Refi terms question - LTV 80.1%!

[Sean Crowe]

Hello,

I'm working on a refi for my primary residence. A lender has offered us a loan estimate (waiving the appraisal) and magically valuing our property at $555,555. The loan amount is $445,000. This puts the LTV at 80.1% and forces us to pay PMI for 1-2 months before we can request PMI be stopped. Getting a rate of 2.5%.

$555,555 seems like an arbitrary number designed to put the LTV at just above 80%. I asked if they could loan us $444,000 instead, with us bringing a bit more cash to close, so that we could avoid having to deal with PMI at all (their terms for escaping PMI seem very vague). The loan officer tells me "I don't know why, but if your LTV dips below 80%, we will have to decrease credits by $1500."

I would have more skin in the game with a lower LTV. Why would they penalize me for this? Are they hoping to exploit me for more PMI than 1-2 months?

Thanks in advance,

Sean