FHA Cash-Out Refinance in 2026: FACOP Requirements, Costs, and How Much You Can Borrow
FACT-CHECKEDFACT-CHECKEDAn FHA cash-out refinance can turn your home equity into usable cash, but qualifying comes down to three gates you have to clear first: occupancy history, credit-score eligibility, and the loan-to-value cap. This article breaks down what determines whether you clear them, and how those gates set the amount you can borrow.
Key Takeaways
- FHA requires 12 months of documented ownership and occupancy before you can cash-out refinance
- A 580+ credit score reaches the 80% LTV cap; 500-579 caps out at 90% LTV; below 500 is ineligible
- Cash-out refinances only apply to owner-occupied primary residences, not rentals or second homes
- Upfront mortgage insurance runs 1.75% of the loan amount, added on top of annual premiums
- Current FHA loan limits range from a $541,287 floor to a $1,249,125 ceiling in high-cost areas
What FACOP Actually Is
Every situation is different, but I hear some version of the same question constantly: "I've got equity in my home, so why can't I just cash it out?" The honest answer is that FHA doesn't let you skip straight to the amount. Before a lender even calculates what you can borrow, your file has to clear a sequence of qualification gates. Miss one of them and the amount conversation never starts.
FACOP is the shorthand HUD uses internally for the FHA cash-out refinance program. It's simply an FHA-insured refinance where you borrow more than you currently owe and take the difference in cash, built on the same FHA insurance framework applied to a cash-out transaction, with its own specific occupancy, credit, and loan-to-value requirements layered on top. Understanding it that way matters, because you might otherwise shop for "FACOP" as though it were a distinct offering with different terms, when it's really the standard FHA cash-out structure under a different name.
Gate One: The 12-Month Ownership and Occupancy Rule
The first gate is the one to plan around before anything else in this process. FHA requires that you've owned and occupied the property as your principal residence for the 12 months prior to your case number being assigned. FHA enforces that rule strictly. If you bought your home eight months ago and it's appreciated quickly, or you inherited a chunk of equity from a market swing, FHA still wants that 12-month occupancy history on record before it'll insure a cash-out transaction.
There's a narrow inheritance exception, but outside of that, the rule holds. I've worked with buyers who assumed that once they had enough equity on paper, the loan amount conversation would start immediately. Instead, the first conversation is about ownership history and how the property has been used. The property also has to be your primary residence throughout that period. That's a hard line: FHA cash-out refinancing isn't available for investment properties or second homes, no exceptions. If you're shopping for a way to pull equity from a rental, FHA isn't the program built for that.
Gate Two: Credit Score and Eligibility
Once occupancy clears, credit score becomes the next filter, and it decides something more basic than you might expect: whether FHA will insure the transaction at all.
A credit score of 580 or higher qualifies you for FHA's standard maximum financing tier, which is where the 80% loan-to-value cap applies. If your score falls between 500 and 579, you're still eligible for a cash-out refinance, but your maximum loan-to-value steps down to 90%. That step-down is a genuine qualification tier with real consequences: it means less equity converts to cash and your file has to clear underwriting without the cushion a higher score provides. If your score drops below 500, FHA insurance is off the table entirely for this transaction.
This is where I go back to something I tell people all the time: shopping with someone else's bank account gets you into trouble. Your neighbor's 620 score and your 555 score aren't shopping in the same lane, even if your homes are worth the same and your loan amounts look similar on paper. Your own numbers set the terms of your program, every time. When we sit down with you at AmeriSave, the credit conversation happens early precisely because it determines whether your file clears underwriting before any amount gets discussed. If your credit sits in that 500-579 band, expect the underwriting conversation to be more detailed from the start rather than anchoring to a number a friend or relative mentioned.
