Newbie question for lenders

[James Harris]

Called upon a local mortgage broker for a rate quote on a 30-year fixed mortgage (cash out refi). I'll preface this with the fact that I have used this broker before and give them high marks. The particulars of the deal are as follows: 200K cash out refi on my primary residence (SFR) which is mortgage-free and conservatively valued at 280k (LTV 75%). DTI is right under 60% with a decent credit score of 700 (no late payments, stable residence, stable employment, and no defaults…current debt is the ONLY anchor on my score). Purpose of loan (expressed to broker) is to pay off all current debt…90k HELOC, 50K mortgage (6%apr) on rental property (vacant/remodeling), and 30k credit card debt…basically a consolidation of all my obligations. The rate offered was 4.6, which seems high in the current market. When asked why such a high rate, the answer (expected) was DTI.

The question is this: is 4.6 on the higher end of the spectrum for my position? Given that my credit score will improve subsequent to (and as a direct result of) the loan (DTI falls down to around 26% by my math), why is this not given consideration? Are rates for cash out refi loans typically higher in general? Is it unreasonable to expect a rate under 4 given my financial picture? I understand the lender's exposure here, I think. They could cash me out the 200k, I decide to skip paying off the debt as intended and instead, head to Vegas and throw it on black….6 feet away from all other players at the table, of course. But the more realistic outcome (given my history) is that I pay off the debt as intended, cut my DTI down to 26%, and begin putting my next deal together. How do I mitigate this risk to lender and get a rate under 4? Any way to earmark the loan proceeds to outstanding obligations? It should also be mentioned that my condo has equity (100K+), and once rented adds another 2K minimum to income (driving DTI % down even further).

Oh, and hello to you all, I’m James (real estate newbie)…brand new to BP and first-time poster. Such an incredible amount of info and knowledgeable investors here! Appreciate any and all feedback, cheers!