FHA Cash Out Refinance Requirements

An FHA cash-out refinance lets homeowners turn built-up equity into cash by replacing an existing mortgage with a new loan up to 80% of the home’s appraised value, provided the borrower meets FHA eligibility requirements (credit, DTI, payment history, and seasoning). It’s a common way to consolidate debt, pay for home improvements, or access equity under government-insured guidelines.

What is an FHA Cash Out Refinance?

An FHA cash out refinance is a new mortgage against the property which pays off the existing loan, plus provides additional money from some of the remaining equity in the home to be used for other purposes. The maximum loan amount permitted per the FHA guidelines is 80% of the appraised value.

Key attributes of an FHA Cash Out Refinance:

• Pays off and replaces existing mortgage
• New appraisal is required to establish the current value
• Maximum cash out of up to 80% of the current appraised value
• Must provide full income and asset documentation
• The home must be your primary residence
• No restrictions on what the cashed out equity can be used for

According to HUD’s FHA Handbook, there must be a net tangible benefit to the borrower when refinancing. This means your rate or term must improve, or you are trying to access equity.

Read more about FHA refinance options.

FHA Cash Out Refi Guidelines 2026 – Eligibility and Requirements

Qualifying for the cash out option is nearly the same as qualifying for any FHA loan. However, there are a few slight modifications which only apply to the cash out version of the FHA loan.

These are the minimum requirements to qualify:

• Employed for a minimum of 2 years
• Minimum credit score of 500
• No missed mortgage payments in last 12 months
• Maximum debt to income ratio of 56.9%
• Maximum total loan amount of 80% loan to value
• Need to have made at least 6 monthly payments on existing mortgage before applying
• Cannot have any late mortgage payments within the past 12 months
• Property Requirement – The home must be your primary residence and 1-4 units

These are just the basic requirements. We can help you to determine exactly how much you can qualify for and provide a rate quote without running your credit.

An important note is some lenders have their own credit score and DTI requirements which may be tighter than what FHA guidelines permit. These are called lender overlays.

In our more than 20 years in the industry as mortgage professionals, we have helped tens of thousands of homeowners to refinance their homes with an FHA loan. Just click to contact us to discuss your options and provide you with all of the information needed for you to make a decision about your refinance.

What Can the Cash Out Equity Be Used For?

The FHA cash out refinance does not restrict what the funds can be used for. Our guidance would be to use the cash towards interest saving, or equity building activities as outlined in this list:

• Home improvements

• Debt consolidation 

• Paying medical or student loan debt

• Education expenses

• Investments or savings

• Purchasing additional properties
• Buying out an ex-spouse

However, once you close on the FHA cash out refinance, you can use the funds for anything you like.

Closing Costs & Impacts on Cash Out Amount

Something you need to consider before moving ahead with the refinance is the closing costs. FHA closing costs will amount to anywhere from 2%-5% of the loan amount. Remember with FHA loans you will still have the mortgage insurance premium at closing and also the monthly mortgage insurance included in your payment.

The closing costs will be paid for out of the cash out funds or will essentially reduce the amount you can cash out. We suggest reading our article on FHA closing costs, FHA mortgage insurance, and the article about rolling FHA closing costs into the loan.

We can help provide you with a closing cost estimate but your best bet is to look at the closing documents from your home purchase to see exactly what those costs were. Then, plan on eliminating the inspection and a reduction of the mortgage insurance.  Once you complete a loan application, your estimated closing costs will be fully disclosed.

When closing on a cash out refinance, your closing costs will be very similar to what you had at the time of purchase.  Some things to note about the closing costs:

• Closing costs can reduce net cash-out

• Mortgage insurance premium (UFMIP) applies and may be rolled into the loan

• FHA mortgage insurance stays on the loan per standard FHA rules. However the mortgage insurance calculation is based upon your final equity position after the cash out.

Standard Closing Costs for an FHA Cash Out Refinance

• Loan Origination Fee: For processing and funding the loan (around 1%). 
• Application/Processing/Underwriting Fees: For loan application, processing, and reviewing.
• Rate Lock Fee: To guarantee your interest rate.
• Discount Points: Optional fees to lower your interest rate. 

*Not all lenders charge these fees above

Third Party Fees

• Appraisal Fee: For a professional valuation of the home.
• Credit Report Fee: For pulling your credit history.
• Title Search & Title Insurance: To ensure clear property title and protect the lender/buyer.
• Recording Fees: To record the deed and mortgage with the county.
• Notary Fees: For notarizing documents.
• Attorney Fees: If required in your state.
• Flood Certification: Checks if the property is in a flood zone.

