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Texas A6 Loan: 80% Cap, 2% Fee Limit, and Closing Checklist

· By the HomePilot team · Reviewed by a licensed loan officer · Company NMLS #2752340

Texas A6 Loan: 80% Cap, 2% Fee Limit, and Closing Checklist

A Texas A6 loan is a home equity loan authorized under Article XVI, Section 50(a)(6) of the Texas Constitution that lets a homeowner borrow against primary residence equity, subject to strict rules: an 80% combined lien limit, a 2% statutory fee cap, a mandatory notice period, a 3-day right to rescind, and non-recourse protection for the borrower. The sections below walk through what qualifies, how the limits work, and how we help Texas borrowers navigate the process.

TL;DR:

  • Only a primary residence qualifies, and the loan must take first lien position; second homes, rentals, temporary buydowns, and many adjustable rate structures are excluded.
  • On a $400,000 home with a $250,000 mortgage, the 80% ceiling leaves at most $70,000 for cash out before closing costs.
  • Appraisal, survey, and title insurance charges sit outside the statutory fee cap, so budget for them separately from lender controlled charges.
  • The separate notice must arrive at least 12 days before closing, and the clock starts on delivery, not application; federal disclosures follow their own schedule.
  • A current Texas home equity loan generally must season for 12 months before refinancing; a conventional conversion also restricts additional cash out.
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Table of Contents

What Exactly Is a Texas Section 50(a)(6) Loan

Texas is the only state that writes home equity lending protections directly into its constitution. Article XVI, Section 50(a)(6) permits homeowners to borrow against homestead equity, but only when the loan meets a specific set of conditions tied to the property’s status as a primary residence. Any loan secured by a Texas homestead that pulls cash out of built-up equity, beyond the amount needed to pay off an existing mortgage or specific debts named in the constitution, falls under this framework.

Classification as an (a)(6) loan is a legal determination, not a system output. Fannie Mae’s guidance makes the point directly: an automated underwriting recommendation does not decide whether a transaction is governed by Section 50(a)(6). A lender has to look at the actual structure and history of the loan, including what liens already sit on the property and how the proceeds are used, and make that call independently of what any software flags.

Borrowers get real protection in exchange for this complexity:

  • The loan is non-recourse against the borrower’s other assets beyond the homestead itself.
  • Lenders who make a compliance mistake generally must correct it within a defined cure period rather than simply declaring default.
  • Failure to cure certain violations can result in forfeiture of principal and interest the constitution describes as a serious penalty for lender noncompliance.

That last point matters because it shapes how carefully title companies and lenders in Texas prepare these closings, covered later in this guide. The protections exist because homestead equity carries unusual legal weight in Texas, and the constitution treats it differently than nearly any other asset a homeowner holds.

Who and What Qualifies for an A6 Loan

Not every property or borrower can use Section 50(a)(6) financing. The rule applies only to a homestead, meaning the property has to be the borrower’s primary residence, and the eligible dwelling types are narrower than a standard refinance.

  • Eligible properties include single-unit homes, units in a planned unit development, eligible condominiums, and certain manufactured homes that meet homestead requirements.
  • The loan must be in first-lien position, meaning it pays off or sits ahead of any other mortgage debt on the property.
  • Acceptable structures include fixed-rate, fully amortizing loans, along with specific adjustable-rate plans Fannie Mae permits for Texas Section 50(a)(6) loans, generally limited to certain 5, 7, or 10-year ARM structures.

Several common loan features are off the table. Second homes and investment properties never qualify, since the constitutional protection is tied to homestead status. Many ARM structures outside the specific plans named in GSE guidance are excluded, and temporary buydown structures are generally not permitted on these loans either.

This narrower eligibility is exactly why borrowers researching an A6 loan benefit from working with someone who prices across multiple lenders rather than a single rate sheet. Not every lender structures Texas home equity products the same way, and the gap between what is technically allowed and what a given lender actually offers can be wide. A broker who shops the file across more than 40 wholesale lenders can match a borrower to a lender actually built to handle Section 50(a)(6) structuring rather than one treating it as an afterthought.

How the 80% Limit and Fee Cap Actually Work

All debt secured by the homestead, the new loan plus any other liens that remain, cannot exceed 80% of the property’s fair market value at the time of closing, as set under Section 50(a)(6). Fair market value has to be established by a current appraisal, and the borrower signs a written acknowledgment of that value as part of the closing package.

A statutory fee cap limits most lender and third-party charges on Texas home equity loans, according to the Texas Department of Banking’s examination guidance. That cap governs origination and most lender-controlled fees, but it does not sweep in everything a borrower pays at closing.

