FHA Cash-Out Refinance
Turn your home equity into cash, even with lower credit.
An FHA cash-out refinance lets you pull equity out of your home through a new FHA-insured loan.
It works even if your credit score falls in the 580 to 680 range.
This article is for homeowners who’ve built equity but don’t qualify for a conventional cash-out.
We cover what you need to qualify, what it actually costs, and how it compares to other options.
By the end, you’ll know whether this is the right move or if another path fits your situation better.
FHA cash-out is usually the better path when your credit score falls between 580 and 680.
In This Article
What Is an FHA Cash-Out Refinance?
A cash-out refinance replaces your current mortgage with a new, larger loan. You receive the difference as a lump sum at closing. An FHA cash-out refinance does this through a loan insured by the Federal Housing Administration. Because the government backs the lender against default, lenders can approve borrowers with credit scores that conventional loans won’t typically reach.
One thing worth clearing up right away: you don’t need a current FHA loan to use this program. You can refinance a conventional loan, a VA loan, a USDA loan, or any other type. What matters is whether you qualify for the new FHA loan, not what you started with.
The maximum loan-to-value (LTV) ratio for an FHA cash-out is 80% of your home’s appraised value. That means you must keep at least 20% equity in the home after closing. If your home appraises at $400,000, the largest FHA cash-out loan you can take is $320,000. If your current balance is $200,000, the gross cash before closing costs is $120,000. That 80% cap is a hard ceiling, and it’s based on the appraisal at the time of closing, not your original purchase price.
For a full overview of how FHA loans work, including purchase and refinance options, that page covers the program from the ground up.
What You Need to Qualify for an FHA Cash-Out Refinance
There are four main requirements: credit score, seasoning, debt-to-income ratio, and loan limits. Most people focus on credit score and overlook the others. The seasoning rule and DTI limits catch borrowers off guard just as often.
Credit Score
FHA sets a minimum credit score of 500 for cash-out refinances. Most lenders set their own floor higher, typically 580 to 620. Cash-out refinances face more scrutiny than purchases, so lenders tighten their standards accordingly. If you’ve seen other articles citing a 500 minimum, that’s technically FHA’s floor, not the real-world floor. Ask any lender you’re talking to what their specific requirement is, not just what FHA allows.
Occupancy and Seasoning
You must have owned and occupied the property as your primary residence for at least 12 months before applying. The clock starts on your original closing date, not your move-in date. If you bought 9 months ago, you’ll need to wait 3 more months. The property must also be your primary residence at the time of the refinance, not a rental or second home.
Debt-to-Income Ratio
FHA allows a debt-to-income ratio up to 43% for most borrowers. With strong compensating factors, such as significant cash reserves or a higher credit score, some lenders will approve up to 50%. Your DTI compares your total monthly debt obligations, including the proposed new mortgage payment, against your gross monthly income. If that ratio runs too high, you can either reduce the cash-out amount or pay down other debts before you apply. A useful starting point is our overview of what lenders actually look at when evaluating your application.
Loan Limits
Your new loan amount must fall within the 2026 FHA limit for your county. The national floor for most counties is $541,287 for a single-family home. In Colorado Springs, the 2026 FHA limit for El Paso County is $541,650. Denver County comes in at $862,500. High-cost counties like Eagle and Pitkin reach $1,249,125. In Florida, most counties sit at the $541,287 floor. Monroe County (the Florida Keys) reaches $990,150, and Miami-Dade, Broward, and Palm Beach counties are set at $667,000 for 2026.
If you’re refinancing in Colorado or Florida, use the lookup below to find your county’s exact 2026 FHA limit.
Colorado FHA Loan Limits (2026)
| Property Type | 2026 FHA Limit |
|---|
Florida FHA Loan Limits (2026)
| Property Type | 2026 Loan Limit |
|---|
What This Means for Your Situation
The credit score and DTI requirements on an FHA cash-out affect borrowers very differently depending on the full financial picture. A 620 score with a low DTI and solid reserves lands in a different place than a 620 score with a borderline debt load. If your profile feels tight on any one of these factors, running your full numbers before you apply gives you a much clearer read on where you actually stand.
How Much Can You Borrow With an FHA Cash-Out Refinance?
The formula is straightforward. Your new loan cannot exceed 80% of the appraised value. The cash you receive is that loan amount minus your current balance, minus closing costs.
Here’s how that looks on a $400,000 home:
| Line Item | Amount |
|---|---|
| Appraised value | $400,000 |
| Maximum loan (80%) | $320,000 |
| Current balance | $200,000 |
| Gross cash available | $120,000 |
| Closing costs (2–5% of loan) | $6,400–$16,000 |
| Estimated net cash | $104,000–$113,600 |
That gross cash figure is not what hits your bank account. Closing costs come out first, either paid at the table or rolled into the loan. Rolling them in is common, but it raises your balance and your monthly payment. Run both options before you decide.