• Upfront Mortgage Insurance Premium (UFMIP): A one-time, mandatory fee, currently 1.75% of the loan amount, paid at closing.

• Prepaid Interest: Interest from closing day to the end of the month.
• Homeowner’s Insurance: Initial premiums.
• Property Taxes: Initial escrow deposits

Real Example of a refinance scenario:

Below is an example of how the program will work. One of the variables that may differ for each person are the closing costs.

Original Purchase Price	$200,000
Current Loan Balance	$180,000
Current Appraised Value	$255,000
New Loan Amount at 80% of the Appraised Value	$204,000
Estimated Closing Costs	$6,120
Estimated Cash Out Amount	$17,880

This is just one example and every scenario will be different. The closing costs will need to be calculated when you speak with one of our loan officers. If you are unsure of what to budget for closing costs, read about the FHA closing costs.

Credit Score Requirement

FHA guidelines permit credit scores as low as 500, however lenders have the autonomy to impose their own credit score requirements which can be higher. However, we are able to help with the minimum credit score of 500.

If you are unsure of what your scores are or think they may be too low to qualify, we still think there is a chance for you. Reach out to us here and we can have one of our loan experts help with your credit.

What is the Max LTV When Cashing Out Equity?

The maximum LTV for an FHA cash out refinance is 80% of the appraised value of the home.

The underwriter will require a full appraisal before issuing a final approval. After the appraisal, your loan amount can be adjusted to meet the maximum 80% LTV requirement.

What Can the Cash be Used For?

The FHA does not restrict what the cash out funds can be used for and there are many benefits. However, these are the typical reasons why homeowners opt for a FHA cash out refinance:

• To make home improvements such as updating your kitchen or bathrooms
• To consolidate credit card debt
• To pay off auto loans
• To pay off student loans
• For college savings funds
• For a down payment on another property

In the end, you can use the funds for anything you want. However, paying down high interest credit cards and other high interest debt accounts makes the most sense financially.

Click to get connected with one of our loan officers

Typical FHA Interest Rates

The interest rates for cashing out are similar to what you would see if you were obtaining a mortgage to purchase a home. You can expect rates to be slightly lower than that of a conventional cash out refinance.

If you are looking for the lowest rate possible, you can potentially buy the rate down by paying for discount points with some of your cash-out proceeds.

Loan Limits and Application Process

No matter what type of FHA loan you are applying for, there will be a maximum FHA loan limit for each county. This is the maximum FHA loan amount you are permitted to have regardless of whether you can qualify for a higher amount based upon your income. We have an FHA loan limits page that you can review to see what the maximum is for your area.

The application process is very simple and should take a short time if you apply online. The loan officer will ask you to complete the application like you would for a purchase. However, you are not required to provide income documentation. No pay stubs, W2’s or tax returns.

There will be no appraisal to verify the property value and this may be helpful at a time when property values have declined. 

The loan officer will verify that you have not been late on any mortgage payments over the past 12 months. Your credit score will not be used as a deciding factor of whether your loan is approved, but it does play a major role in determining your interest rate.

Once you receive a conditional approval from the automated underwriting system, then the title work can begin and any outstanding items requested by the underwriter should be provided.

The closing should take no loner than three to four weeks from start to finish

FHA Seasoning Requirements When Cashing Out Equity

The FHA seasoning requirement is 12 months from the closing date of your current loan or purchase. This means you must wait at least 12 months after the purchase or refinance date before you can cash-out equity.

In addition to waiting 12 months, you cannot have any late or missed mortgage payments during that time.

Refinancing with a 580 Credit Score

Many homeowners have credit scores of 580 and are looking to cash out equity with an FHA loan. Although most lenders require higher scores for a mortgage approval, there are a handful of lenders who will accept a 580 score when cashing out. We are able to go lower than 580 per the FHA guidelines.

Contact us so we can help regardless of what your credit scores are.

FHA Cash-Out Plan

The FHA cash out plan involves refinancing your current mortgage while cashing out equity. With this plan, you will refinance up to a maximum of 80% of the appraised value. You will have to qualify by providing all of your income documentation and tax returns.

The equity that you cash out can be used for anything you want. The FCOP differs from the FHA streamline refinance because it allows for a larger loan amount than the current balance and you need an appraisal.

FHA Refinance with Very Bad Credit

If your credit score is extremely poor, you still may have an opportunity to get a cash out refinance. With a score as low as 500, you can potentially qualify but with compensating factors. 

