When it comes to mortgage refinancing, the maximum loan-to-value (LTV) ratio is an important factor to consider. Fannie Mae and Freddie Mac allow for a maximum LTV ratio of 95% for a standard refinance (without cash outlay) of a single-family home. However, if you're looking for cash-out refinancing, your maximum LTV drops to 80%. The threshold is lower for second homes and investment properties. At Freedom Mortgage, the maximum loan-to-value ratio for an FHA cash-out refinance is also usually 80%.
As with conventional loans, you'll also need to meet credit, financial, and income requirements for your FHA cash-out refinance application to be approved. LTV ratio requirements are more lenient when refinancing with a government-backed mortgage, including an FHA, VA, or USDA loan. Your ratio can reach 97.75% in the case of an FHA mortgage, and you could refinance your home without equity with a VA or USDA mortgage. For fixed-rate loans, there are no maximum LTV, combined loan-to-value (CLTV), or home equity combined loan-to-value (HCLTV) rates. For adjustable rate mortgages (ARM), there is a maximum LTV ratio of 105%, but there is no maximum CLTV or HCLTV ratio.
To learn more about all the requirements, check out the eligibility matrix.