Mortgage Payment Algebra!

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```					Mortgage Payment Algebra!

QB
By
Quackenbos – Bell
Commercial Real Estate
Richard Bell, CCIM
Date 00, 2008
High School
Introduction

• Background
– Personal background
– Company background
• Interesting facts
Math in the field

• Affordability calculations
• Loan payment calculations
• Percentage/ratio calculations (Percent of credit
card available credit used and income vs.
amount of unsecured credit owed)
Vocabulary
• Contract Review
• Credit
– Good Credit vs. Bad Credit
•   Paying the minimum required payment vs. paying too little
•   Paying on time vs. paying too late
•   Never missing a payment vs. missing payments
– The Three C’s of Credit
• Character - How steady are you?
– Do you pay your bills on time and in full?
– How long have you been at your current job?
• Capital – What are your assets?
– What do you own? A car? A home?
– Do you have money in a savings account?
– Do you have other investments?
• Capacity – Can you repay the loan?
– Do you have steady income?
– Do you make enough money?
– Do you have other debts or obligations?
Vocabulary
•Debt-to-income ratio
All Existing   Credit Payments  Mortgage   or Rent
Debt - to - income Ratio 
Gross Monthly Income
–The amount of monthly expenses over the amount of
monthly income.
•Existing Credit Payments
–This includes: credit card payments, auto loan
payments, student loan payments, etc, etc…
•Mortgage/rent
–By far the largest obligation for us in Southern
California
–The monthly payment the mortgage loan company will
allow an individual to finance.
•Gross Monthly Income
–Based on loan application or paycheck stubs, tax
returns
–The amount of money an individual earns before any
deductions (like taxes) are taken out.
Example
All Existing Credit Payments  Mortgage Payment
Debt Ratio 
Gross Monthly Income
•   Lakeisha has decided she wants to
buy a new house.                                                   \$ 1, 000  Mortgage        Payment
. 40 
\$5,000
•   The mortgage company says her
\$ 1, 000  m
credit is good but she needs to have a                                  . 40 
\$5,000
debt-to-income ratio below 40%. If
her existing credit payments are                                                  \$ 1, 000  n
( \$5,000)( . 40 )                   ( \$5,000)
\$5,000
\$1,000 a month, and her gross
monthly income is \$5,000, what is the                                    \$2,000  \$ 1, 000  m

maximum monthly mortgage payment                                         \$ 1, 000      \$ 1, 000

she can afford?                                                          \$1,000  m

Answer: The maximum mortgage payment allowed is \$1,000.00 a month.
What could she do to get the payment lower?
Guided Practice
All Existing Credit Payments  Mortgage Payment
Debt Ratio 
Gross Monthly Income

\$ 300  Mortgage         Payment
. 40 
\$4,000
•   Pedro has decided he wants to buy a                                 . 40 
\$ 300  m
new house.                                                                     \$4,000

•   The mortgage company says his                           ( \$4,000)( . 40 ) 
\$ 300  m
( \$4,000)
credit is fine but he needs to have a                                          \$4,000

debt-to-income ratio below 40%. If                                    \$1,600  \$ 300  m
his existing credit payments are \$300                                \$ 300       \$ 300
a month, and his gross monthly                                     \$1,300  m
income is \$4,000, what is the
maximum monthly mortgage payment
she can afford?
Answer: The maximum mortgage payment allowed is \$1,300.00 a month.
If Pedro makes less money than Julio from the last Example, how come Pedro can
afford a higher mortgage payment?
Should you buy something just because you can???
Independent Practice
All Existing Credit Payments  Mortgage Payment
Debt Ratio 
Gross Monthly Income

\$ 1,500  Mortgage       Payment
. 40 
\$8,000
\$ 1,500  m
. 40 
•   Angelina has decided she wants to                                               \$8,000
buy a new car.                                                                \$ 1,500  m
( \$8,000)( . 40 ) 
•   The mortgage company says her                                                   \$8,000
( \$8,000)

credit is good but she needs to have a                                \$3,200  \$ 1,500  m
debt-to-income ratio below 40%. If
 \$ 1,500       \$ 1,500
her existing credit payments are
\$1,500 a month, and her gross                                         \$1,700  m

monthly income is \$8,000, what is the
maximum monthly mortgage payment
she can afford?

Answer: The maximum house payment allowed is \$1,700.00 a month.
What’s my Mortgage payment?
• “My Mortgage Payment” Partner Activity
• Each group of partners will need 1 “Random
Number Selector”
• Follow the directions on the “My Mortgage
Payment” Activity sheet and work together on
each others Mortgage Payment Calculation.
• Each partner group should have at least two (2)
payment calculations.
• Afterwards we will share out!
Thank You

• Questions?
• Final thoughts