Your credit score is not the only thing the loan officer will look at. High income and longevity in your current job will help you to secure an approval.

When your credit scores are low, it may limit how far you can push the debt to income ratio for your loan. Some lenders reduce the DTI as the credit scores decline.

FHA Cash Out Refinance Q&A

What is an FHA cash-out refinance?

An FHA cash-out refinance replaces your existing mortgage with a new FHA loan and allows you to take cash from the equity you have in your home — up to 80% of the appraised value.

How much equity can I cash out with an FHA refinance?

Under current FHA guidelines, you can borrow up to 80% of your home’s appraised value. The difference between that amount and your existing mortgage balance is your available cash-out amount.

What are FHA cash-out refinance eligibility requirements?

To qualify for an FHA cash-out refinance, you generally need:

• At least 12 months of on-time mortgage payments

• No late payments in the most recent 12 months

• An acceptable credit profile (often 580+ for better pricing)

• A debt-to-income ratio within FHA limits (e.g., up to 56.9%)

• Sufficient income to support the new loan

• Owner-occupied primary residence status (1–4 units)

Do I need to have an appraisal for an FHA cash-out refinance?

Yes. An FHA cash-out refinance requires a full appraisal to determine the current value of the home, which is essential to calculate the maximum loan-to-value and the cash-out amount. 

What is the minimum credit score for FHA cash-out refinance?

FHA guidelines permit credit scores as low as 500, but many lenders require a higher score (such as 580 or above) to qualify for a cash-out refinance.

How long do I have to live in my home before doing an FHA cash-out refinance?

FHA requires that you live in the home as your primary residence for at least 12 months before pursuing a cash-out refinance. 

What counts as a late payment on an FHA cash-out refinance?

Typically, any 30-day late mortgage payment reported within the past 12 months can disqualify you from an FHA cash-out refinance. Consistent on-time payments improve approval odds. 

Can I cash out on a non-FHA loan using an FHA cash-out refinance?

Yes — even if your existing mortgage is not an FHA loan, you can refinance into an FHA cash-out refinance, provided you meet FHA eligibility and seasoning requirements.

Can FHA cash-out refinance be used for any purpose?

Yes — unlike some government refinance options, FHA cash-out funds can be used for debt consolidation, home improvements, education expenses, emergency funds, or other personal financial needs. 

Are FHA cash-out refinance closing costs different?

Closing costs for an FHA cash-out refinance are similar to other FHA loans and typically include appraisal, title, recording, origination fees, and mortgage insurance. These costs can often be paid from the cash-out proceeds, reducing the net funds received.

Is Refinancing to pull out equity a Smart Decision?

Every situation and reason for applying to access equity in the home will be different. The only thing that is the same for everyone is the need for additional cash for a legitimate purpose.

Most financial experts would prefer that you use the money for things that can build wealth or to pay off high interest debt.

What these experts like Dave Ramsey will caution against is using the money for frivolous things such as vacations and new cars. You should consult with a financial professional to see whether a cash out equity makes sense for you.

Is there an FHA Streamline Cash Out?

The FHA does not offer a cash out streamline option. Therefore, you would need to provide all of the standard documentation to qualify for an FHA cash-out refinance. If you would like a streamline refinance, you would not have the ability to cash out any additional funds other than what is needed to cover the closing costs. Read more about the [No cash out FHA streamline refinance]

Can I take out equity with FHA if my Current Loan is Not an FHA Loan?

You can still refinance even if your current loan is not an FHA loan. The only restriction where the current loan must be an FHA loan is when you are applying for an FHA streamline refinance.

How Long do You Have to Live in the Home to Access the Equity?

According to the FHA guidelines, homeowners must live in the home for at least 6 months and make at least 6 mortgage payments before refinancing. However, to cash out equity you will need to be in the home for at least 12 months.

What is the difference between a cash out refinance and a HELOC?

The cash out refinance is a fixed rate loan where you cash out the equity all at once. Conversely, a HELOC is a line of credit that you can borrow against as needed and the rate adjusts monthly. FHA does not offer a HELOC.

How long does it take to complete the FHA cash out refinance?

How is the interest rate determined for the refinance?

How does an FHA version of the cash out refinance differ from a conventional cash out refinance?

What are the repayment terms for an FHA refinance?

Noteworthy FHA Cash-Out Statistics You Should Know

Related Articles

FHA Changes the Cash Out Refinance Limits

FHA Streamline Refinance