Docstoc

Buying A Home

Document Sample
Buying A Home Powered By Docstoc
					                                                                                                    1


                                      Buying a Home

A 25-minute lesson on mortgages and the costs associated with
purchasing a home.


Opening Discussion: 5 minutes

Show students PPT slide “A Roof Over My Head: is Grace ready?”




     A Roof Over My Head: is Grace
     ready?




                                         4




Getting your first apartment or house is fun and exciting! The costs of

putting a roof over your head are more than simply the monthly rent or

buying price of a house, however. This lesson will show you the costs




The information provided in this lesson may consist of materials from any or all of the following
resources: FDIC Money Smart, the National Endowment for Financial Education, and Practical
Money Skills for Life.
                                                                                                    2


associated with buying a house. When it’s time for you to have your own

house, you will be prepared.

So let’s get started.

Imagine that you have just finished school and you have your first full-time

job in retail, as an associate at your favorite clothing store. You make

$1,500 per month (about $9.40/hr), and take home about $1,200. You also

get a monthly bonus of $400 if you meet your sales goals. You have about

$600 in savings from your old part-time pizza job.



Do you think you have enough to move out of your parents’ house and buy

your own home? Why or why not?



Show PPT slide “Buying a Home: Mortgages.”

Buying a home usually requires getting a loan called a “mortgage.”




The information provided in this lesson may consist of materials from any or all of the following
resources: FDIC Money Smart, the National Endowment for Financial Education, and Practical
Money Skills for Life.
                                                                                                    3



     Buying a Home: Mortgages

       What is a mortgage?
                   • A loan, or amount of money,
                     provided by a financial institution
                     to buy a house
                   • Must be repaid
                   • Mortgage loans may be divided
                     over 15-30 years


                                         10




Mortgages are large sums of money. Mortgage payments are made over

long periods of time, usually 15-30 years. There are many different

types of loans that will meet the needs of people in different

situations.



Let’s talk about home loans and how to know if you’re financially ready to

buy a house.



Costs of a Mortgage: 5 minutes

Mortgages are not free; in addition to paying back the money you

borrowed, you have to pay additional money. The costs involved in buying

a home include:
The information provided in this lesson may consist of materials from any or all of the following
resources: FDIC Money Smart, the National Endowment for Financial Education, and Practical
Money Skills for Life.
                                                                                                    4


Show PPT slide “Buying a Home: Costs.”



     Buying a Home: Costs

      Closing costs fees you pay to get a mortgage
      Taxes & Insurance property taxes and
      homeowner’s insurance

      Interest money
      charged to borrow
      money; some is paid
      up front




                                         11




• Closing costs

        Closing costs are fees associated with buying and settling, or

        finalizing, your loan. They can include property taxes, broker and

        attorney fees, inspection fees, title insurance, and many other items.

• Taxes & Insurance

        You will probably have to pay some taxes upfront. The locality

        (usually county and state) where you live will charge taxes on the

        property, which are generally paid upfront at first and then either

        monthly with your mortgage payment or separately by you once or

        twice a year. They can amount to several thousand dollars per year,

        depending on the value of your house and the state where you live.

        You also need homeowner’s insurance, in case your house catches
The information provided in this lesson may consist of materials from any or all of the following
resources: FDIC Money Smart, the National Endowment for Financial Education, and Practical
Money Skills for Life.
                                                                                                    5


        on fire, the basement floods in a storm, or a window breaks due to

        your next door neighbor’s son’s baseball. You may also obtain other

        insurance, such as flood or earthquake insurance.

• Interest over the course of the loan

        Interest is money that the bank charges you to borrow money. A

        portion of every mortgage payment goes toward interest.


Show PPT slide “Buying a Home: Down Payments.”