Gate Three: The Loan-to-Value Ceiling That Sets Your Borrowing Amount
The loan-to-value ceiling answers the "how much can I borrow" question directly, and it comes in two tiers depending on where your credit score landed at Gate Two. If your score is 580 or higher, your FHA cash-out refinance is capped at 80% of the home's adjusted value. That threshold was reduced from a prior 85% ceiling, a change HUD made specifically to reduce risk exposure in its insurance fund. If you researched FHA cash-out refinancing a while back and remember an 85% figure, that number's outdated. If your score falls in the 500-579 band, the ceiling rises to 90% of the adjusted value. The credit tier and the loan-to-value tier move together as a single combined limit rather than as two caps stacked on top of each other.
Run the math on a home with an adjusted value of $400,000. At the 80% tier, available if your score is 580 or higher, the ceiling is $320,000. If you owe $250,000 on your current mortgage, the difference, before closing costs and mortgage insurance financing, is your rough cash-out ceiling: about $70,000. At the 90% tier, available if your score sits in the 500-579 band, the ceiling on that same $400,000 home rises to $360,000. Against that same $250,000 payoff, the rough cash-out ceiling is about $110,000, roughly $40,000 more headroom than the 80% tier produces, before the same closing costs and mortgage insurance financing come out of it. Which tier you're working from is decided entirely at Gate Two: it determines both whether you get to run this math at all and which percentage goes into it.
Loan limits also cap the overall loan amount regardless of your equity position. FHA's current nationwide floor for a one-unit property sits at $541,287, with a ceiling of $1,249,125 in the highest-cost markets. If your home's value pushes your calculated loan amount above the limit that applies in your county, that county limit governs, overriding whatever the 80% math produced.
What Qualifying Actually Costs
Clearing the three gates gets you to an approved loan amount, but the amount you're approved for isn't the amount that lands in your account. FHA charges an upfront mortgage insurance premium of 1.75% of the base loan amount, typically rolled into the loan rather than paid out of pocket at closing. On top of that, you'll likely pay an ongoing annual premium, generally in the range of roughly 0.50% to 0.75% depending on your loan amount, starting loan-to-value, and term. If your starting loan-to-value is above 90%, which is common for cash-out borrowers, that annual premium runs for the life of the loan rather than dropping off partway through.
I think of this as part of qualifying itself, because it changes what the cash-out number actually means for your budget. If you're approved for $70,000 in cash-out proceeds, that mortgage insurance premium adds a real ongoing cost against your monthly payment picture. The mortgage insurance is baked into the ongoing math for as long as that loan is active in most cash-out scenarios.
Bringing the Gates Together
None of these three gates work in isolation, so it helps to work through them in order rather than asking about amounts before anyone's looked at your file. Occupancy history determines whether you're even eligible to apply, while credit score sets whether your file clears FHA's insurance floor and how it gets underwritten. From there, the loan-to-value ceiling, combined with the current loan limits, determines your actual borrowing amount. If you skip ahead to the amount question without clearing the first two, you're building on a number that might not hold up once underwriting looks at your actual file.
At AmeriSave, we walk you through these gates in the order they actually matter, rather than starting with a hypothetical amount and working backward. If you're considering an FHA cash-out refinance, the more useful first conversation is about your occupancy timeline and your credit profile. The amount follows from there.
HUD, Mortgagee Letter 2019-11: sets the current 80% maximum loan-to-value and combined loan-to-value limits for FHA cash-out refinances, replacing the prior 85% ceiling.
HUD, "HUD Announces Agency Efforts to Reduce Risk from Cash-Out Refinance Lending" (archived press release): confirms the rationale for the 80% loan-to-value reduction as a risk-management measure for FHA's insurance fund.
HUD, "HUD's Federal Housing Administration Announces 2026 Loan Limits" (HUD No. 25-145): supports the 2026 nationwide floor loan limit of $541,287 and ceiling of $1,249,125 for one-unit properties.
HUD, Mortgagee Letter 2023-05, "Reduction of Federal Housing Administration (FHA) Annual Mortgage Insurance Premium (MIP) Rates," Appendix 1.0, Mortgage Insurance Premiums: supports the 1.75% upfront mortgage insurance premium figure and the annual premium range of approximately 0.50% to 0.75% for loans above a 90% loan-to-value ratio.
