so we were approved for an 80/20 with an interest rate of 6.875% the average around the town i live in seems to be between 6 and 6.5% does 6.875% seem reasonable or is that too high?

Way to high. If you are going with an 80/20 it should be structured as a 3/1 ARM on the first at 5.875% (fully amortized) or 6% (interest only)with no more than $1,050 in closing costs and a 30 due in 15 at 6.875% for the second with no costs. Granted this would be if you have decent credit (620+), full doc, owner occupied, single family residence.

Forgot to add. You never want to go with a 30 year fixed on any loan to value over 80%. There are a number of reasons why:

1) In 1-2 years you will want to consolidate your 1st & 2nd in to one loan at or below 80% LTV to avoid MI.
2) By then you will have a much better understanding of whether or not you plan on staying in that particular property for an extended period of time. (the avg. time a person stays in a home is 7 years).
3) The way a 30 year fixed is amortized, you are paying primarily interest only at a much higher rate the first 5 years anyway.

AZLender, are you considering that he probably got a quote with no points?.... Your quote looks like you would be charging points, right?... Your closing costs are very, very, very, very competitive. What bank/mortgage firm are you with?

P.S Slim, your quote doesnt seem all that bad. You could definately do a little better on the first. 1/8th - .375 better. AZ did make a good point with the 3/1. I will add the the Treasuries are up side down so you would not get normal spread between arms and fixed rates, with that being said you get more value in the 30 year fixed regardless of your plans. Good Luck, if you need any help just email me.

He most definately did. I do not charge points. I am set up with 177 wholesale resources. I have the best rates available in the industry. The problem with most LO's is they dont know where to look. I also do not try to make a million dollars on my loans. The way I see it is if I give the consumer a good deal, I in turn get referrals which is mainly where my business has come from over the years.