The Quick Read: On a Texas homestead, neither government cash-out loan is a straightforward choice. VA cash-out is generally treated as unavailable because of a Texas Attorney General opinion. FHA cash-out is commonly reported as effectively unavailable too, though the reason is different and the evidence is thinner. Veterans and FHA borrowers who want equity from a Texas home usually end up comparing a conventional Texas home equity structure, or a refinance that takes no cash out.
The Honest Answer First
Here is who each option is really for, and where Texas changes that.
VA cash-out is built for eligible veterans and service members. Nationally it is the most generous government cash-out. Federal guidance allows financing up to 100% of the home’s reasonable value and applies net tangible benefit standards to every cash-out loan. On a Texas homestead, though, the Texas Attorney General’s opinion treats the VA guaranty as additional collateral, which the state constitution bars on a homestead equity loan. Lenders underwrite to that opinion.
FHA cash-out is built for borrowers who need flexible credit and can live with mortgage insurance. Across the wholesale programs Lendmire places files with, it reaches 80% of value on a home you have owned and occupied for 12 months. In Texas, the commonly reported obstacle is arithmetic. The upfront mortgage insurance premium collides with the state’s cap on lender fees. This is industry practice, not federal policy, and it can differ by lender.
So the real question for a Texas homeowner is often not “VA or FHA?” It is “which path actually exists for my situation?” The rest of this article walks through that.
Side-by-Side
| Factor | VA cash-out | FHA cash-out |
|---|---|---|
| Who qualifies | Eligible veterans, service members | Any owner-occupant meeting credit rules |
| National leverage ceiling | Up to 100% of reasonable value | 80% LTV, home owned 12 months |
| Mortgage insurance | None; one-time VA funding fee instead | 1.75% upfront plus annual premium |
| Occupancy | Primary residence | Primary residence only |
| Credit floor | Set by lender overlays | 580 decision score on our programs |
| Documentation | Certificate of eligibility, residual income | Full income review; 31/43 to 40/50 ratios |
| Texas homestead | Generally unavailable per AG opinion | Commonly reported as unavailable |
| Texas 80% combined-lien cap | Applies if a Texas equity loan is used | Applies if a Texas equity loan is used |
Program figures in the table are subject to lender guidelines and full file review. Nothing here is a commitment to lend.
Why a Homestead Changes the Math
Texas treats a cash-out refinance on your primary residence as a home equity loan under Article XVI, Section 50(a)(6) of the state constitution. Lenders call it a “Texas A6” loan. The label matters because the A6 rules apply no matter which loan program you start with.
Several rules come with it. The constitution’s borrower notice says the new loan, added to all other liens, cannot exceed 80% of the home’s fair market value. It also limits lender fees, requires a waiting period after the application and a right to cancel after closing, and allows only one equity loan at a time. You can read the full text at the official Texas statutes site to confirm exact subsection letters.
Two points are easy to miss.
First, the 80% cap is constitutional, not a lender preference. It covers every lien on the home. At least 20% of the value stays in the house, which is far less cash than VA’s national 100% ceiling would suggest.
Second, a refinance that puts more cash in your hands than needed to pay off the old loan and closing costs triggers the A6 rules. A refinance that only pays off the existing loan does not.
A short note on lanes. Rental properties are not homesteads, so none of this applies to them. FHA and VA cash-out both require that you live in the home, so occupancy decides the leverage.
When VA Cash-Out Is the Better Fit
VA cash-out wins in the right setting. That setting is mostly outside Texas homesteads, but there are a few situations worth knowing.
You are an eligible veteran and the home is not a Texas homestead. If you own a home in another state where the program is open, VA’s high leverage ceiling and the absence of monthly mortgage insurance can make it the strongest government cash-out. The funding fee is a one-time charge that can be financed, and it varies with use and down payment.
You want to move out of FHA mortgage insurance. A veteran carrying an FHA loan may find a VA refinance attractive because the annual premium goes away. The key word is refinance, not cash-out. On a Texas homestead the no-cash version is the one that tends to work. A rate-and-term VA refinance, including the interest rate reduction loan (IRRRL) if you already hold a VA loan, does not pull equity out. The A6 rules apply to cash-out, so these are generally described as unaffected. That description comes from lender summaries, so confirm it on your own file.
