Cash-out refinance requirements

The rules depend on the loan type. Here's what Fannie Mae, FHA and VA require, and when a HELOC is the cheaper way to the same cash.

Reviewed by Shawn Way, NMLS #1007298★ 4.9 from 111 reviewsUpdated October 28, 2026

Conventional (Fannie Mae) requirements

• Maximum LTV: 80% for a one-unit primary residence; 75% for two to four units. The new loan, plus any other liens that stay, can't exceed that share of the appraised value.
• Seasoning: at least one borrower must have been on title for six months before closing, and the mortgage being paid off must be at least 12 months old (note date to note date). Inherited homes are exempt from the six-month title rule.
• Credit: Fannie Mae's general floor is 620. For manually underwritten cash-out loans, the matrix requires 680 at 75% LTV or less and 720 above 75%.
• Debt-to-income: manually underwritten loans start at a 36% maximum and can go to 45% with stronger credit and reserves. Loans approved through Fannie Mae's automated system can go higher, with extra reserves required above 45%.
• Pricing: cash-out loans carry loan-level price adjustments based on LTV and credit score, so the rate is usually higher than a no-cash-out refinance.

FHA requirements

• Maximum LTV: 80% of the home's value, and the same 80% cap on combined LTV. HUD lowered this from 85% in 2019.
• Occupancy and seasoning: the home must have been owned and occupied as your principal residence for the 12 months before the FHA case number is assigned. Homes with a mortgage need at least six months of payments.
• Payment history: every mortgage payment in the last 12 months (or since the loan began, if shorter) must have been made within the month due.
• Mortgage insurance: FHA loans carry an upfront mortgage insurance premium plus an annual premium paid monthly. That's a real cost to add when you compare.

VA requirements

• Eligibility: you need a VA Certificate of Eligibility, and you must live in the home you're refinancing.
• Maximum LTV: VA rules allow cash-out up to 100% of the home's value, though many lenders set a lower cap of their own.
• Credit and income: VA sets no single minimum score; you must meet VA's and the lender's standards for credit and income.
• Funding fee: most borrowers pay a one-time VA funding fee at closing unless exempt, for example because of a service-connected disability.

Requirements at a glance

When a HELOC beats a cash-out refinance

A cash-out refinance reprices your entire mortgage. A HELOC prices only the new money. So the question is which costs less across all the debt: the cash-out rate on everything, or your current rate on the old balance blended with a HELOC rate on the new one.

The blended-rate test: (first balance × first rate + HELOC amount × HELOC rate) ÷ total. If the result is below the cash-out rate, keep your mortgage and add a HELOC.

Example (illustrative numbers): a $650,000 home with $400,000 owed at 4%. The owner needs $80,000.

• Conventional cash-out limit: $650,000 × 80% = $520,000. Minus $400,000 owed leaves up to $120,000 in cash, so $80,000 fits.
• HELOC at an assumed 8%: ($400,000 × 4% + $80,000 × 8%) ÷ $480,000 = ($16,000 + $6,400) ÷ $480,000 ≈ 4.67%.
• A cash-out refinance would have to come in below about 4.67% on the full $480,000, before its closing costs, to win.

A cash-out usually wins when your current rate is near or above today's rates, when the cash needed is large relative to your mortgage, or when you want one fixed payment for decades. A HELOC usually wins when your first-mortgage rate is low, you need the money over time, or you'll repay it within several years. HELOC rates are usually variable, and the home secures either loan. The full walkthrough is in HELOC vs. cash-out refinance, and the HELOC vs. cash-out calculator runs your numbers. For what a HELOC lender looks for, see HELOC requirements; if you have an FHA or VA first mortgage, see HELOC with an FHA or VA loan.

Current rates from Shawn

To see your own numbers, get your HELOC rate from Shawn. Examples here are not an offer; terms depend on your credit, income and property.

Questions people ask

What credit score do I need for a cash-out refinance?

For a conventional loan, Fannie Mae's general minimum is 620, rising to 680 or 720 for manually underwritten cash-out loans. FHA and VA lenders set their own minimums on top of agency rules.

How much equity do I need for a cash-out refinance?

For conventional and FHA, you must keep at least 20% equity after the refinance, since both cap at 80% LTV. VA allows borrowing up to 100% of value at lenders that permit it.

How soon can I do a cash-out refinance after buying?

Conventional loans generally need six months on title and a first mortgage at least 12 months old. FHA requires 12 months of owning and living in the home.

Can I do a cash-out refinance on a rental property?

Yes, conventional loans allow a cash-out refinance on a rental property, at lower loan-to-value limits than on a primary home. FHA and VA cash-out loans require you to live in the home, so they don't work for a rental.

Is a HELOC easier to get than a cash-out refinance?

Often, yes, and HELOCs usually close faster with lower costs. Many HELOC lenders allow combined borrowing up to 80%–85%, above the 80% conventional and FHA cash-out caps.

Sources: Fannie Mae Selling Guide B2-1.3-03, Cash-Out Refinance Transactions; Fannie Mae Eligibility Matrix; HUD Mortgagee Letter 2019-11; HUD Single Family Housing Policy Handbook 4000.1, section II.A.8.d (cash-out refinance occupancy and payment history); U.S. Department of Veterans Affairs, Cash-out refinance loan.

More in HELOC guides

• HELOC vs. cash-out refinance
• HELOC vs. home equity loan
• HELOC vs. reverse mortgage
• HELOC vs. 401(k) loan
• HELOC vs. credit card
• Paying off your mortgage with a HELOC
• HELOC or home equity loan for debt consolidation?
• Paid-off home: HELOC or cash-out refinance?

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