Down Payment Calculation | Real Estate Math (2018)

Down Payment Calculation | Real Estate Math (2018)



I just about felt this part of my real-estate exam math has never been my strongest subject and all this stuff about mortgages and taxes and rates like I literally couldn't even wrap my head around it I honestly I don't even know how I passed the math portion of my real estate exam now keep in mind when I was in real estate school I was very young so I hadn't purchased a home I didn't really even have people very close to me who had purchased a home that I could ask those questions so I was just totally clueless now today I'll still admit I'm no math expert but I do know a thing or two when it comes to this real estate math especially when we get into talking about down payments and mortgages and Commission of course and there's one part of real estate math that has a real estate agent you're always going to see and that's what I want to talk about in its video today I'm going to show you how to calculate down payments and then also I'm going to talk a little bit about the mortgage payment so if this is your first time watching my videos welcome to my channel my name is Jason J miles and I have been a real estate agent for many years now and I've sold millions of dollars worth of real estate year-over-year and so what I like to do on my channel is really educate either agents who are coming into the business or if you're already in the business giving you the reality of what it's like working in real estate and so I welcome you and hit the subscribe button while you're watching this intro and let's get into this topic so commonly in a transaction you're going to deal with two parties so there's a real estate agent which I would imagine that you are and then there's also the lender or you may here loan officer mortgage broker they have several names but we work hand-in-hand to get a transaction done so if anybody's borrowing money from the bank to purchase a home they're going to be taking out a mortgage or a loan from whatever financial institution and they're most likely going to be working with a lender you as the real estate agent we show them the homes we do all the documents and contracts and everything and then we pass it off to the lender for the lender to work with them on the whole money side although I don't work in lending and I'm not the one putting together the loan and everything I still have a lot of knowledge when it comes to the requirements what goes into the monthly mortgage payment what they could be looking at as a down payment and so I'm able to articulate this to clients and it's especially needed when we are going to write a contract so when I get a new buyer you know I let them know upfront that I'm the real estate agent and we work together with the lender because sometimes buyers can ask you questions like that are deep into the lending process that you may not know and so I don't want to give them wrong information plus that's the lenders job the lenders job is to make sure that all their financial questions are answered and that the money is in line so that we can get to closing and that we can close on this properly yeah and so that we can close on this property in the right way so come to the board with me I want to show you a few things as it concerns to down payment and monthly payments and how you can calculate them typically on a contract there are gonna be three pieces of financial information that's super important and this could help make or break your deal but it's things that you need to know as a real estate agent because you have to fill out the contract and so ahead of time make sure that you have already received financing authorization or a pre-approval from whatever lender your buyer is using so that you can fill this information out on the contract so we have our cash from buyer we have our loan amount and then we have our sales price those are three numbers that we use on pretty much every single contract and let's as a cash do you still have to fill this out and so the way to calculate these I kind of like to work backwards a little bit for this example I'm just gonna use a nice round figure and so we're gonna use a property that costs $100,000 or is being sold for $100,000 so we're going to go ahead and put that sales price of $100,000 here and then the cash from buyer is going to be whatever they are putting down on the property this doesn't include closing costs so don't count closing cost into this number this is strictly down payment so whatever number they put there as cash from buyers this is what's expected to go to the down payment of the actual property we're going to just say for instance they are putting 5% down it's on a hundred thousand dollar home that's going to be five thousand dollars so that'll leave the actual loan amount that's the amount that the buyer is going to be financing this is the number that the lender the bank the the mortgage company this is what they're going to be giving as far as lending goes all we have to do for that is minus this five thousand from that hundred thousand and that tells us what the loan amount is since our loan amount is ninety five thousand dollars that's the amount that the buyer is going to be financing over the term of their loan or you can kind of say that that's the mortgage amount but something to note especially when it comes to mortgages this loan amount is not all that the buyer is going to be paying per month because what a lot of people think that they can break the payment scenario down is just take this 95,000 and divide that up over 30 years and they think that's how much the buyer is going to be paying per month but that's not true there are four things that go into a buyers actual monthly payment and the way that the easy way to remember what those things are we use this little acronym and that is P i t i so piti here's what this stands for this damns for principal interest taxes and insurance those are the four things that go into someone's monthly payment now of course there can be things like an HOA or certain other things depending on what they're purchasing but for the most part this is what's going to be that monthly payment so just know if a buyer asks you what am I looking at for a month don't just tell them the sales price divided over thirty years because you're going to be leading them in the wrong direction so principle principle is the actual mortgage amount so the principal amount is this ninety five thousand dollars divided up over thirty years and then divided up over twelve months you get it and so that's what this number is so it's going to be pretty low that's gonna be a pretty low number because you are dividing ninety five thousand dollars up over thirty years because for the most part they're probably gonna get a 30-year loan there are other loan products out there but for this example I'm going to use a 30-year the next number is going to be interest interest is one of those things that it's super hard to calculate if you're not working with the loan officer because everyone's interest rate can be different and there are variety of factors that go into it but mostly it's your clients financial situation so it's going to be their credit it's going to be their income it's going to be whatever the bank assigns now the interest rates are actually set from a very high level so I mean you can pretty much open up any newspaper and see what today's interest rates are or you can walk into a bank and see posters everywhere and they'll tell you what interest rates are but that's not 100% for your client because everybody has different credit profiles everybody kind of falls within different brackets and so the lender is the one that is going to give you the interest rate and interest rates change daily and so until you're going under contract that interest rate is not necessarily locked so don't tell a client what their interest rate is before speaking to a lender you can give them what the national averages are but that may not necessarily be theirs especially if they're trying to do any type of programs or receiving any grants you know all of those things can affect the actual interest rate when it comes to their monthly payment next we have our tax of taxes like like taxes for cars and for just regular merchandise a parity when we get into real estate taxes there are certain things that can change that tax little amount depending on what city you're in what county state taxes even some neighborhoods have school school districts charge a school district tax so so that's something tooks to kind of know what you can do though you can get an estimation of your taxes because taxes actually vary by the value of the property as well and so if the property is worth more now that attackers will be higher and then lastly we have insurance insurance is one of those things that can vary as well because insurance is actually based on the properties and so it's based off of the property's location the age of the property the condition of the property things like that just just like a car your insurance can be higher or lower they tend to research if there's been any previous claims on a property the age and condition of the roof most companies will even send somebody out to look at the property before they actually insure it and so that's another value that can change that you don't want to you know give your client a hard number about because it may not be true at the end of the day but these four things are what goes into the actual monthly payment your principal interest taxes and insurance now at the closing table there are other closing call such as your title fee's or attorney feed lender fees and then also fees for the real estate agent what I want you to do I want you to let me know in the comments I'm gonna give you just like a little quiz question and see who can answer this correctly I'm gonna put your math to the test I want you to tell me how much a client will be getting a mortgage for for a property that is four hundred and fifty thousand and they are putting 20% down let me know your answer in the comments I want to see who understands this real estate man I hope this information has been helpful to you if you do have any questions feel free to asking them in the comments and please give me a thumbs up if this video was informative and I always appreciate you subscribing to my channel so if you haven't subscribed yet hit the subscribe button because I release content like this all the time and I would love to have you a part of my community so until next time I'm chasing J mile and I will talk to you soon [Applause]