You have strong residual income and a clean entitlement record. VA underwriting looks at residual income, not just ratios. Veterans with steady earnings and a large family sometimes qualify more comfortably than they would under rigid ratio tests.
The tradeoff. VA cash-out requires a net tangible benefit, and the appraisal sets a reasonable value that drives the loan-to-value calculation. If your goal is a large cash draw on a Texas homestead, VA is probably the wrong tool no matter how good the national program looks on paper.
When FHA Cash-Out Is the Better Fit
FHA cash-out is the pick when credit is the sticking point and you accept mortgage insurance as the cost of flexibility.
Your credit or ratios are tighter than conventional lenders like. Across the wholesale programs Lendmire works with, FHA starts at a 580 decision score. The base ratio pair is 31/43 with no compensating factors, and documented factors can stretch that to 40/50 at the top tier. The automated finding governs most files. A borrower with a recent credit blemish may fit FHA when conventional says no. HUD’s own waiting periods apply after a bankruptcy or foreclosure: two years from a chapter 7 discharge and three years from a foreclosure. Those are HUD rules, not a promise from any one lender.
You are not a veteran. VA is off the table without eligibility. FHA is open to any owner-occupant who meets the credit and income rules.
You can wait on the premium math. FHA charges an upfront premium of 1.75% of the base loan, which can be financed, plus an annual premium between 0.15% and 0.75% of the balance depending on term, amount and LTV. On a thirty-year loan above 90% LTV, the annual premium lasts for the term. At or below 90% it ends after eleven years. At 80% LTV on a cash-out, you would sit in the shorter bucket.
The Texas catch. Here is the honest part. If the home is a Texas homestead, the same fee-cap issue tends to stop a cash-out from being placed. Some lenders may not offer it at all. Others might structure it differently. If you want to see how the program works in general, Lendmire’s page on the FHA cash-out refinance program lays out the mechanics. For the Texas homestead layer specifically, see Lendmire’s piece FHA Cash-Out Requirements When Texas Homestead Rules Cap the Loan.
FHA is the better fit mainly when your credit profile is what limits you and you are outside the homestead wall, or when you are using FHA’s no-cash refinance options instead.
What Actually Works on a Texas Homestead
Because both government cash-out loans hit a wall, most Texas homestead borrowers who want cash look at three routes.
1. A conventional Texas A6 cash-out. This is the structure the Texas constitution was written around. Combined liens stay at or below 80% of value, and conventional loans at that leverage generally do not carry mortgage insurance. Credit floors on conventional loans tend to run higher than FHA’s. Lendmire’s piece VA Cash-Out vs. Conventional Cash-Out When Texas Homestead Rules Apply goes deeper on this lane.
2. A refinance with no cash out. If your goal is a different term or dropping mortgage insurance, a rate-and-term refinance avoids the A6 rules. On the FHA side, the Streamline refinances an existing FHA loan with no appraisal and a limited credit review, but it requires a net tangible benefit and the premium continues. The FHA rate-and-term with an appraisal reaches 97.75% on a principal residence you have occupied for the previous twelve months. VA’s IRRRL does the same job for an existing VA loan.
3. A home equity loan or line. These sit behind your first mortgage and keep it in place. The same 80% combined cap applies. If your first mortgage is a low-cost loan you want to keep, this can beat refinancing.
A caution on conversions. If you already have a Texas A6 loan, state law has allowed refinancing it into a non-A6 loan since 2018 when conditions are met. Those conditions include enough time since closing, no extra cash beyond what is permitted, and a combined balance at or below 80% of value. Lender summaries describe the details, so verify them against the statute. The required notice also warns that you give up certain foreclosure and recourse protections when you leave the A6 structure. That is a real cost, not a technicality.
A Practical Way to Decide
Skip the program names for a minute and answer these in order.
- Is the home your Texas primary residence? If yes, the A6 rules apply to any cash-out.
- Do you need cash, or just a better loan? No cash means VA IRRRL, FHA Streamline or a rate-and-term refinance are on the table.
- Do you have VA eligibility? If yes and you need cash, a conventional A6 or home equity product is usually the realistic Texas route. If no, the same applies.
- How tight is your credit? If a conventional A6 is out of reach because of the credit floor, ask a broker whether any FHA structure can be placed on your property. Be ready for a no.