Here’s a simplified illustration using round numbers. Say a home has a fair market value of $400,000. If the homeowner already owes $250,000 on the first mortgage, the maximum new cash-out amount available under an A6 structure is $70,000, before accounting for closing costs.

Texas A6 equity and fee limits explained

Fees excluded from the statutory fee cap include appraisal fees, survey charges, and title insurance premiums. Those costs are real and borrowers should budget for them separately, but they do not count against the statutory cap the way origination or discount points do.

Required Notices, Waiting Periods, and the Right to Cancel

Texas builds specific timing protections into every A6 transaction, separate from the federal disclosure timeline. These rules exist to give homeowners a genuine chance to review the loan terms and to reconsider the decision before money changes hands, per Section 50(a)(6).

  1. The a mandatory notice period period. Homeowners must receive a specific written notice, delivered on a separate instrument from other loan paperwork, at least 12 days before closing. The clock starts when the notice is actually provided, not when the application is submitted.
  2. The a short right of rescission period after closing. After closing, Texas home equity borrowers generally retain a right to cancel the transaction within three days, mirroring protections found in other consumer lending contexts but applied here with specific state requirements.
  3. Federal disclosure timing runs in parallel. The Loan Estimate and Closing Disclosure required under federal TRID rules operate on their own schedule, and Texas lenders layer the state-specific Texas Disclosure on top of the federal Closing Disclosure to capture title and closing cost detail the federal form aggregates.

These timelines do not simply stack back to back. A lender has to sequence the mandatory notice period, the appraisal, title work, and the federal disclosure waiting periods so everything lands correctly before the actual signing date. Borrowers who assume an A6 loan closes on the same timeline as a conventional refinance often find themselves surprised when closing gets pushed out by a week or two to accommodate these overlapping requirements.

Closing Mechanics, Title Work, and Required Forms

A Texas A6 closing is not interchangeable with a standard refinance closing, and the paperwork reflects that. Constitutional rules require that certain steps happen at specific locations and with specific recorded documents in place before the transaction is valid.

  • Closing must occur at the office of the lender, an attorney, or a title company, a requirement meant to keep the signing in a controlled, documented setting.
  • The borrower signs a Home Equity Affidavit and Agreement, commonly referenced as Form 3185, confirming understanding of the loan’s terms and the homestead’s status, a document the Department of Banking’s exam guidance flags as a core compliance item.
  • The loan is secured by a Texas-specific security instrument, often referenced as Form 3044.1 in Fannie Mae’s closing guidance, built specifically to satisfy Section 50(a)(6) requirements rather than a generic deed of trust.
  • Title insurance must include specific endorsements, T-42 and T-42.1, designed to address the unique risks tied to home equity lending in Texas.

Title companies carry real responsibility here. Because an uncured compliance defect can trigger forfeiture remedies for the lender, title agents working on A6 closings tend to be meticulous about confirming every recorded form, every signature, and every notice timestamp before the file is considered complete. That level of scrutiny is a feature of the system, not a delay for its own sake: it is what keeps the homestead protection meaningful rather than theoretical.

Refinancing, Seasoning Rules, and What Happens if Something Goes Wrong

An existing Texas A6 loan cannot be refinanced immediately into a new one. A seasoning period applies before certain refinances are permitted, and GSE guidance builds in specific conditions for converting a seasoned home equity loan into a conventional, non-(a)(6) loan.

  • A home equity loan generally must season for at least 12 months before it can be refinanced, and even then, specific conditions govern whether the new loan can shed the (a)(6) designation or stays bound by the same rules.
  • Converting a seasoned Section 50(a)(6) loan into a conventional loan requires meeting criteria laid out in Fannie Mae’s underwriting guidance, including confirming no additional cash-out beyond what the rules allow for that conversion path.
  • When a compliance issue surfaces on a loan sold to an agency, guidance references a defined cure window, often cited at 60 days, during which the lender can correct the defect before more serious remedies apply.

The consequences of an uncured violation are not minor. The Texas Constitution allows for forfeiture of all principal and interest on a loan found noncompliant and uncured, a remedy far more severe than what applies to an ordinary mortgage default. That severity is precisely why lenders, title companies, and GSEs treat A6 documentation with more rigor than a standard refinance file, and why borrowers benefit from working with a team that treats the state-specific rules as the starting point rather than an afterthought.

Your Closing Checklist for a Texas A6 Loan

Getting from application to a compliant closing goes smoother with the right documents ready early. Gather a copy of your current deed, payoff statements for any existing liens, written authorization for the appraiser to access the property, and proof the home qualifies as your homestead, such as a copy of your homestead exemption filing.

