Do you qualify for a cash-out refinance?
Lenders check four things: your equity, your score, your debt load, and your income.
- You usually have to keep about 20% equity — most cash-out refis cap the new loan at ~80% of the home's value.
- A common minimum credit score is around 620, with better rates higher up.
- Your total debt payments usually can't top 43% of your income, sometimes ~50%.
- FHA and VA cash-out loans have their own, often looser, rules.
- The catch: a weak score or high debt raises your rate — and that rate hits your whole new balance.
The three numbers that decide it
A cash-out refinance replaces your mortgage with a bigger one and hands you the difference in cash. Before a lender does that, it checks whether the loan is safe to make. Three numbers carry most of the weight.
What each check means
- Equity and loan-to-value. Loan-to-value, or LTV, is your loan balance as a percent of the home's value. Most conventional cash-out refis cap LTV at about 80%. So you keep roughly 20% equity in the home. FHA and VA loans let you borrow against more in some cases, which leaves less of a cushion.
- Credit score. A conventional cash-out often starts around 620. The higher you go, the lower the rate you're offered. FHA loans can accept a lower score, but the score still shapes your cost.
- Debt-to-income. Debt-to-income, or DTI, is your monthly debt payments divided by your monthly income before taxes. Many lenders cap it near 43%, and some stretch to about 50% with strong credit and reserves.
- Income, appraisal, and seasoning. You show steady income the lender can verify. An appraisal sets the home's value, which drives your LTV. Many programs also want a seasoning period — you often must have owned the home for a while, commonly six to twelve months, before you can pull cash out.
Improve your odds. Pay down other debt to lower your DTI. Build your credit score before you apply. If you're short on equity, wait for the balance to drop or the value to rise — and a dip in rates can widen who qualifies at a workable cost.
Having the equity is only the first gate. A weak score or a high DTI won't always stop the loan — but it raises the rate you're offered.
On a cash-out refi, that rate applies to your whole new balance, not just the cash you took. So the same rate bump costs far more here than on a small loan. It pays to qualify well before you sign.
Not sure this is the right tool for your situation? See who a cash-out refinance is for. And if the score is your gap, start with how to build credit before you apply.