Question:

Can you explain how Option ARM 100% financing works?

Answer:

The Option ARM 100% financing is a relatively new product. Option ARMs are risky in their core, and the 100% financing makes them even riskier. Given this, it is not a surprise that Option ARM 100% financing comes with high rates for an Option ARM.

With one and the same lender, an Option ARM 80% financing may be available with a start rate at 1% and margin of 2.80%. In comparison, Option ARM 100% financing may be available at a start rate of 3.5% and a margin of 4%.

Obviously, the higher the LTV, the much the rates - as expected. Credit score will also determine how much of financing you are available for.

Sometimes, 80/20 is a good option for an Option ARM 100% financing. You will get the Option ARM 80% financing and possibly a HELOC for the 20%. You won't have to pay PMI, and sooner or later the HELOC will drop.

If you choose to go with a piggyback to get a Option ARM and 100% financing, if your credit score is not particularly good, you may have to spend some time looking for a lender that will offer you a good loan. No need to go subprime with an Option ARM and 100% financing at that.

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