FHA generally lets you borrow up to 80% of your home's appraised value in a cash-out refinance, paying off your current mortgage and giving you the rest in cash. You'll generally need to have owned and lived in the home as your primary residence for at least 12 months, with on-time mortgage payments over that period, plus a new appraisal and full credit and income review.
How an FHA cash-out refinance works
With a cash-out refinance, a new FHA loan pays off whatever is currently owed on the home, and you receive the remaining proceeds at closing. The maximum new loan is generally 80% of the appraised value (and can't exceed the FHA loan limit for your county — see FHA loan limits).
In plain terms: take the appraised value, apply FHA's 80% maximum, and subtract what you owe today. What's left, minus closing costs and mortgage insurance, is roughly the cash available. Your actual figure depends on the appraisal, fees, and underwriting.
Texas homeowners: cash-out loans on a Texas homestead must follow Section 50(a)(6) of the Texas Constitution, and FHA generally doesn't insure those loans. In Texas, the usual routes are a conventional Texas cash-out refinance or a HELOC — see MyExpressHELOC or Texas FHA loans, and Matthew will walk you through the options.
Unlike a streamline, the current loan doesn't have to be FHA. Conventional, VA, or privately held mortgages can be refinanced into FHA cash-out, and homes owned free and clear are eligible too.
Ownership, occupancy, and payment history
HUD's cash-out rules focus on stability. Generally:
| Requirement | General FHA guideline |
|---|---|
| Maximum loan | 80% of appraised value, within the county FHA limit |
| Ownership and occupancy | Owned and occupied as your primary residence for the 12 months before the case number is assigned |
| Payment history | All mortgage payments in the last 12 months made within the month due (or fewer than 12 months if the home was recently bought, with extra rules) |
| Appraisal | New FHA appraisal required; property must meet FHA property standards |
| Credit and income | Full documentation; FHA credit and DTI guidelines apply, often with lender overlays |
Inherited homes and homes received in a divorce may have different ownership-timing rules. Ask Matthew before assuming you have to wait.
Want a straight answer for your situation? Skip the call center — Matthew will review your credit, budget, and FHA options himself.
Talk with MatthewCommon uses for FHA cash-out
FHA doesn't restrict how cash-out proceeds are spent, but the most common goals are:
Paying off debt
Replacing credit card or personal loan balances. This can lower your overall debt-to-income ratio, but it turns unsecured debt into debt secured by your home — weigh that carefully.
Home improvements
For light projects. For bigger renovations, an FHA 203(k) loan may fit better — see FHA 203(k) Info.
Life expenses
Education, medical bills, or buying out an ex-spouse's share after a divorce.
It also works when you simply want to refinance out of a loan you're unhappy with and pull out a modest amount at the same time.
FHA cash-out vs. a HELOC
A home equity line of credit leaves your first mortgage untouched and adds a separate line you can draw on as needed. An FHA cash-out replaces your first mortgage entirely.
| FHA cash-out refinance | HELOC | |
|---|---|---|
| Your current first mortgage | Paid off and replaced | Stays in place |
| How you receive funds | Lump sum at closing | Draw as needed during the draw period |
| Mortgage insurance | Upfront and annual FHA MIP apply | No mortgage insurance |
| Credit expectations | FHA's flexible tiers, plus lender overlays | Typically higher credit expectations |
| Best fit | When refinancing the first loan also makes sense, or credit is still rebuilding | When your current first mortgage is worth keeping |
If you'd rather keep your existing mortgage, Matthew also offers an online HELOC through My Express HELOC, which he can compare side by side with FHA cash-out.
FHA cash-out vs. conventional cash-out
Conventional cash-out refinances generally have similar maximum loan-to-value limits for a single-unit primary home, but they tend to expect stronger credit and have their own title-seasoning rules. The biggest practical differences:
- Credit flexibility: FHA may work for borrowers with lower scores or past credit issues that would be priced heavily or declined on a conventional loan.
- Mortgage insurance: conventional cash-out at or under the maximum usually doesn't require mortgage insurance, while FHA cash-out carries MIP — often the deciding factor for borrowers with strong credit.
- Debt ratios: FHA can allow higher ratios with compensating factors, though automated approval decides much of this.
More detail is on FHA vs. conventional loans.
Before you apply
- Estimate your equity honestly. Recent nearby sales matter more than online estimates.
- Gather 12 months of mortgage statements to confirm on-time history.
- List your goals and amounts. Borrowing only what you need keeps the loan and MIP lower.
- Review your credit reports for errors, since cash-out is fully credit-qualified and a higher score can widen your lender choices.
- Plan for the MIP: upfront and annual FHA mortgage insurance apply to the new loan, so borrow only what serves the goal.
- Have Matthew compare options: FHA cash-out, conventional cash-out, and a HELOC. HUD guidelines change, and lenders may add overlays — Matthew will confirm the current rules for your file.
Frequently asked questions
How much can I get with an FHA cash-out refinance?
Generally up to 80% of the appraised value, minus what you owe and closing costs, and within the county FHA loan limit.
Do I need an FHA loan now to do an FHA cash-out?
No. Any existing mortgage can be refinanced, and homes owned free and clear are eligible too.
How long do I need to own the home?
Generally 12 months of ownership and occupancy as your primary residence before the case number is assigned. Inherited or divorce-related situations may differ.
Can I use an FHA cash-out on a rental property?
No. FHA cash-out is for owner-occupied primary residences. For investment property equity, other loan types would need to be reviewed.
How long does the appraisal remain usable?
An FHA appraisal is generally valid for 180 days. If closing slips past that point, an update may be needed. Keeping documents organized up front helps avoid delays on your side.
Can I buy out my ex-spouse with an FHA cash-out?
Often, yes. Divorce-related buyouts can have different rules than a standard cash-out, depending on how the property is being transferred and what the decree says. Bring the divorce decree or settlement agreement so Matthew can review which refinance structure applies.
Ask Matthew about your FHA home loan
Tell Matthew a little about the property and your plans. He'll follow up by phone or email — no obligation.
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