Financing and Economics
The loan as a math problem
LTV equals loan divided by value; the down payment is the remainder. Below 20% down, conventional loans usually require PMI; FHA allows 3.5% down with MIP; VA offers 0% down with a funding fee and entitlement limits.
ARM anatomy: index plus margin equals the fully indexed rate, subject to periodic and lifetime caps and a teaser start rate. Discount points are prepaid interest that lowers the note rate; an origination fee is lender revenue. The APR folds fees into a rate for comparison - it is not the note rate.
Qualifying follows guideline ratios of about 28% front-end (housing) and 36% back-end (total debt) of gross monthly income.
Disclosures
TILA-RESPA: Loan Estimate within three business days of application; Closing Disclosure at least three business days before consummation. RESPA bars kickbacks and unearned fees.
Investment math
Cap rate = NOI ÷ price. Gross rent multiplier = price ÷ gross annual rent. Leverage magnifies gains and losses. A 1031 exchange defers gain when replacement property is identified in 45 days and acquired within 180.
Worked example: $500,000 purchase, 20% down, $400,000 loan at 6% for 30 years. At roughly $6.00 per $1,000 of loan, principal and interest are about $2,400 per month.