How is the loan amount calculated in real estate transactions?

The loan amount in real estate transactions is calculated by subtracting the down payment from the purchase price of the property. This calculation reflects the actual amount the lender will provide to the buyer. When a buyer wishes to purchase a property, they typically contribute a portion of the total purchase price as a down payment, which represents their equity in the property. The remaining portion is the loan that they will borrow from a bank or financial institution.

For example, if a property has a purchase price of $300,000 and the buyer makes a down payment of $60,000, the loan amount would be calculated as $300,000 (purchase price) - $60,000 (down payment), resulting in a loan amount of $240,000. This understanding is crucial for potential buyers, as it directly affects their financing and monthly mortgage payments.