A limited cash-out refinance allows the borrower to get cash back, the lower of what amount or percentage?

A limited cash-out refinance allows a borrower to access some cash from their home equity while refinancing their mortgage. The proper guidelines for determining how much cash can be taken out typically set a limit based on either a fixed dollar amount or a percentage of the loan amount.

In this scenario, the correct option outlines that the borrower can receive cash back that is restricted to the lower of $2,000 or 2% of the loan amount. This means that if the calculated 2% exceeds $2,000, the borrower is limited to receiving a maximum of $2,000. Conversely, if 2% of the loan amount results in less than $2,000, the borrower would receive that lower amount. This policy is designed to manage risk for lenders while still providing borrowers with some flexibility in accessing their home equity.

The other options present lower dollar amounts and percentages, which do not align with the guidelines for a limited cash-out refinance, thereby making them less appropriate choices in this context. The higher limit of $2,000 or 2% provides borrowers with the most generous access to cash while ensuring compliance with underwriting requirements.