There are so many reasons homeowners opt for a cash-out refinance, especially since the funds received can be spent on a variety of things. Whether you're looking to consolidate debt, pay for an unexpected major expense, or complete some home improvement projects, a cash-out refi can provide the influx of cash you need.

But with so many available types of cash-out refinances, how do you know which you qualify for so that you can more easily narrow down your options? We've got you covered, with a quick overview of the eligibility requirements for three popular loan types: conventional, Federal Housing Administration, and Veterans Affairs.

Conventional Cash-Out Refinance

When you hear "cash-out refinance," a conventional loan probably comes to mind. That's because they're very popular options, especially for homeowners with strong credit scores. Why? Because they tend to come with lower overall costs. Here are general conventional cash-out refinance requirements:

  • Home appraisal to verify value
  • Credit score of 620 or higher
  • Maximum 50% debt-to-income ratio
  • Must keep 20% equity in the home; thus, maximum 80% loan-to-value ratio (how much of your home's value you can borrow)

Keep in mind, every lender is different, which is a great reason to shop around when looking for a cash-out refi lender.

Interested in a cash-out refinance but are nervous about the home appraisal? Here are a few ways to easily boost your home's value so that you can head into the appraisal process with confidence!

FHA Cash-Out Refi

Because the Federal Housing Administration (FHA) views cash-out refinances as a riskier type of loan, they typically have more eligibility requirements than conventional options do.

Here's what to expect when it comes to FHA cash-out refi qualification requirements:

  • Home appraisal to verify value
  • Credit score of 580 or higher, although many lenders require 600
  • Maximum 43% debt-to-income ratio
  • Maximum 80% loan-to-value ratio
  • The home must be your primary residence
  • Must have lived in the home for at least 12 months before applying
  • Last 12 payments on loan must have been paid within the month they were due
  • Proof of financial standing, including recent pay stubs and W-2 information

While there are typically more requirements for an FHA cash-out refinance, they typically come with lower credit score minimums, making them great options for those who have a few past financial mishaps. Because of the more forgiving minimums, FHA cash-out refinance options tend to be more expensive than conventional ones.

VA Cash-Out Refinance

If you qualify for one, a VA cash-out refinance has many perks, like being able to get up to 100 percent of your equity in certain cases. As is true with the other options, there are eligibility requirements to meet. Those include:

  • Obtaining a Certificate of Eligibility that verifies your service
  • Being able to pay the VA funding fee, if applicable
  • Typically a credit score of 620 or higher
  • Maximum 41% debt-to-income ratio, but there are exceptions
  • Having financial statements ready for review, like W-2s and bank statements
  • Possibly a list of debts to be paid, if you plan to use your cash-out for debt consolidation purposes

When it comes to a VA cash-out refinance, there's a lot of flexibility. If you qualify for a VA refinance, chat with your lender about your particular financial standing, as there are many exceptions to the rules.

Is it Hard to Qualify for a Cash-Out Refinance?

Generally speaking, no!

If you're in good financial health and have built up some equity, it's typically easy to qualify for a cash-out refinance.

Even if you don't currently qualify, you can take a few months to work on improving your financial standing, like paying down debts, and will have more time to add to your equity.

Common Uses for a Cash-Out Refi

Wondering how most people use their cash-out refinance? Popular uses include:

  • Debt consolidation
  • Paying for a major life expense, like a wedding
  • Remodeling/home repairs
  • Purchasing an investment property

But one of the best parts of a cash-out refinance is that you can use the money however you see fit! There is a lot of flexibility when it comes to spending your cash-out money, making it a great alternative to personal loans, which typically come with high costs.

Find the Right Cash-Out Refinance Lender

When it comes time to handpick your cash-out refinance lender, Lendgo makes it easy to explore options. With no obligations, no commissions, and no fees, you can be confident that Lendgo has your best interests at heart.

Explore your cash-out refinancing offers from the comfort of your home now. You'll be able to discuss your unique situation and learn more about qualification requirements once you've found a trusted lender to partner up with. In just a few short weeks, you could have much-needed cash in hand!