If they had taken option 1 would they have received more money? 

@Simone Montague-Jackson agree with @Charles Carillo and @Jordan Moorhead, that they aren't what the marketing hype claims.Insurance companies are in business to make money, which requires them to have a hard stance on claims and incentivizes them to deny as many claims as possible.In our opinion and 24 years of observations, it worse with warranty insurance products!

It depends if you have a lien on title already (a mortgage or hard money loan), but I would either do this as a hard money refinance or a DSCR cash-out refinance to pay for the reno. 

AVR was good and we pulled 90% of our money out at refi time.

It's a sad way to make money IME.

I spent so much money trying to bring that place together that I am literally tens of thousands of dollars in high interest credit card debt.

You will lose peoples’ money if you do this deal.

@Nick BednarczykI think people also need to understand that fed rates are not directly correlated to mortgage ratesMortgage rates are more in line with the 10 year treasury which could remain high if we continue to spend money like a drunken sailor

For me it's capital, I have more leads than I have money. 

If you want to buy a home and live in it for a few years before renting it out, I will look at low-money down conventional/FHA options; if you cannot qualify conventionally with your DTI, I would look at DSCR loans.