Should you need to pay off debt to qualify, it will work on conforming loans, but not necessarily on jumbo loans (over 417,000). On jumbo loans, even if you pay off the debts, they still can be counted against you in your ratio of debt to income. Subprime loans of any size work the way that the conforming loans work: pay off the debts and they aren't counted against you. This works even if you are paying the debts with the cash from the refinance.
Do you want a special rate on your loan, whether it is a new purchase, a refinance, or a cash out refinance? You can have one, if you are a low to moderate income borrower. You qualify if you earn 80% of the median income in the county you live or will be buying in for the transaction, or if you are living or buying into an area that is designated a low to moderate income census tract.
This works best in California, Texas, North Carolina, Florida and New York. You would be surprised by the areas that fall into these tracts. Homes can be worth multi-millions and you can still qualify!
In closing, I want to remind you of a few things: that "interest only" is not a loan but an option, the "1% loan" does not refer to the interest rate (which is usually around 7% or higher) but the payment rate, and a 50 year loan takes 40 years to pay off half the principal.
And finally, a car pool lane is not a reward to enjoy, like a nice walk in the park. It is a way to get from point A to point B a bit quicker, because you get to circumvent the majority of the traffic.