7/1 arm

It is typically libor+2.25, but more importantly I would request/push for 2/2/5 rather than 5/2/5 cap structure to protect yourself against higher rates upon reset in 7yrs.

oh ok, they have shown 5/2/5. i assume though that if they do 2/2/5, it would entail a higher start rate? right now i'm being quoted 2.5% for the first 7 years.

wells fargo has a product where the first portion is an I/O fixed for a term, which resets to the SAME fixed rate but amortized of the rest of the period. So for example you would get a 10/20 which is 10 years interest only at say, 3.5% (rates a little higher on this product) then in 10 years it converts to a FIXED rate at 3.5% fully amortizing loan, however the payoff term is 20 years. An $800k loan would be roughly $2250 for 10 years, then $4400 for 20 years. It's the best product out there in my opinion. YOu pay off so little principal in the 7/1 arm that I dont see the point except to lower the payment. if that is the priority, then IMHO this Wells product is better.

GWC - I would not characterize ~16% of mortgage balance paid over 7 years in sched prin amortization as 'so little'. as expected, ARM mortgage choices are dependent on 1) aversion to payment changes, 2) aversion to leverage 3) duration of expected ownership & 4) expectations of fwd mortgage rates.

Very interesting. Unfortunately, I'm on the verge of closing, I'd initially gone for a 30yr fixed, and was only made aware of the potential to do the ARMs (it was my fault initially for not even considering the ARMs, i should've done that while i was applying for the mortgage).
In any case, it seems like fanniemae guidelines require a 25% downpayment (rather than 20%) on about a 600k mortgage loan? Is that true? If so, I can't really opt for the ARM as the underwriting process has to begin again but I need to close in a week.

Brooksvale makes a good point. I agree.

you can google to get latest fannie requirements.

yea i've been trying to find it with respect to new york guidelines, but can't get it. if you do happen to have a link, could you please post it. i'll keep looking, thanks for all the help.

>Brooksvale makes a good point. I agree.

Thought I was on ignore

yes - all else equal 2/2/5 cap structure should cost more for the borrower (higher rate) than 5/2/5. if wells is really offering 10/20 IO, it's a matter of rate and leverage preferred.

Columbia. Tell your loan officer to reset the product from a FNMA product to a Jumbo product and you will be able to do the loan at 80% LTV. Many loan officers dont understand that they can do this, but it is the easiest solution to get around the 5% restriction. The rates should be pretty similar, as we would likey be right around there on a jumbo 7/1 interest only.

Jim McPartland
AVP, Mortgage Banking
Bank of America Home Loans
50 Rockefeller Plaza, 11th Fl.
New York, NY 10020
(646) 556-0207 Direct
(917) 993-2358 Mobile
(866) 614-4829 Fax
james.mcpartland@bankofamerica.com
NMLS#614743