[Steve Carlton]

I believe Ditech is owned by GMAC, so it should be fine. Other onlines can be flaky. When you're buying a house, you don't want to lose the financing late in the deal or have them change the deal on you. If it's a refi, there's less at stake. Countrywide is huge and has a large choice of programs; I like them a lot.

Even if you lose a little on the house, you will have had deductible interest and real estate taxes. Considering the relatively small amount of money at stake, maybe do a 30 year deal. You'll get owner-occupied rates going in, then if/when you move you can keep the house and rent it out instead and have a stable, minimal interest rate. It sure looks like you wouldn't have much of a negative cash flow, since you'd get to deduct depreciation. Could be a heck of a nestegg in the long run...

Sounds like the credit is excellent and probably a non-issue. A 4-year old paid collection should have minimal impact.

I think rates are still heading up. I believe in a healthy economy, they might stabilize around 1% higher than they currently are. A lot of the hazards in the ARMs are in what index they're based on. Countrywide's fixed period ARMs are based on the LIBOR index, which is the most volatile and therefore the worst when rates go up. Countrywide does have 30-year fixed loans with the first 10 & 15 years interest-only. After the I/O period the loan becomes fully amortized and the payment is even higher than a non-I/O payment would have been because there's only 15-20 years left to pay off all the original principal. But that might work you you guys if you really need the I/O payment to start, as your income will come on line before the payment increases, or you can make a fully amortized payment as soon as you can afford to. Countrywide also has a 7/1 and 10/1 ARM (the /1 means the rate is adjusted annually after the fixed period). Generally, the longer the fixed term, the closer the rate gets to the 30 year rate.

If you can come up with 5% down + the closing costs, and meet the reserve requirements, you can get the best rates on 30 year conforming loans (under $359,650). After you close, you can get a 100% CLTV (combined loan to value), and get your 5% (or more) back. Citibank has some 20-year fixed 2nds to 100% CLTV with great rates and zero closing costs, as well as HELOCs (home equity lines of credit) with lower margins than most, including Countrywide. Otherwise, it looks like Countrywide will do an 80/20 on a fixed period ARM.

I would also think that you should probably do two loans, an 80% 1st and a 15-20% 2nd. That way you'll avoid mortgage insurance (which is a rip) on the 1st. Or a higher rate, that is basically MI built-in (but at least deductible).