Borrow up to 80% of your home's value and take the difference in cash — whether or not your current mortgage is an FHA loan.
You replace your existing mortgage with a larger FHA loan and receive the difference at closing. The ceiling is 80% of the appraised value, so a home worth $700,000 supports a new loan of up to $560,000. Whatever is left after paying off the current balance and closing costs is yours.
The part that surprises people: your current loan does not have to be FHA. A conventional mortgage, or a loan from any other program, can be refinanced into an FHA cash-out. That makes this a genuine option for borrowers whose credit has slipped since they bought, and who would struggle to qualify for a conventional cash-out today.
Unlike the streamline refinance, this is a fully underwritten loan. There is an appraisal, income documentation and a credit check.
| Requirement | FHA cash-out |
|---|---|
| Maximum loan-to-value | 80% of appraised value |
| Occupancy | Primary residence, occupied at least 12 months |
| Payment history | All payments made in the month due for the last 12 months |
| Existing loan type | Any — FHA, conventional or other |
| Appraisal | Required |
| Use of funds | Unrestricted |
FHA sets a credit floor of 500, but cash-out is the transaction where lender overlays bite hardest — most require considerably more.
If you are refinancing a conventional loan into an FHA cash-out, be clear-eyed about what you are taking on. The new loan carries FHA mortgage insurance: an upfront premium of 1.75% financed into the balance, and an annual premium charged monthly.
Because a cash-out at 80% loan-to-value means you are putting less than 10% equity behind the loan by FHA's reckoning, that annual premium generally stays for the life of the loan. You would be trading conventional mortgage insurance that ends on its own for FHA insurance that does not.
That trade can still be worth making — access to equity you could not otherwise reach usually is — but it is a trade, not a free upgrade. Where credit and equity allow, a conventional cash-out is often the cheaper route. It is worth pricing both.
Program parameters shown are current as of publication and are subject to change. All financing is subject to credit approval, property review and program availability.
No obligation — find the right fit for your situation.