The Quick Read: To qualify for a cash-out refinance, you need enough equity to stay under the program’s leverage cap, a first mortgage that is old enough, time on title, and occupancy that fits the property type. On a primary residence, every borrower on the loan lives in the home. Credit, debt-to-income ratio, and reserves then decide whether the file clears. On a conventional loan, the cap is 80% of appraised value on a one-unit primary residence and 75% on two- to four-unit homes, second homes, and investment property. Every figure here is subject to lender guidelines and full file review, and none of it is a commitment to lend.
What a Cash-Out Refinance Actually Is
A cash-out refinance replaces your current first mortgage with a new, larger one. The new loan pays off the old balance and any liens being cleared, and you receive the remainder as cash after closing costs. That is the whole mechanism.
It is not a HELOC or a home equity loan. Those leave your first mortgage in place and add a second lien. A cash-out refinance has one lien, the new first mortgage. The Consumer Financial Protection Bureau draws the same line in its research on cash-out refinance mortgages.
It is also different from a limited cash-out refinance, sometimes called a rate-and-term refinance. That loan pays off the existing first mortgage, closing costs, and a purchase-money second lien, with only incidental cash back. It can go to 95% LTV on a one-unit primary residence. A cash-out refinance cannot, because you are taking real cash out. Cash-out has its own, lower leverage caps, which is why the two products get confused and why files get mis-scoped at intake. Every figure here varies by lender and program — guidelines, property type, leverage, and credit profile all apply.
Lendmire arranges these loans through wholesale lenders. Its cash-out refinance programs cover conventional, FHA, VA, and jumbo lanes, and the qualifying tests below are the ones those files actually run through.
Key Terms Defined
LTV (loan-to-value): the new loan balance divided by the appraised value of the home.
Seasoning: how long you have held the title or the existing loan before a cash-out is allowed.
Note date: the date on the signed promissory note, used to measure loan age.
DTI (debt-to-income): your total monthly debt obligations divided by gross monthly income.
Reserves: liquid assets left after closing, counted in months of housing payments.
Delayed financing: a seasoning exception for someone who bought a home with cash and wants to borrow against it soon after.
How the Loan Gets Underwritten, Step by Step
The deal works through a series of checks in a fixed order. A failure at any step stops the cash-out or shrinks it.
1. Equity screen. The new loan has to fit under the program’s leverage cap, measured against the appraised value. On a conventional one-unit primary residence, that cap is 80%. Say you owe 60% of the appraised value today. You could in theory borrow the difference up to the cap, minus closing costs. That gap is your maximum cash on paper.
2. Seasoning clocks. The first mortgage being paid off must be at least 12 months old, measured note date to note date. At least one borrower must have been on title for six months. Fannie Mae’s Selling Guide sets both tests. The 12-month test does not apply to a subordinate lien being paid off, or to buying out a co-owner under a legal agreement.
3. Occupancy. On a primary residence cash-out, every borrower on the loan must occupy the home, and VA requires you to live in it too. Second homes and investment property follow separate leverage tiers (75% conventional), so occupancy decides the cap. A co-borrower who lives elsewhere is a common reason a primary-residence file gets restructured.
4. Credit, income, and DTI. Across the wholesale conventional programs, files start at a 620 decision score. The automated finding governs most files, with a total ratio ceiling of 50%. Manually underwritten loans run 36% or 45%, with reserve and score factors from the Eligibility Matrix. Income, employment, and assets are documented either way.
5. Appraisal. A full appraisal sets the value that the cap multiplies. Streamline products can skip it. Cash-out products cannot.
6. Title and payoff. Existing liens are paid, closing costs come out, and what remains is your cash. A listed property must be taken off the market by the disbursement date under Fannie Mae’s rule.
What decides the outcome: equity by appraisal, seasoning, occupancy, credit and DTI, and which program you choose.
