I'm trying to refinance my mortgage- just a rate refinance, no money back. We bought the house in August 2013 (11 months ago).

A month ago I contacted the same loan officer at WF that I originally dealt with. For a refinance, he quoted me 4% with no points or 3.875% for $1475. He locked me in at 4% (got it in writing and everything) but said we can buy down the rate any time we want. He asked how much I thought the house was worth and I told him. The figure I gave him was about $100k more than our purchase price but we had done work on it and I keep up to date on comps.

So a few weeks later, I get a GFE saying that 3.875% will cost me over $3,000. I ask him what happened to the $1475 and he said that because I am refinancing within a year, they have to calculate the loan to value ratio using the purchase price and not the appraised value. So because my loan to value ratio is now higher (because we are using the purchase price), the cost of the buy down increased. For the record, with using the purchase price OR the appraised value, my loan to value ratio is under 80% either way. So this isnt' a case of me paying PMI or anything. So at this point I'm confused. Since when do points have anything to do with loan to value ratio? But I tell him forget it, I'll stick to 4%, no points.

Now, a few weeks later, I get another GFE saying my rate is 4%, and the cost is 1/8 of a point. I call him and he again says that this is because of the price adjustment of the loan to value ratio. He said that 4% no points was quoted to me based on the value of my house that I estimated for him. But since I'm refinancing within a year, they have to use the purchase price and that changes the loan to value ratio and thus the cost of the rate. Meanwhile, WF ordered an appraisal and the house appraised for close to what I was thinking it was worth. So I asked why they wouldn't use the appraised value and he said they can't.


As long as the loan to value ratio is under 80%, I don't understand what it has to do with the rate. Has anyone ever heard of this before?

Thanks!