The appraisal controls the whole equation. Your original purchase price doesn’t factor in. Your neighbor’s recent sale doesn’t factor in. What the FHA-approved appraiser determines on the day of your appraisal sets your ceiling. If the appraisal comes in lower than expected, your maximum loan amount drops accordingly. Getting a realistic estimate of your current value before you apply saves you from building a plan around a number that won’t hold.
What an FHA Cash-Out Refinance Actually Costs
There are two MIP components plus standard closing costs. All three affect the real cost of this refinance over time, and one of them is widely misunderstood.
Upfront Mortgage Insurance Premium
Every FHA loan, including a cash-out refinance, requires an upfront mortgage insurance premium (UFMIP) of 1.75% of the new loan amount. On a $320,000 loan, that’s $5,600. It typically rolls into your loan balance at closing rather than coming out of pocket. But it raises your total balance and your monthly payment from day one.
Annual Mortgage Insurance Premium
FHA also charges an annual MIP. For a 30-year cash-out at 80% LTV, the annual rate is 0.50% of the outstanding loan balance. On a $320,000 loan, that’s $1,600 per year, or about $133 per month added to your payment.
Here’s what most articles get wrong: MIP at 80% LTV does not last for the life of the loan. Because the loan-to-value at origination is at or below 90%, MIP cancels after 11 years on a 30-year loan. That’s a meaningful distinction from a purchase loan with less than 10% down, where MIP can run much longer. You can still refinance into a conventional loan before the 11-year mark if your credit and equity support it, but you’re not locked into paying MIP indefinitely at 80% LTV.
Closing Costs
Beyond MIP, standard closing costs include the appraisal fee, title insurance, lender fees, and more. These typically run 2% to 5% of the new loan amount. Lenders must provide a Loan Estimate within three business days of your application. Use it to compare costs across lenders before committing. The CFPB’s Closing Disclosure guide breaks down every line item so you know exactly what you’re reviewing.
FHA vs. Conventional Cash-Out: What Changes the Math
Most people assume FHA cash-out is a fallback for borrowers who can’t qualify for conventional. That’s not exactly right. For borrowers in the 580 to 680 credit score range, FHA cash-out often carries more competitive pricing than conventional, even after accounting for MIP. The table below lays out the key differences.
| Factor | FHA Cash-Out | Conventional Cash-Out |
|---|---|---|
| Max LTV | 80% | 80% |
| Minimum Credit Score | 500 (FHA); 580–620 in practice | 620 per Fannie Mae guidelines |
| Mortgage Insurance | UFMIP 1.75% + annual MIP 0.50% | None required at 80% LTV |
| MIP Duration | 11 years (at 80% LTV) | No MIP to cancel |
| Residency | Primary residence, 12-month seasoning | Primary, second home, or investment |
| Loan Limits | FHA county limits apply | Conforming county limits apply |
| Best For | Scores 580–680, primary residence | Scores 680+, no ongoing MIP preferred |
The LTV cap is identical. Both programs max out at 80% for cash-out. The real differences come down to credit score eligibility, whether mortgage insurance applies, and how long that MIP lasts if it does.
For borrowers above 680, conventional cash-out almost always wins because there’s no PMI at 80% LTV. The FHA MIP adds cost without adding access to a better rate. For borrowers between 620 and 680, you need to run both. FHA may offer a better rate in that tier, and the 11-year MIP window may cost less overall than the rate premium you’d pay on a conventional loan. Below 620, FHA is typically the only path.
“We see a lot of borrowers in the 620 to 660 score range assume they should go conventional because they technically qualify. But when we run the full comparison, including the rate difference and the 11-year MIP window, FHA comes out ahead on total cost in a meaningful number of those cases. The decision isn’t which program sounds better. It’s which one actually costs less over your likely holding period.”
Reed Letson, Owner, Elevation Mortgage
Getting to the right answer requires more than pulling a rate table. Your current mortgage rate, how long you plan to stay in the home, and what you’re doing with the cash all shape the real comparison. That’s exactly where the math gets complicated enough that a mistake costs real money. A Colorado mortgage broker who works with both program types regularly can run both scenarios and tell you which one actually costs less for your profile.
When an FHA Cash-Out Refinance Makes Sense
The strongest use case we consistently see is debt consolidation. According to the Federal Reserve’s G.19 consumer credit data, the average interest rate on credit cards accruing interest was 21.52% in the first quarter of 2026. Rolling a significant credit card balance into a cash-out refinance, even after accounting for MIP and closing costs, can cut that rate sharply. The monthly savings often cover the MIP cost and leave meaningful net relief on top of it.
