This attracts a higher-quality renter, ensures funds are available to maintain the home, and reduces the risk of major losses.

It was put in place because the feds have increased immigration for the last ~10 years (over 5M people or 8% of our population) to the point that we now have a housing shortage. 

2) Is the extra LTV on cash-out worth the increase in interest rate and if not, how much LTV would I need to go get the next property?

Your insurance is going to be highly variable and I wouldn't use what an agent or the seller tells you as the cost of dwelling policies have increased substantially over the past few years due to rising new construction costs. 

The deal does have a sizable amount of margin, which makes it attractive to begin with. 

Just last month, from what I read in the Wall Street Journal, there’s been a growing interest in these more under-the-radar markets.. places like Casper that might not scream top-of-the-charts popularity, but quietly attract buyers who appreciate untapped potential.

Of course, if you do flip it you'll want to put in nicer finishes so that would increase your rehab costs and that needs to be factored in as well. 

The shorter the prepayment term has an impact on increasing the rate.4.

The property value has increased quite a bit since then and i would like to increase it, but i wasn't sure it they would entertain it being that its an investment now and not my primary home.  

Market AnalysisDemand: Red River Gorge has seen a significant increase in vacation rental demand.