re: 10/1 7/1 5/1 ARM Question Concerning Construction/Mortgage

I agree it's confusing. Perhaps I just have a loan officer doing a poor job of explaining this. The whole involvement of the "adjustable rate" terminology is turning me off from Whitney. Here's the conversation chain between us verbatim:

quote:

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We will lock you into one of our ARM products during construction & then modify it out at the end of construction into the current 30 year market rate. Below are our ARM products & rates;

10/1 ARM – 4%
7/1 ARM – 3.50%
5/1 ARM – 3.00%

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So I responded with this:

quote:

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What product are we in at the end of the construction project? If we use the 10/1 ARM and we “modify it” as you say at the end of construction will it still be an ARM for the permanent mortgage? I think I was under the impression that construction to permanent worked as such:

1. I enter in to an Interest only construction loan at a set fixed for a max duration of 1 year.
2. After construction I enter in to a permanent mortgage at a fixed rate for 30 years at 4%-4.5% depending on current rates, credit and my income.

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And finally she sent me this:

quote:

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You are in the 10/1 ARM or whatever ARM you choose & rate for the one year term of construction. At the end, you can choose to stay in the ARM or modify into a 30 year fixed product. You are not committed to that ARM product. You will be modified into a fixed product if you so choose.

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Seems pretty clear to me. I just don't understand why they offer 3 ARM products for the construction if one of them clearly has a better rate and you convert to a fixed rate 30 year loan at the end of construction.(less than a year)