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I received the quote from the bank, telling me I could get a construction loan for $350,000 at 6.5% interest that rolled into a 5 year ARM fixed at 6.5%. They also offered a 1/1 loan, that doesn’t really mean anything to me. What it supposedly means is that I get a 1 year construction loan at 6.25% that needs to be turned into a final mortgage when the construction is done. I was a little afraid of that one though, because it looks to me like the market is going to crash and interest rates on mortgages are going to go through the roof about the time I have to refinance the construction loan.
I saw an article in the news a couple of days ago that said there were going to be like 2.2 million foreclosures this year, and a bunch of mortgage companies were going to go bankrupt due to all of the foreclosures. Capitol one shut their home loan company last week and put 1,900 people out of work. And, it looks like Countrywide is going to go bankrupt too. The whole mortgage world looks really scary to me right now, so I will probably go with a local bank.
The only thing that I really hate about the 6.5% loan with a 5 year arm is that if I go with it, I will have to pay loan origination fees when I refinance sometime within the next 5 years. But, unlike the 1/1 loan, at least I have 5 years to find the best rate instead of being forced to refinance the second the house is done.
Wait, there’s an update… I guess the local bank is out. LOL
I contacted 2 other local lenders to see what they had to offer, and heard back from one of them today. He offered a construction loan at 6.375% that rolls directly into a 30 year fixed at the same 6.375% rate. Man that looks good to me. I was thinking about not going with them because they are out of Spokane instead of Walla Walla, but my other bank called me just now and told me they wouldn’t OK my loan if I stayed with the builder I’m thinking about using as my construction consultant. That sure makes the decision a little easier right now.