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

The reason it is an arm is because they are hedging their bets. It is a product that will be sold after your initial closing. The bond that is sold is based on the dual loan package, however there is a certain percentage of homes not completed in six months that is a regular scenario or suppose you lose your job, death, disability, contractor issues, etc. If there is no COO at the end of 6 months you may not be able to roll it into a permanent loan.

Every loan is based on a picture in time, suppose you get a a lien or even id fraud, suppose the construction loan lowers you score, and you don't have the credit or dti to qualify at the lower score? If you don't meet the FNMA guides, you won't be able to convert it.

What you need to do is get their GFE and then call Dow FCU and see what their terms are for construction only. If it is better that your construction with Whitney, use them. What you should be looking for with your initial construction loan is the fees, the rate and the ease of the loan. Whitney may have stage of completion conditions, and conversion fees that cost you more than a construction only. You want to know the fees associated with the construction to service it and inspect it. If rates are in decline, which 6 months from now probably won't be, you may be better of with a onetime close. But you owe it to yourself to look at it. Also be aware that DFCU and other places basically give you a checkbook and you pay the people. What are the Whitney product restrictions, do they allow multiple contractors, does the contractor request a check or do you? There is a lot to be said for ease of the loan. I built right after Katrina and had issues getting contractors that I had lined up for months ahead, with out the easy terms, it would have been rough. Also, they didn't have an issue extending my time.