I am a mortgage banker and want you to know that this is a good deal. 100% financing in this marketplace is especially hard to come by with scores less then 700 for both borrowers. In addition, mortgage rates have really spiked the last 45 days, almost as much as a point.
Yes, there are lower rates out there then the one that you are quoted but they are generally for loans that are less then 80% of the appraised value, in your case you are using 100% of the appraised value for the loan. Another thing to consider is that because you don't have to pay PMI, that is causing your rate to go up as well, as you are essentially financing the PMI. This is a good thing because instead of spending the money on insuring your loan for the bank, you are applying it towards your principal balance.
Finally, the last thing to consider is that it is very tough to compete with builder's lenders because of the incentives that the builders are offereing. In your case they are paying your closing costs.
Like I said I am a mortgage banker and in escrow for my own house and using the builders lender because I can't compete with their loan after considering the $8000 incentive for closing costs.
Feel free to ask any more questions as I would love to help out, I have gotten so much great info from this forum it feels good to offer advice. I also can fund loans in 50 states if by chance you need help.
John-