Under ATR, I want to make sure we are calculating DTI and repayment ability correctly.
Our ARM is pretty simple.
Intro rate: Fixed for 3 years. Adjusts every 3 years. Index of .73 plus a margin of 4.25%
Maximum adjustment cap 2.5%
Future margin 4.25
Our software provider is showing that the maximum rate during the first 5 years is 7.98.
The introductory rate is 4.98%; whereas 2.5% could be added at month 37, resulting in a maximum during first 5 years of 7.98% - I am of the opinion that we would use the 7.98% and the cooresponding payment amount to underwrite ATR? Am I correct?