Well if you are going to refinance soon after the initial loan program wouldn't be as important than if you were going to stay in that original mortgage program. However you always have to think worst case scenario, and that is if you don't refinance afterwards, be it that your scores couldn't get to where you think they'd be, a sudden medical issue, rates go up and it's not worth refinancing, etc. Interest only scares people off because some think that they can never pay down their balance, but that isn't true as it's an interest only option, not a required interest only payment. What concerns me more is that it's a 10/1 ARM, meaning 10 years from now you would face a rate adjustment and in order to avoid it would need to refinance. Now in 10 years the real estate market is likely to turn around so refinancing is probably going to be a strong possibility, but nothing is guaranteed. I'd check out what the rate is on a 30-year fixed as a comparison, it should be pretty close to the 10/1 ARM.
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