Updated July 2026. This page previously reproduced HUD’s 2012 Homeownership Center reference guide, which cited Handbook 4155.1 — superseded by Handbook 4000.1 in 2015. The most important change since: the FHA cash-out maximum was cut from 85% to 80% for case numbers assigned on or after September 1, 2019 (Mortgagee Letter 2019-11). The rules below are current.
FHA offers three refinance paths in Kentucky: a cash-out refinance capped at 80% of appraised value, a rate and term refinance up to 97.75%, and the Streamline, which needs no appraisal, no income documentation and no debt ratio calculation. Which one fits depends on whether you already have an FHA loan and whether you want money out.
The Three FHA Refinance Options
| Type |
Max LTV |
Appraisal |
Income docs |
Needs an existing FHA loan? |
| Cash-out |
80% |
Yes |
Yes |
No — any loan type can refinance into it |
| Rate & term (no cash-out) |
97.75% |
Yes |
Yes |
No |
| Streamline |
Based on existing balance |
No |
No |
Yes |
FHA Cash-Out Refinance
The maximum loan-to-value and combined loan-to-value on an FHA cash-out is 80% of the appraised value. If you own a Kentucky home appraised at $300,000, the most you can finance is $240,000 — and any existing mortgage balance comes out of that first.
Requirements
- 12 months of ownership. If you have owned the property less than a year, the calculation uses the lesser of the appraised value or the original sales price.
- 12 months of on-time payments on the existing mortgage, or since you took ownership if that is shorter.
- Owner-occupied only. Investment properties and second homes are not eligible, and a non-occupant co-borrower cannot be added to make the credit work.
- 1–4 unit properties are eligible. On 3–4 units the property must pass the self-sufficiency test and you need three months of reserves after closing.
- Free and clear is fine. A home owned outright can be refinanced as a cash-out.
- Inherited property qualifies if you have occupied it as your primary residence since inheriting it, with documentation of how you acquired it.
Worth checking before you commit: an FHA cash-out adds a new 1.75% upfront mortgage insurance premium to the balance and restarts annual MIP. If you already have 20% equity and decent credit, a conventional cash-out at the same 80% cap will often cost less, because it carries no mortgage insurance at all at that LTV. Price both.
FHA Rate and Term Refinance
Maximum LTV is 97.75%. This is the path for lowering your rate, shortening your term, or moving out of an ARM — and for refinancing a conventional, VA or USDA loan into FHA. Cash back to the borrower is limited to $500; anything more makes it a cash-out.
The maximum mortgage is the lesser of 97.75% of appraised value, or the sum of your existing first lien, any purchase-money second, closing costs, prepaid expenses and escrow deposits, less any upfront MIP refund.
FHA Streamline Refinance
The Streamline is only available if your current loan is already FHA-insured. In exchange, it drops most of the underwriting: no appraisal, no income verification, no debt-to-income calculation for most borrowers, and no CAIVRS check.
Seasoning — all three must be true
- At least 6 full monthly payments made on the existing FHA loan
- At least 210 days since the closing date of the loan being refinanced
- At least 6 months since the first payment due date
Payment history
- Under 12 months of history: every payment made within the month due
- 12 months or more: no more than one 30-day late in the past 12 months, and all payments within the month due for the last 3 months
Net tangible benefit
The refinance has to actually help you. FHA requires a documented benefit — generally a reduction of at least 0.50% in the combined rate (interest rate plus annual MIP), or a move from an ARM to a fixed rate that does not raise the combined rate by more than 2%.
Cash back on a Streamline is capped at $500. If subordinate financing stays in place, the maximum CLTV is 125%.
The overlooked Streamline advantage: you may be owed a refund of the upfront MIP from your original FHA loan if you refinance within 36 months. That refund is applied against the new upfront premium. Nobody volunteers this — ask for it.
What Applies to Every FHA Refinance
- You must be current for the month due, and a current payoff statement is required
- Upfront MIP of 1.75% is charged on the new loan and can be financed
- Annual MIP is 0.55% above 95% LTV and 0.50% at or below 95%; it terminates after 11 years only when LTV is 90% or less
- The property must be your primary residence, except on certain Streamlines of properties that have since become rentals
- Manufactured homes carry extra restrictions on every refinance type
Kentucky FHA Refinance FAQ
What is the maximum LTV on an FHA cash-out refinance?
80% of appraised value. It was 85% until HUD Mortgagee Letter 2019-11 lowered it, effective for case numbers assigned on or after September 1, 2019. Any source still quoting 85% is out of date.
How soon can I do an FHA Streamline refinance?
You need at least 6 full monthly payments on the existing FHA loan, at least 210 days since that loan closed, and at least 6 months since the first payment was due. All three conditions must be satisfied.
Does an FHA Streamline require an appraisal?
No. A Streamline requires no appraisal, no income verification and no debt-to-income calculation for most borrowers. That is the entire point of the program.
How much cash can I take out on an FHA rate and term refinance?
No more than $500. Anything above that makes the transaction a cash-out refinance, which caps at 80% LTV instead of 97.75%.
Can I get an FHA cash-out on a rental property in Kentucky?
No. FHA cash-out refinances are limited to owner-occupied primary residences, and a non-occupant co-borrower cannot be added to help the loan qualify.
Can I refinance a conventional loan into an FHA loan?
Yes. Cash-out and rate and term refinances are open to any loan type. Only the Streamline requires that your existing loan already be FHA-insured.
Free Kentucky FHA refinance review — same-day answers
Send me your current loan details and I will tell you which refinance you actually qualify for, whether the numbers justify it, and whether you are owed an upfront MIP refund. Over 20 years originating Kentucky mortgages and more than 1,300 Kentucky families helped. No cost, no obligation.
Joel Lobb — Mortgage Loan Officer
EVO Mortgage · 10602 Timberwood Cir, Ste 3, Louisville, KY 40223
Call or text: 502-905-3708
Email: kentuckyloan@gmail.com
NMLS #57916 · Company NMLS #1738461
Start Your Free Application
This is not a commitment to lend. This site is not the FHA, HUD, VA, USDA or any other government agency, and is not endorsed by them. All loans are subject to credit approval and to program guidelines in effect at the time of application; not all applicants will qualify. Guidelines summarized here reflect HUD Handbook 4000.1 and published FHA mortgagee letters as of July 2026 and are subject to change without notice. Joel Lobb, NMLS #57916 · EVO Mortgage, Company NMLS #1738461 · 10602 Timberwood Cir, Ste 3, Louisville, KY 40223 · www.nmlsconsumeraccess.org · Equal Housing Lender.
