A Texas Buyout Has to Satisfy Two Rulebooks, and They Ask for Different Things
Program and regulatory figures verified October 10, 2026. Details change; confirm your scenario with us.
Most of this site is about the Texas Constitution. This page is about the federal layer that sits on top of it, and the places the two layers do not line up.
The agency rule, verbatim
Fannie Mae Selling Guide B2-1.3-02, under "Refinances to Buy Out An Owner's Interest":
"A transaction that requires one owner to buy out the interest of another owner (for example, as a result of a divorce settlement or dissolution of a domestic partnership) is considered a limited cash-out refinance if the secured property was jointly owned for at least 12 months preceding the disbursement date of the new mortgage loan. All parties must sign a written agreement that states the terms of the property transfer and the proposed disposition of the proceeds from the refinance transaction."
★★ Limited cash-out and cash-out are priced and underwritten differently. ★ We publish no rates or payment figures, so we will not put a number on the difference, but the classification is worth having.
★★★ Two rulebooks, running at once
This is the Texas-specific point, and it is the reason this page exists:
| Texas Constitution | Fannie Mae | |
|---|---|---|
| What it governs | whether a lien may attach to the homestead at all | how the loan is classified and underwritten |
| Key provision | ★★★ § 50(a)(3) owelty, or § 50(a)(6) home equity | ★★ B2-1.3-02 |
| ★★ Who decides compliance | your attorney and the title company | the lender and the investor |
| ★★★ What it wants to see | a properly created owelty, by court order or written agreement | 12 months of joint ownership and an agreement covering the proceeds |
★★★ Neither satisfies the other. A perfectly structured owelty can still fail the twelve-month condition. A perfect Fannie agreement can still be a homestead problem if the lien was not properly created. Both have to be right.
★★★ The twelve-month condition, precisely
"jointly owned for at least 12 months preceding the disbursement date." Three readings people get wrong:
- ★★★ It runs to disbursement, the day the loan funds, not to application. Applying early does not help; funding after the anniversary does.
- ★★★ It is joint ownership of this property, not the length of the marriage and not occupancy. The document that answers it is the deed.
- ★★ Falling short does not prevent the loan. It reclassifies it as a cash-out.
★ So if the deed date is close, the question for the settlement is when the transaction can fund, not when it can be filed.
★★★ The agreement condition, and why a decree may not be enough
The guide wants a written agreement signed by all parties stating both the terms of the transfer and the "proposed disposition of the proceeds from the refinance transaction."
★★★ A Texas decree that awards the homestead and imposes an owelty has addressed the first limb thoroughly. Whether it says where the refinance proceeds go is a separate question, and often it does not.
★★ Because an owelty is commonly set up by court order or written agreement anyway, this is usually an easy thing to include — if it is raised while the document is still a draft. After signature it needs the other side's cooperation again. The short version for counsel.
★★ One more agency provision that helps in a divorce
Selling Guide B2-1.3-03: the usual six-month on-title requirement does not apply — "There is no waiting period if the lender documents that the borrower… was legally awarded the property (divorce, separation, or dissolution of a domestic partnership)", and the twelve-month seasoning of the loan being paid off "does not apply… when buying out a co-owner pursuant to a legal agreement."
★★ Note the asymmetry, which confuses people: one provision imposes a twelve-month joint-ownership condition; another removes a six-month on-title wait. Different questions, different answers.
★ The limits of this page
- ★★ These are Fannie Mae requirements, read 2026-10-10, subject to change and to individual lender overlays.
- ★★ They govern agency loans. All 254 Texas counties sit at $832,750, so most Texas buyouts are inside that, unlike California. The limit
- ★★★ They say nothing about Texas homestead law, and Texas homestead law says nothing about them. The constitutional side
Mike Certo, NMLS #260555. (480) 296-6513 · mcerto@cfmtg.com. Not a law firm; no owelty structuring advice.
Frequently asked questions
Is a Texas divorce buyout a cash-out refinance?
Under Fannie Mae's rule it is a limited cash-out refinance, not a cash-out, if the property was jointly owned for at least 12 months preceding the disbursement date and all parties sign a written agreement stating the terms of the property transfer and the proposed disposition of the refinance proceeds.Does satisfying the Texas owelty rules satisfy the lender?
No, they are separate requirements. The Texas Constitution governs whether a lien may attach to the homestead at all and is a matter for your attorney and title company. The Fannie Mae Selling Guide governs how the loan is classified and underwritten. A properly created owelty can still fail the agency's twelve-month condition, and a perfect agency agreement does not cure a defective homestead lien.Is the 12-month rule measured from when we apply?
No. It runs to the disbursement date, the day the new loan funds, and it is a test of joint ownership of the property rather than of the length of the marriage or of occupancy. The deed is the document that answers it.Mike Certo · NMLS #260555 · Cornerstone First Mortgage NMLS #173855 · Equal Housing Lender. Educational content about mortgage financing during and after a divorce. Not a loan commitment, and not legal, tax or financial advice. Cornerstone First Mortgage is a lender; it is not a law firm, does not represent any party to a dissolution, does not make attorney referrals, takes no position on how property should be divided, and does not advise on how an owelty of partition should be documented or closed. Texas homestead and property-division rules are set by the Texas Constitution and the Family Code and applied by the courts; homestead tax exemptions are administered by county appraisal districts. Agency requirements described here are Fannie Mae Selling Guide provisions current as of the date shown and are subject to change and to lender overlays. Housing market figures describe the twelve months to August 2026 and are not a forecast. All loans are subject to borrower, property and program qualification.