We offer a 3/1 ARM loan that will be placed in portfolio as a non-QM. We are confused as to what rate should be used to calculate the qualifying payment in order to meet ATR. Here's the scenario:

Introductory Rate: 5.0%
Index: .120%
Margin: 4.25%

To comply with ATR, we need to use the fully indexed rate (4.37%) or introductory interest rate (5.0%), whichever is greater. In this case, we should use 5.0%. Is that correct?

I believe you have it right.