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How do I know how much house I can afford? |
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Generally speaking, you can purchase a home with a value equals to four (4) to six (6) times your annual household income. However, the amount that you can borrower would depend upon your household income, credit history and the amount of down payment. Since the lenders normally require DTI (debt-to-income) ratio not to exceed 38% to 45% of monthly household income, the size of loan amount can be determined to meet this DTI ratio requirement. The DTI ratio is computed by total monthly debts by total monthly household income. The total debts consist monthly PITI (principal, interest, property taxes & insuance), all installment loan payments and credit/charge card payments. However, there are other loan programs available to fit each borrower's needs. |
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What is the difference between a fixed-rate loan and an adjustable-rate loan? |
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Normally, the interest rate on a fixed-rate mortgage stays the same during the life of the loan. However, the interest rate on an adjustable-rate mortgage (ARM) changes periodically in relation to an index. While the monthly payments on a fixed-rate mortgage are relatively the same during the life of the loan, the payments on an ARM will likely change periodically. There are advantages and disadvantages to each type of mortgage. The best way to select a loan product is to contact one of our mortgage specialists. |
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How is an index and margin used in an ARM? |
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An index is an economic indicator that lenders use to set the interest rate for an adjustable-rate mortgage (ARM). Generally, the interest rate on ARM consists of index rate and pre-set margin. Five commonly used indices are 11th District Cost of Funds (COFI), 1-Year Treasury Bill (T-bill), Monthly Teasury Average (MTA), London Inter-Bank Offered Rate (LIBOR) and constant Maturity Treasury (CMT). |
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How do I know which type of mortgage is best for me? |
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There is no simple formula to determine the type of mortgage that suits you the best. There are other factors that come into play in determining the type of mortgage that will fit your need. These factors include your current household income, reserved assets, credit scores and the value of property. Often times, some of the lenders would quote interest rates over the phone without verifying these factors, which could result in misleading. M C Funding, Inc. can help you by reviewing and analyzing the factors to determine the type of mortgage that will suit you the best. |
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What does my mortgage payment include? |
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Normally, the mortgage payment includes principal (partial repayment of money borrowed) and interest (partial cost on the money borrowed). However, if you borrowe more than 90% of the value of property or purchase price, the property taxes and hazard insurance are included in the monthly payment, which is mandatory. If you borrowe less or equal to 90% or the value of property or purchase price, it becomes your option to request for these expenses to be impounded or not. |
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How much cash will I need to purchase a home? |
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The amount of cash you need is (1) Down payment, (2) Loan closing costs and (3) Asset reserve required by the lenders, if there is any. This can be determined depending on the type of loan program and documentation, which is usually equals to 2 to 3 months mortgage payment including property taxes and insurance (pricinpal, interest, taxes and insurance).
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