Must be an income ratio issue, If you have extra cash try increasing the down payment by $1,000 and re-run the 30 year fixed. If that doesnâ€™t work try paying a point, lower the interest rate Â¼% and run the decision again. There is a point the matrix will favor the 30 year fixed, if you can afford the additional closing cost/down payment.
Ask your agent to communicate this to the listing agent. I don't think it will take that long, maybe you give them something to get something if need be. It could be better terms, or money. But, if you can lock in to a 30yr fixed in todays market, it would be foolish to pass up the opportunity.
Your agent should be able to help you to ask for extension on the time required to get the 30 yrs fix. If that's not an option, better go with the 7/1 ARM or cancel the contract before the loan contingency date.