The Requirements at a Glance
| Requirement | What it means | How to improve it |
|---|---|---|
| Equity / LTV | 80% cap on a one-unit primary | Wait for value gains or pay down |
| Loan seasoning | First mortgage 12+ months old | Wait it out |
| Title seasoning | 6 months on title, one borrower | Wait, or check exceptions |
| Occupancy | Primary: all borrowers live there; second home or rental: 75% cap | Remove a non-occupant co-borrower, or expect the lower cap |
| Credit score | 620 starting point | Fix report errors, pay down cards |
| DTI | 50% ceiling on automated files | Pay off debts before applying |
| Reserves | Months of payments, if DTI is high | Document liquid assets |
Credit, DTI, and Reserves: Where Files Get Tight
The automated underwriting finding governs most files, so the number you see on a checklist is rarely the whole story. A 620 score can clear on a strong file and stall on a thin one.
DTI is the second pinch. Your new payment replaces your old one, and a larger balance means a larger payment. That payment goes into the ratio. On Fannie Mae’s Desktop Underwriter, a DTI above 45% triggers a six-month reserve requirement on cash-out. The Eligibility Matrix carries that rule along with other reserve tests. Final terms depend on lender guidelines, property type, leverage, and the borrower’s complete credit picture.
Paying off debts with the proceeds can improve the ratio on the next review, but the underwriter counts the new payment now. Plan the file around the ratio at application, not the ratio after you spend the money.
Credit events have waiting periods set by the agencies: four years from a chapter 7 discharge, seven from a foreclosure, and four from a short sale or deed-in-lieu. Documented extenuating circumstances can shorten them.
Structures and Variations
Conventional is the default lane, but it is not the only one.
Conventional cash-out. 80% LTV on a one-unit primary residence. 75% on two- to four-unit primary residences, second homes, and investment property. Mortgage insurance is not the usual issue here because the cap sits at 80%. These specifics are subject to lender guidelines and a full review of property, leverage, and credit.
Higher-leverage wholesale lane. One lane reaches 89.99% LTV with no mortgage insurance. It requires a 680 score, a 50% ratio, a thirty-year fixed rate, a primary residence, a conforming balance, and its own six months of seasoning. It is not written in Texas. Terms depend on the lender’s guidelines, the property type, the leverage, and a full review of the credit profile.
FHA cash-out. HUD cut the maximum LTV and CLTV on FHA cash-out refinances from 85% to 80% of Adjusted Value through Mortgagee Letter 2019-11. The common belief that FHA lets you borrow more than conventional is out of date. FHA cash-out is also a different product from the FHA Streamline.
VA cash-out. You need a Certificate of Eligibility, a credit and income profile that meets VA and lender standards, and you must live in the home. A Type I loan does not exceed the payoff amount including the funding fee. A Type II loan exceeds it. The lender must certify a recoupment period on Type I loans.
Jumbo. Above the conforming limit, the jumbo lanes take over with a 660 decision score, leverage to 90%, loans to $5,000,000, and a 50% ratio ceiling on the fixed lanes. Those leverage tiers apply to rate-and-term jumbo files, and cash-out jumbo leverage is set file by file.
Where the Rule Breaks
These are the edge cases that move a file out of the standard path.
- Co-owner buyout. Fannie Mae exempts it from the 12-month test.
- Paying off a subordinate lien. The 12-month test does not apply to the lien being retired.
- Free and clear. A new mortgage on a home with no lien is still a cash-out. Delayed financing, inheritance, and legal-award exceptions can shorten the title clock. Check which one fits before assuming you are blocked.
- Recently listed. The home has to be delisted by disbursement. Lender overlays can add to that.
- Manufactured homes. They must be underwritten with Desktop Underwriter, and cash-out is not permitted with Community Seconds.
- Second homes and rentals. One sentence settles it: occupancy decides leverage, and the cap drops to 75%.
- Texas homestead. A state constitutional cap applies, and the wholesale higher-leverage lane is not written there.
Two products that look like cash-out but are not: the FHA Streamline and the VA IRRRL. Neither pays out cash. The FHA Streamline needs an existing current FHA loan and a net tangible benefit, per HUD. The IRRRL is VA-to-VA only.
Net Proceeds: The Number That Matters
The maximum cash on paper is not the cash you receive. Take the appraised value, apply the 80% cap, subtract your payoff, then subtract closing costs and prepaid items. What is left is your net.
Rolling closing costs into the new balance reduces your cash. Paying them separately keeps the balance down but needs cash at the table. Compare Loan Estimates side by side and ask which one you are looking at.