  1. Confirm your current lien payoff amounts so your loan officer can calculate the 80% combined lien limit accurately from the start.
  2. Schedule your appraisal early, since fair market value has to be established and acknowledged in writing before the mandatory notice period can properly run.
  3. Build in a buffer of at least three weeks between application and target closing to accommodate the a mandatory notice period, appraisal turnaround, and title work without last-minute delays.
  4. Confirm your title company is experienced with Section 50(a)(6) closings, since the recorded forms and endorsements differ from a standard refinance package.
  5. Review your Loan Estimate line by line, comparing lender fees against the 2% statutory cap and checking which third-party costs fall outside it.

Pro Tip: Ask your loan officer to walk through the 80% combined lien math with your specific numbers before you lock a rate, so there are no surprises about your available cash-out amount at closing.

We’re licensed to originate in Texas and we price every Texas A6 file across more than 40 wholesale lenders, keeping lender fees at $0 rather than layering on retail markup. Our live Texas rates post next to the national average every business day, and our published $500 Best Price Guarantee applies to eligible fixed-rate conventional, FHA, and VA offers when we can’t beat a comparable competing quote, terms apply. If you already have a Loan Estimate from another transaction, we offer a free Loan Estimate review to check it against wholesale pricing before you commit.

Why Compliance Protections Matter More Than Convenience

The constitutional safeguards built into Section 50(a)(6) exist because Texas treats homestead equity as something close to sacred, not as collateral to be moved quickly for convenience. We think that’s the right instinct, even when it means a borrower waits an extra week or two for the mandatory notice period to run its course.

A lender’s job on one of these loans isn’t just to originate it fast. It’s to coordinate title, underwriting, and disclosure timing precisely enough that nothing has to be unwound later. We build our process around that reality rather than around shaving days off a closing calendar at the expense of a clean file. Wholesale pricing and transparent daily rates don’t change that discipline: they just mean the borrower isn’t paying a markup for it.

The HomePilot Team

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If you’re weighing a Section 50(a)(6) home equity loan against a cash-out refinance or a HELOC, the product you choose matters less than the pricing and compliance behind it; homeowners exploring exit strategies can also consult a comprehensive Cash Home Buyers Guide for alternative options. We’re a family-owned wholesale broker licensed across Texas, Arizona, California, Colorado, and Florida, and we shop every file across more than 40 wholesale lenders instead of handing you one bank’s rate sheet.

  • $0 lender fees on every file we price, with our margin built into the rate rather than added as a separate charge.
  • Live Texas rates posted daily at HomePilot Mortgage, shown next to the national average so you can see where you stand.
  • A published $500 Best Price Guarantee on eligible fixed-rate conventional, FHA, and VA offers, terms apply.
  • Purchases typically close in about 20 days from accepted offer, with a standard 30-day commitment.

Start with a free quote on a cash-out refinance alongside your A6 loan comparison, no hard credit pull required to see where you stand.

FAQ

What does Dave Ramsey say about home equity loans?

Personal finance commentators vary widely in their stance on home equity borrowing, and specific guidance from any individual commentator isn’t something we can verify or attribute here. Generally, consumer finance voices urge caution with any loan secured by a primary residence, since missed payments put the home itself at risk.

How do I become a mortgage loan officer in Texas?

Becoming a licensed mortgage loan officer in Texas requires completing pre-licensing education, passing the national SAFE MLO test, and registering through the Nationwide Multistate Licensing System, along with a state-specific application through the Texas Department of Savings and Mortgage Lending. Specific coursework hours and fees are set by state regulators and the NMLS, so prospective loan officers should confirm current requirements directly with those agencies.

What are the rules for a cash-out refinance in Texas?

A cash-out refinance on a Texas homestead that pulls out equity beyond paying off the existing mortgage is generally governed by the same Section 50(a)(6) rules as other Texas home equity loans, including the 80% combined lien limit, the 2% fee cap, and the a mandatory notice period requirement. That means the rules covered throughout this guide apply whether you call the transaction a “home equity loan” or a “cash-out refinance” in Texas.

How much income do I need to afford a $400,000 house in Texas?

The income needed to afford a $400,000 home in Texas depends on your down payment, interest rate, existing debt, property taxes, and insurance costs, so there’s no single income figure that applies to every borrower. A lender calculates this using your full debt-to-income picture rather than home price alone, which is why getting a personalized quote gives a more accurate answer than a general rule of thumb.

Sources

HomePilot Mortgage, NMLS #2752340, is a licensed mortgage broker in Arizona, California, Colorado, Florida, and Texas. Equal Housing Lender. This article is general information, not a loan offer or a commitment to lend. Rates and program terms change daily and depend on credit, loan amount, and county. HomePilot Mortgage is a private company, not affiliated with or endorsed by the Department of Veterans Affairs, HUD, or any government agency.

Texas A6 Loan: 80% Cap, 2% Fee Limit, and Closing Checklist | HomePilot