     Buying a Home: Down Payments

                                              Not consi der ed
                                              cost s but st i l l
                                              needed t o
              Down                            pur chase a hom   e
            payments
                are…
                are…
                                              Pai d t o show you
                                              ar e ser i ous
                                              about buyi ng t he
                                              house



                                         12




Down Payments

Although the down payment is not a cost of obtaining a mortgage, you also

need to have money for it. A down payment is usually a set percentage of


The information provided in this lesson may consist of materials from any or all of the following
resources: FDIC Money Smart, the National Endowment for Financial Education, and Practical
Money Skills for Life.
                                                                                                    6


the cost of the home you want to buy. Typically, down payments are

between 3 percent and 20 percent of the purchase price.



That means that if you want to purchase a townhouse for $100,000, you will

have to pay at least $3,000 up front. Generally speaking, a larger down

payment results in a lower monthly mortgage payment.


Am I ready to buy a home? : 5 minutes

Show PPT slide “Am I Ready to Buy a Home?”




     Am I Ready to Buy a Home?

       You should be prepared:

                • Personally
                • Professionally
                • Financially




                                         13




Distribute Activity 2: Am I Ready to Buy a Home? Checklist




The information provided in this lesson may consist of materials from any or all of the following
resources: FDIC Money Smart, the National Endowment for Financial Education, and Practical
Money Skills for Life.
                                                                                                    7


You must be financially ready to buy a home. You should also be ready

personally and professionally. For example, if you’re in college, you don’t

want to buy a home even if you do have the money, because you don’t

know where your career will take you.

Look at the Activity 2: Am I Ready to Buy a Home? Checklist



Discuss.



These are some questions you need to ask yourself to determine if you are

ready to buy a house. These are also questions a lender will ask when you

apply for a loan. If you can answer “yes” to these questions, you might be

ready to buy.

You also should consider that you may need additional funds saved for

emergencies, like possible repairs to the home you buy. If you answered

“no” to any of the questions, concentrate on strengthening those areas.



Help for Purchasing

There are government and homebuyer assistance programs to help

homebuyers, particularly first-time homebuyers. These may lower the costs

of buying a home, such as by providing down payment assistance or

reduced interest rates. There are often other special government programs

for teachers and service personnel.



The information provided in this lesson may consist of materials from any or all of the following
resources: FDIC Money Smart, the National Endowment for Financial Education, and Practical
Money Skills for Life.
                                                                                                    8


Student activitites 10 minutes

Distribute Activity 3: Is Grace Ready?


Have the students divide themselves into small groups. Give them a few minutes

to discuss the scenario and then talk about their answers as a class.



Grace thinks she may be ready to buy a home of her own. Here

is her situation:

Grace’s gross monthly income is $4,100. After taxes, she brings home

$3,075 per month.

So far she has saved $4,200 for the down payment and closing costs on a

house.

Grace thinks that maybe she is ready to buy a house so she has decided to

find out more about home ownership.



Use the information about Grace to determine if she has enough money to

buy a house. Look at Grace’s situation on the Activity 3 worksheet:



Review Grace’s information and ask each of the checklist questions for

her. Decide if she is ready to buy a house, and why or why not. If

not, what can she do to get ready?




The information provided in this lesson may consist of materials from any or all of the following
resources: FDIC Money Smart, the National Endowment for Financial Education, and Practical
Money Skills for Life.
                                                                                                    9


After students have had time to formulate their answers, ask:

Based on the information that you know, do you think Grace is

ready? Why or why not? If not, what can she do to be better prepared?



You may end the lesson here with the following conclusion. If you would like to

do more, there is an additional 5- minute session on renting versus buying that

can be inserted here.



Let’s see what she decided.

Show PPT slide “Conclusion: Grace’s Decision.”



     CONCLUSION: Grace’s Decision




                                         23




                                         End of lesson
The information provided in this lesson may consist of materials from any or all of the following
resources: FDIC Money Smart, the National Endowment for Financial Education, and Practical
Money Skills for Life.

				
DOCUMENT INFO
Shared By:
Categories:
Tags:
Stats:
views:12
posted:5/16/2012
language:English
pages:9
fanzhongqing fanzhongqing http://
About