Help with Mortgage First Time Home Buyer

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Here’s the conundrum I’m in. I bought a house back in July and went on vacation to HI. I had compared lenders and what have you and picked the one that gave me the best rate. It was a lender through lending tree. Back then he quoted me 5.5% on a 30-year fixed with no pre-payment penalty 0.875 points. I come back form HI and I find out that the guy was unable to deliver on his promise due to debt to income ratio just above 50%. I am royally screwed because back when I was shopping lenders I got quoted 5.5% with 1 point on a stated loan so debt to income ratio would not have been an issue.

This whole fiasco is costing me big. To get 5.5% right now on a 30-year fixed, we’re talking 2 points. No way I’m paying that much up front. Just some additional information. I have absolutely stellar credit with scores @ 794, 784 and 760 and that’s after they’ve gone down due to “too many inquiries”. Also I have about ten years on the bureau showing on time payments with credit cards, car payments, etc. I currently live in apartment so I do not have mortgage payments history on my credit report. I have solid employment history and am putting 20% down. Also I have no debt. Never any settlements, foreclosures, child support, alimony, none of that stuff.

Given my situation, I am looking for suggestions from people in the mortgage industry. One option is to go with an short term interest only ARM, establish some mortgage payment history, increase income and then refinance with a better rate 30-year fixed. But that assumes that interest rates are going to go down or stay even. Mortgage industry insiders, do you have a read on interest rates direction short/medium/long term. I can also go for 3/5 year ARM. I can even go 30-year fixed. I am confused as to which loan is best for me. Please help. Time is against me. I need to commit fast because that close of escrow date is sneaking up on me. I am a first-time home buyer. We’re talking Detached Single Family Residence.