We do a one-time construction to perm close. I am wondering about the loan product field. Our term is a 9-month interest only construction phase which then goes to a 10/1 ARM (ARM rate is known at consummation). We are disclosing the product as follows: 9 mo. Interest Only, 10/1 Adjustable Rate. Encompass is automatically changing the product to: 9 mo. Interest Only, 10.75/1 Adjustable Rate. We are able to change it back to what we originally entered, but wondering if we should be leaving as Encompass is? Our thought is that the first option is correct, and that Encompass is incorrectly changing it.

Any thoughts?

Thank you!

When does the loan close and what is the date of the first interest rate change? If you start the construction loan at 5% for 9 months and then it converts to permanent at 5% and does not change to 10 years - then it is 10.75/1

The 1st rate change is at the end of the construction period (after the initial 9 months). Then the rate is fixed for 10 years at a different rate than what the construction period was. So...then the 10/1 would be correct??

How is the start rate on the permanent loan determined?

The permanent rate is credit based and determined at application.