Down Payment = Purchase Price x Down Payment %. How it connects to the loan amount and LTV on the NY exam.
Down Payment = Purchase Price × Down Payment %
How to solve it, step by step
- Convert the down payment percentage to a decimal.
- Multiply by the purchase price.
- Subtract from the purchase price to get the loan amount if asked.
- Remember the down payment percentage and the LTV always total 100%.
Worked examples
20% down on $500,000 = $500,000 × 0.2 = $100,000. The loan is therefore $500,000 − $100,000 = $400,000.
Reversed: a buyer puts $85,000 down on a $425,000 home. Down payment percentage = $85,000 ÷ $425,000 = 20%, which means an 80% LTV.
What the NY exam actually asks
Down payment and LTV are two views of the same number. If the down payment is 20%, the LTV is 80%. The exam often gives one and asks for the other.
Try one yourself
A buyer purchases a $340,000 home with a 15% down payment. What is the loan amount?
Show the answer
$289,000. The down payment is $340,000 × 0.15 = $51,000, so the loan is $340,000 − $51,000 = $289,000. That is an 85% LTV.
Common mistakes
- Reporting the down payment when the question asked for the loan amount.
- Forgetting that down payment % and LTV always add to 100%.
- Confusing the down payment with earnest money, which is only a deposit toward it.
Questions students ask
Is earnest money the same as the down payment?
No. Earnest money is a good-faith deposit that is usually credited toward the down payment at closing.
If the down payment is 15%, what is the LTV?
85%. The two always add to 100%.
Related formulas
- The loan-to-value (LTV) formula
- PITI and the monthly interest calculation
- All 12 formulas — NY Real Estate Math Cheat Sheet
- Real Estate Math Calculator
Practise this. The free 10-question math quiz drills these formulas, and the free timed practice exam puts them under exam conditions.
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