistic. Each has a different trade.

Conventional Texas cash-out refinance. This is the closest match to what you wanted. It replaces your first mortgage and pays you cash. Fannie Mae’s Selling Guide says Texas law decides whether a loan is a 50(a)(6) loan, regardless of how the lender labels it. Some lenders set a higher credit floor or lower leverage on these loans than on a standard refinance.

Home equity loan or HELOC. This keeps your first mortgage and adds a second lien. It is also a homestead equity loan, so the same cap counts every lien on the home.

FHA rate-and-term or streamline. These pay off the old loan and put nothing in your pocket. The FHA rate-and-term with an appraisal reaches 97.75% on a principal residence you have occupied for the previous twelve months. The FHA Streamline refinances an existing FHA loan with no appraisal, a limited credit review, and a net tangible benefit. The mortgage insurance premium continues.

A quick note on rentals: FHA cash-out requires a home you live in, so occupancy decides the leverage. Move on if that isn’t your situation.

How Does Signing a Texas Equity Loan Work, Step by Step?

A Texas equity loan has a fixed sequence, and skipping a step stops the closing. Here is the order, start to finish.

1. Application and the state notice. The lender gives you a “Notice Concerning Extensions of Credit.” Each owner and spouse signs and dates it. Closing can’t happen until a statutory waiting period passes after the later of your application or the notice. A late notice delays closing. Many lenders also refuse a notice acknowledgment signed at the closing table.

2. Appraisal. The appraised value drives everything. The 80% cap counts every lien on the homestead, not just the new one. A low appraisal cuts your cash directly. The cap applies to value, not to your equity.

3. Underwriting. Conventional files follow automated findings plus the agency’s Texas overlays. Freddie Mac’s Guide defines the Texas equity mortgage as a first-lien home equity refinance on homestead property.

4. Final disclosures. Timing here is stricter than an ordinary refinance. Lenders set a gap between your final Closing Disclosure and the closing. Compare it against your earlier Loan Estimate line by line.

5. Signing. Every owner and every spouse signs, even a spouse who isn’t on the loan. The closing must happen at the permanent office of the lender, an attorney, or a title company. The Texas Land Title Association’s summary of state guidance describes those venues. A kitchen-table or mobile-notary signing at home does not meet the rule.

6. Cancellation window. After you sign, a Texas cancellation period applies. A federal right of rescission also covers a refinance of a primary residence. Your closing agent will give you the exact dates in writing. Funds are not released at the table. They arrive after the window closes.

7. Recording and payoff. The lender pays off the old loan and records the new lien. Ask your closing agent to confirm the payoff in writing.

What to bring. Government ID for every signer. Your signed notice. Also compare the final figures against your earlier estimate, and ask about any number that moved.

Where Does the General Rule Break?

The rules bend in a handful of named situations. Each one changes the answer.

You already hold a Texas equity loan. This is the most important exception. Texas Constitution Article XVI, Section 50(f)(2) lets you refinance out of an equity loan into a rate-and-term loan. The requirements are:

• At least one year has passed since the equity loan closed.
• No additional equity is advanced.
• The combined loan-to-value stays within 80% of fair market value.
• You receive a specific notice shortly after you apply.

It is the one route that lets an FHA or VA loan replace an equity loan. It provides no cash.

Rate-and-term refinance, no existing equity lien. These aren’t equity loans, because nothing converts the home into an equity-loan homestead. FHA streamline and FHA rate-and-term work here.

Non-homestead property. The 80% cap and waiting period apply to homesteads. A property that isn’t your homestead follows ordinary guidelines, but FHA cash-out still requires a principal residence.

Agricultural homesteads. A 2017 constitutional amendment repealed the ban on equity loans against agriculturally exempt homesteads. Per a law-firm summary of the amendment, it took effect for closings on and after January 1, 2018.

Inherited property. FHA waives the occupancy period for inherited homes the borrower never treated as an investment. Texas law still applies if the home is a homestead.

Co-borrowers. FHA cash-out doesn’t allow income from a non-occupant co-borrower. Texas also limits who can sign the note on an equity loan, because a guarantor can count as extra collateral. Ask before you plan around a parent or friend.

Disaster waiver. The one-year wait between equity loans has a disaster exception. The Texas Office of Consumer Credit Commissioner’s home equity COVID-19 emergency guidance shows how it was applied.

What Does the Decision Look Like in Practice?

Three questions sort most borrowers. Do you need cash, and how much? Do you already hold an equity loan? Can every owner and spouse get to an approved office?

If you need cash and the first answer is a firm yes, you are looking at a conventional equity loan. Run the 80% cap first. Take the appraised value, subtract every lien on the home, and see what’s left. Mortgage insurance financed into a loan eats room under the cap, which is one more reason FHA doesn’t fit.

If you only want to change your loan terms, a rate-and-term refinance avoids the equity-loan rules entirely. That also avoids a one-way door. A Texas equity loan can carry its designation into later refinances, and Section 50(f)(2) of the Texas Constitution is the way out after one year. Lendmire’s piece Is an FHA Cash-Out Worth It on a Texas Homestead? goes deeper on that tradeoff.

Plan around time. A mandatory waiting period means a Texas cash-out can’t be rushed, so a borrower with a debt deadline should start early. Households with a spouse who is traveling or deployed should line up attendance before application, not at the table.

Last, remember how FHA charges. The annual premium applies to the whole balance, so a bigger cash-out raises it. That is true wherever FHA cash-out is offered.

Key Terms Defined

Homestead: the home you live in as your primary residence, which Texas protects with special lending rules.

Section 50(a)(6) loan: the Texas constitutional name for a cash-out or equity loan against a homestead.

LTV (loan-to-value): the loan balance divided by the home’s appraised value.

Combined loan-to-value: the same ratio, counting every lien on the home, not just the new loan.

Rate-and-term refinance: a refinance that changes your rate or term without paying you cash out.

Right of rescission: a cancellation window after closing, during which you can back out of the loan.

Mortgage insurance premium (MIP): FHA’s insurance charge, made up of an upfront premium and an annual premium.

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. Everything here is subject to lender guidelines and full file review, and nothing is a commitment to lend.

For your own numbers, request a scenario review with Lendmire.

About Lendmire

Lendmire, NMLS# 2371349, is a mortgage brokerage with consumer lending licenses in 16 states. FHA, VA, conventional and jumbo purchase and refinance loans are arranged through wholesale lending partners, and each application is reviewed individually by the lender. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.

For the program’s current guidelines, see FHA loan programs.

References

1. Texas Attorney General Opinion KP-0183

2. HUD Mortgagee Letter 2023-05, annual mortgage insurance premiums

3. Fannie Mae Selling Guide, Texas Section 50(a)(6) loan eligibility

4. Freddie Mac Guide, Texas Equity Section 50(a)(6) Mortgage

5. Texas Land Title Association, closing location guidance

6. Texas SJR 60 handout (bmandg.com)