Thank for the support everyone.Points / Origination Fee$ Prepaid Hazard Insurance$ Prepaid Flood Insurance$ Prepaid Property Taxes$ Annual Assessments$ Title and Escrow Fees$ Attorney Charges$ Inspection Costs$ Recording Fees$ Appraisal Fees$ Other Fees / Charges$

Is some of the 20K going to closing costs and prepaids and not actually a down payment?

In that case it can only be used to offset your closing cost and prepaids.If your closing cost and prepaids comes out to be lesser than that of the seller credit, then we show the seller credit same as the total closing cost as we can't go above that.

If this lender is now mentioning its now 3.875% + .80% (current FHA MI if you have atleast 5% equity) then your effective rate is now 4.675% which is still over 1.125% lower than your current loan) so its a definite interest cost benefit.The other factor you'll have to resolve is the closing costs and prepaids.

The new loan amount can be no more than the actual documented amount of the borrower's initial investment in purchasing the property plus the financing of closing costs, prepaid fees, and points on the new mortgage loan (subject to the maximum LTV, CLTV, and HCLTV ratios for the cash-out transaction based on the current appraised value)."

Furthermore they may at the very least have a prepaid card.

If the applicant doesn't meet our criteria and they are the only one we have we will accept them with conditions, like prepaid rent or cosigner. 

@Ryan KeenanGetting a lower rate is possible but it'll more than likely mean you'll need to pay more points (pre-paid interest) on the loan.Doing this drastically reduces the amount of interest you would pay @ a higher rate w/ less points. 

For example they prepaid January - June 2017 already and if you close January 31st, you owe the seller taxes for Feb - June 2017.Do you have a breakdown of the costs or is this just a verbal estimate?  

I had an idea to offer a year's rental pre-paid at a storage unit, with the moving/packing included as part of the deal.