Home renovations are another solid use case, particularly when the improvements add real value. Replacing a roof, updating a kitchen, or finishing a basement tend to return more than they cost in markets across Colorado’s Front Range, from Colorado Springs up through Denver and into communities like Parker and Centennial.
An FHA cash-out is a harder call when your current mortgage rate is well below today’s market. Refinancing means taking on a new rate for your full loan balance, not just the cash portion. Every dollar you borrow costs more. In that scenario, a home equity line of credit (HELOC) or a non-QM loan option might let you access equity without giving up your existing rate on the main balance.
Knowing your break-even point before you apply is the clearest way to evaluate whether the cash-out actually works in your favor. Our overview of when refinancing makes sense walks through how to build that comparison.
FHA Cash-Out Refinance for Debt Consolidation: When It’s the Right Call
A Denver homeowner had built $140,000 in equity over several years of rising prices. But a run of medical bills during the pandemic had pushed her credit score down to 607. That score put a conventional cash-out refinance out of reach.
She applied for an FHA cash-out refinance and pulled $85,000 in cash, using it to pay off $62,000 in high-interest medical and credit card debt. Her total monthly debt payments dropped by over $900.
The annual MIP added about $127 per month to her mortgage payment. Even with that included, the net monthly savings were substantial. The outcome worked because the cash went directly toward eliminating high-rate debt, not toward a lower-priority expense. That’s the use case where FHA cash-out consistently earns its cost.
Common Mistakes to Avoid
Assuming Credit Score Alone Determines Eligibility
Borrowers with scores above 620 often apply with confidence, then get surprised by a DTI problem or a seasoning requirement they didn’t know about. Credit score is one input. Lenders evaluate the full file, and a thin spot anywhere can change the outcome.
Ignoring How Your Current Rate Affects the Math
Taking cash out means refinancing your full balance at the new rate, not just the cash portion. If your existing rate is significantly below today’s market, the monthly payment increase can offset the benefit of the cash-out faster than borrowers expect. We see borrowers pull $30,000 in cash but add $400 per month to their payment because they didn’t model the full comparison before they applied.
Assuming MIP Lasts for the Life of the Loan
FHA cash-out refinances at 80% LTV come with a 0.50% annual MIP that cancels after 11 years. That’s not permanent. Borrowers who don’t know this sometimes avoid FHA entirely or refinance out of it too early, when staying put was actually the lower-cost move.
Questions to Ask Your Lender
- What is your minimum credit score requirement for an FHA cash-out refinance?
- What annual MIP rate and duration will apply at my specific loan amount and LTV?
- What will my break-even point be on this refinance, given my current interest rate versus the new rate?
- Can I roll both the upfront MIP and closing costs into the loan without pushing past the 80% LTV cap?
- What will my total new monthly payment be, including principal, interest, MIP, taxes, and insurance?
- At what credit score would a conventional cash-out start to make more financial sense than FHA for my situation?
Find Out If a Refinance Actually Pencils Out
Our refinance tools let you compare your current rate against today's options, calculate your break-even timeline, and model a cash-out scenario — so you know whether it makes sense before you apply.
Open the Refinance ToolsFrequently Asked Questions
Yes. Your existing loan type doesn’t matter. You can refinance a conventional, VA, USDA, or any other loan type into an FHA cash-out refinance as long as you meet FHA program requirements. What changes is not where you’re starting from but whether you qualify for the new FHA loan, including the 12-month occupancy rule, credit score minimums, and the 80% LTV cap.
For FHA cash-out refinances, the maximum LTV is 80%, which is at or below the 90% threshold. At that origination LTV, annual MIP on a 30-year loan cancels after 11 years. This is different from purchase loans where borrowers put less than 10% down and LTV exceeds 90%, in which case MIP lasts much longer. You can also refinance into a conventional loan before the 11 years is up if your credit score and equity support it.
You must own and occupy the property as your primary residence for at least 12 months before applying. The clock starts on your original closing date, not your move-in date. If you bought 9 months ago, you’ll need to wait 3 more months before you can apply.
On a 30-year FHA cash-out at 80% LTV, the annual MIP rate is 0.50% of the outstanding loan balance. On a $320,000 loan, that’s about $133 per month added to your payment. You also pay an upfront MIP of 1.75% of the loan amount at closing, which typically rolls into the loan balance rather than coming out of pocket.
FHA cash-out tends to be the better fit when your credit score falls below 680 and you have at least 20% equity in the home. Conventional cash-out requires no PMI at 80% LTV, so for borrowers above 680, conventional is usually less expensive over time. In the 620 to 680 range, you need to run both scenarios side by side, because FHA may offer a lower rate that offsets the MIP cost over your expected holding period.