HUD, Answers.hud.gov, "Does FHA require a minimum credit score and how is it determined?": supports the credit score thresholds of 580+ for maximum financing eligibility, 500-579 capped at 90% maximum loan-to-value, and below 500 as ineligible for FHA insurance.
HUD, FHA Single Family Housing Policy Handbook 4000.1, Section II.A.8.d: supports the 12-month ownership and occupancy requirement and the owner-occupied-only restriction for cash-out refinance transactions.
Jerrie leads sales operations in the Dallas-Fort Worth region for AmeriSave, where his entire mortgage career has been spent since being recruited into the industry at age 18. Licensed as a Mortgage Loan Originator in 37 states, he specializes in making complicated loan options accessible and helping borrowers understand what matters most in their individual situations. He brings deep regulatory knowledge and a client-centric approach honed through progression from entry-level to upper management, including successfully onboarding and training 70 people from a closed Cleveland office.
Frequently Asked Questions
FACOP is HUD's internal shorthand for FHA cash-out refinancing. It describes the same FHA-insured refinance program applied to a transaction where you take out cash beyond your existing mortgage balance. When you see the term used, it's describing standard FHA cash-out refinance requirements, including the occupancy, credit, and loan-to-value rules that apply to any FHA cash-out transaction.
No. FHA cash-out refinancing is limited to properties that serve as your principal residence. Investment properties and second homes don't qualify under this program, regardless of how much equity has built up. The property must also have been owned and occupied by you as a primary residence for the 12 months before the case number is assigned, with a narrow exception for inherited properties. If you're looking to access equity in a non-owner-occupied property, you'll need a different loan structure entirely, since FHA insurance doesn't extend to that use case.
Your credit score determines both whether FHA will insure your cash-out refinance and which loan-to-value cap applies to it. A score of 580 or above qualifies you for FHA's standard maximum financing terms, with an 80% loan-to-value cap. If your score is between 500 and 579, you can still get an FHA-insured cash-out refinance, but the cap steps down to 90% loan-to-value. If your score is below 500, you're not eligible for FHA insurance on this transaction type. The useful question to ask is which of the two loan-to-value tiers your score places you in, since that tier is what actually shapes your borrowing amount.
The maximum is 80% of the home's adjusted value if your credit score is 580 or higher. This ceiling was reduced from a prior 85% limit, a change made to reduce risk in FHA's insurance fund. If your score is between 500 and 579, the cap rises to 90% loan-to-value, a different tier tied to the lower credit band rather than a uniform ceiling across all qualifying scores. This cap is usually the real limit on how much cash you can access, regardless of how much total equity you've built up.
FHA charges an upfront mortgage insurance premium equal to 1.75% of the base loan amount, which is typically financed into the loan rather than paid out of pocket. You'll also pay an ongoing annual premium, generally in the range of roughly 0.50% to 0.75% depending on loan amount, loan-to-value, and term. Because most cash-out refinances start above a 90% loan-to-value ratio, that annual premium often continues for the full life of the loan rather than being removed after a set number of years.
Yes. Even if your home's value and equity would support a larger loan under the 80% loan-to-value math, your loan amount can't exceed the FHA loan limit for your county. That limit currently ranges from a nationwide floor of $541,287 for a one-unit property up to a ceiling of $1,249,125 in the highest-cost areas. If the loan-to-value calculation produces a number above your local limit, the limit becomes the actual ceiling on your cash-out amount.
It depends on your full financial situation. If your score is between 500 and 579, you can still qualify for an FHA cash-out refinance at a 90% loan-to-value cap, a step down from the 80% cap that applies at 580 and above, though it does mean less margin for error elsewhere in your file. For some people in that credit range, an FHA cash-out refinance still makes sense. For others, it may be worth working on credit first or talking through alternative structures with an AmeriSave loan officer before moving forward.