A low appraisal hits this directly. The cap multiplies a smaller value, so the loan amount drops and so does the cash. Ask the loan officer early whether a reconsideration request with recent nearby sales is worth submitting.
If You Don’t Qualify Yet
Most misses are one of five things, and each has a lever.
1. Equity short. Reduce the cash requested, or wait for the balance to fall or value to rise.
2. Seasoning short. Wait out the clock, or check whether delayed financing, inheritance, or a buyout exception applies.
3. DTI too high. Pay down installment debt before applying. A ratio change only counts once the old balances are actually paid and show on the report.
4. Credit short. Correct reporting errors and bring revolving balances down. Avoid opening new accounts during the file.
5. Occupancy mismatch. Take a non-occupying co-borrower off the loan, if their income is not needed.
Avoid new debt and large undocumented deposits while the file is in review. Both create conditions that stall the file.
What the Decision Looks Like in Practice
Picture a homeowner with a first mortgage that is eighteen months old, a primary residence, a 700 score, and about 55% of the appraised value owed. Seasoning clears. Equity clears with room. The question becomes how much to take and what the larger balance does to the monthly budget.
That is the real decision. You are converting equity and possibly other debts into debt secured by your home. The CFPB’s research notes this can put the home at risk if payments become unsustainable, and that cash-out draws down wealth available for later. Borrowers in the CFPB’s survey most often used the money to pay other bills or debts, with home repairs second, per the CFPB.
Once you sign, you generally get three business days to cancel a refinance of your primary residence. Saturdays count. Sundays and legal public holidays do not. Waiving that window is allowed only in a bona fide personal financial emergency, and the CFPB notes waiving it can forfeit the right.
Tax treatment can depend on your situation; borrowers should speak with a qualified tax professional before relying on any deduction or credit.
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.
Frequently Asked Questions
How much equity do I need to keep after a cash-out refinance?
On a conventional one-unit primary residence, the new loan can reach 80% of appraised value, so you keep at least 20% equity. Two- to four-unit homes, second homes, and investment property cap at 75%. FHA also caps at 80% of Adjusted Value. Subject to lender guidelines and full file review.
How long do I have to wait after buying or refinancing?
The first mortgage being paid off must be at least 12 months old, note date to note date, and one borrower must have been on title for six months. Delayed financing, inheritance, and legal-award exceptions can change the title clock. The 12-month test does not apply to a subordinate lien being paid off.
Does the new payment count toward my DTI?
Yes. The larger balance produces a new payment that goes into the ratio. On automated files the total ratio ceiling is 50%. On Desktop Underwriter, DTI above 45% triggers six months of reserves on a cash-out.
Can an FHA Streamline or VA IRRRL give me cash?
No. The FHA Streamline is not a cash-out product, and the VA IRRRL cannot pay other loans from proceeds. If you want cash, you need a cash-out refinance under the FHA, VA, or conventional rules.
What if the appraisal comes in low?
The leverage cap is applied to the lower value, so the maximum loan and your cash both shrink. You can ask about a reconsideration request supported by recent nearby sales, reduce the cash you asked for, or wait.
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.
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References
1. CFPB
2. Fannie Mae Selling Guide B2-1.3-03
3. Fannie Mae Eligibility Matrix
4. HUD Mortgagee Letter 2019-11
5. HUD
7. CFPB
8. CFPB
This article is part of Lendmire’s cash-out refinance program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: Can You Refinance Your Home Without a Cash-Out Refinance? · Cash-Out Refinance for Homeowners Who Cashed Out Before · Can You Refinance a Cash-Out Refinance Again Later?
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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- Lendmire LLC · Firm NMLS# 2371349 · Verify firm licensure
Required disclosures. Lendmire (NMLS# 2371349) operates as a licensed mortgage broker, not a direct lender or depository. The discussion in this article is general in nature and should not be relied upon as financial, legal, or tax advice — every investment scenario is unique and should be reviewed by a qualified professional. Any loan inquiry is subject to lender underwriting, and this article is not a commitment to lend or a guarantee of approval. Mortgage rates, loan terms, and program guidelines vary by borrower, property, and state, and may change without notice. Equal Housing Opportunity. Verify licensure at NMLS Consumer Access.