Is This a Good Rate on New Home

[onthelevel]

Here's the scenario:

Mid-Score 659, Self-Employed, Home Price $760,000

We are purchasing a new construction home in Nevada. The builder is offering incentives to use their lender - (Lower Earnest Money Deposit, Only $1,000 deposit on first $25,000 of options added, and 50% deposit on options added over that). The loan offered by the builder's lender is 80/15, 2/28ARM, stated, interest only, with a 7.3 on the 1st and 11.6 on the second with no prepayment penalties on either. Their origination fee is 1 pt.

Fremont Bank is offering 80/20, 2/28ARM, stated, interest only, with a 7.1 on the 1st and 9.9 on the second with a 1 yr. prepayment penalty on the 1st. No origination fees.

Are these good rates for this situation?

Our dilemma is that if we don't use the builder's lender we have to give an additional $10,000 earnest money deposit and pay the other 50% on the options we added. Would we get all of this money back at closing minus closing costs say if we did the 100% financing with Fremont Bank?

Also, how does appraisal work on new homes? We were told that the builder's appraiser will only appraise the house at $1,000 over the sale price since it's a newly constructed home and community. Why is this when resale homes of the same size in the area are going for $900,000? And wouldn't this make our LTV almost 100%? Is this typical?

[credit007]

you could get a non-conforming 30 yr fixed rate mortgage with no MI in the 6.00 - 6.50 range. With no prepay penalty. Up to 95% LTV. Full doc though.

To get a combined CLTV at 95% with a stated program then I think the offer from Fremont is better for a subprime offering.