Those are the guidelines.
There are many others that make zero sense as well.
Underwriters are told to follow directions, not to think for themselves.
If you pay off the house then want cash out, it’s a cash out refi.
You cannot buy the house from yourself.
Freddie & Fannie make the rules which have nothing to do with common sense. Pricing hit for cash out
Your lower loan amount is what’s hurting you if you’re looking for a no cost loan.
Doesn’t matter if you have 80% equity.
There are costs involved with every loan, $500,000 loan fees aren’t that much higher than 160,000 loan.
Lender pays a % of the loan amount to cover the costs.
1% of 500k = $5000
1% of 160k = $1600
Some lenders have penalties for loans under $200K
I am working on one for a client now.
It was cheaper to get a $200,000 cash out loan than $160,000 without cash out. They will probably pay the extra $40,000 back towards principal quickly.
Although the payment won’t change, interest is only charged on the actual loan balance. More will go towards principal.
What are you trying to accomplish ?
Is a rate around 3.21 with $1000 cost or below 3% with a higher cost any interest ?
It’s either low/no cost up front with a higher payment OR pay up front and have a lower payment for the life of the loan.
Some people think paying up front is wasting money but
staying in a higher rate is wasting money too.
