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First off, in Texas, this is true only for subprime cash-out deals. Secondly, although the lender is technically paying for all third party fees (title, insurance, reserves, attorney fees, etc) the lender is typically charging your loan 2 discount points (2) to buy down the rate and pay all third party vendors. This is called a third party buy-out fee. Sometimes this works in your favor. In a situation in which third-party fees are greater than the discount points charged to your account this would make sense.
However, the difference is sometimes nominal. Ask you HomeStart loan officer to see if buying-out third party fees or a typical closing cost scenario best suits your needs.
What is the 3 rule on Texas cashouts. Texas constitution states that all third-party fees on a cash-out or home equity loan for homestead properties may not exceed 3.