Thanks for all your answers, it’s been very helpful to us all. I have a question on a more technical note: what are the typical margins of the standard ARMs and 30-year fixed mortgages over their respective benchmarks?
Let me take a concrete example: say we have the perfect borrower (high FICO, high assets, full doc, etc) in the perfect loan (conforming, very low LTV, etc). Say the borrower wants a 30-year fixed. I believe the benchmark for that is the 10-year Treasury. So the mortgage rate would be the 10-year yield (about 5% now) plus a margin. What is historically that margin? 1.5-2.0%? Same question for ARMs (say 1-year ARMs). The benchmarks must be either the 6-month or 2-year Treasury, I assume. And what would the margin historically be?
Thanks very much for taking your time to answer our questions.
Daniel
PS: I forgot about the possibility of “buying down” the rate. Let’s say our borrower doesn’t go overboard with that, and just pays the typical closing costs.