- How much equity do you need? At 80% combined, 20% of value stays in the house. If your need exceeds what that leaves, no Texas homestead structure will fill the gap.
One practical note on timing. The waiting period and the required appraisal add steps compared with a standard refinance. Plan around them rather than assuming a normal refinance schedule.
Common Mistakes
- Assuming VA cash-out works in Texas at 80%. Some web pages say so. The Attorney General opinion says otherwise, and the opinion is the better source.
- Treating the 80% cap as a lender overlay. It is constitutional and covers every lien on the home.
- Confusing an IRRRL with a cash-out. The IRRRL gives no cash back and refinances an existing VA loan.
- Blaming HUD for the FHA problem. The obstacle is described as a market and fee-cap issue, not a HUD ban. That also means it can differ by lender.
- Skipping the 12-month occupancy test. FHA cash-out needs the home owned and occupied for 12 months before the case number.
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
Homestead: the home you live in as your primary residence, which Texas law protects with special rules on liens and equity loans.
Texas A6 loan: a cash-out refinance or home equity loan under Article XVI, Section 50(a)(6) of the Texas Constitution.
Net tangible benefit: a test that shows a VA cash-out gives the veteran a real, measurable gain.
Funding fee: the one-time charge VA loans carry instead of monthly mortgage insurance.
Upfront and annual premium: the FHA mortgage insurance charges, one added at closing and one that recurs over the loan.
Combined LTV (CLTV): all liens on the home added together and divided by its appraised value.
Balanced Verdict
For a Texas homestead, the comparison between VA and FHA cash-out is mostly a comparison of two doors that are hard to open. VA is the stronger national program, but the Attorney General’s reading of the constitution generally closes it on a homestead. FHA is the more flexible program on credit, but the fee-cap collision is commonly reported to close it in Texas as well, with the caveat that the evidence is industry practice rather than a HUD rule.
If you are a veteran who needs cash from a Texas homestead, expect the answer to be a conventional A6 or a home equity product. If you are a veteran who only wants a better loan, a no-cash VA refinance may be the right door. If you are a non-veteran with tighter credit, ask whether FHA can be placed at all, and keep a conventional route and a no-cash route ready as backups. Every figure here depends on lender guidelines, your credit profile, the appraisal and a full file review.
Frequently Asked Questions
Can a Texas veteran do a VA cash-out refinance on a homestead?
Generally no. The Texas Attorney General’s opinion on the question treats the VA guaranty as additional collateral, and the constitution bars extra collateral on a homestead equity loan. An attorney general opinion is advisory, but lenders underwrite to it. A VA refinance that takes no cash out is a different product and is generally described as unaffected.
Is FHA cash-out banned in Texas by HUD?
Not as far as is publicly documented. The commonly reported reason is that FHA’s upfront premium pushes lender charges past the Texas fee cap. Because that comes from industry practice, availability can differ by lender, and it is worth asking a broker whether any program can be placed on your specific property.
How much equity can I take out of a Texas homestead?
Combined liens, including your existing mortgage, cannot exceed 80% of the home’s fair market value. That means at least 20% of the value stays in the home. This limit applies to a Texas A6 cash-out regardless of credit strength.
Does FHA cash-out need the home to be owned for a certain time?
Across the programs Lendmire places, FHA cash-out reaches 80% LTV on a home owned and occupied for 12 months before the case number. Seasoning rules are often confused with the Streamline, so check the current HUD Handbook for your situation.
What if I already have a Texas home equity loan?
You may be able to refinance it into a non-A6 loan if state conditions are met, including time since closing and a combined balance at or below 80% of value. Doing so gives up some foreclosure and recourse protections, so read the required notice before you decide.
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.
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.
For current guidelines, see FHA loan programs.
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References
2. Texas Attorney General Opinion KP-0183
3. HUD
4. Texas Constitution Article XVI, Section 50 (University of Texas School of Law resource)
5. Texas Statutes (official constitution text)
This article is part of Lendmire’s FHA Loan series — every loan program’s qualification details, guidelines, and scenarios live on the loan options page.
Related reading: Can You Consolidate Debt With an FHA Cash-Out on a Texas Homestead? · FHA Cash-Out Loan Cap and Fee Limits on a Texas Homestead · Can You Get an FHA Cash-Out Refinance on a Texas Homestead?
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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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.