The Finances of Purchasing Your First Home

Framework for Career Education and Consumer, Family, and Life Skills Classroom Activity by New Jersey Educator Title: The Finances of Purchasing Your First Home Content Area: Career Education and Consumer, Family, and Life Skills Grade Level: 9-12 Author Information: Name: Andrew Bellin and Sheree Green School: Teaneck High School District: Teaneck Public Schools County: Bergen Student Learning Objectives: Students will be able to: 1. 2. 3. 4. 5. 6. 7. 8. NJ Core Curriculum Content Standards Content Standard Grade Strand Area Select a number of private Language 3.1 12 H homes (e.g., condominiums) that Arts Literacy they would like to purchase. Language 3.1 12 F Use their budget to determine Arts Literacy how much money they have Career 9.2 12 E available for monthly mortgage Education & payments. Consumer, Use their savings or investment Family, & Life accounts to determine how much Skills money they have available for a Technological 8.1 12 B down payment. Literacy Explain the abbreviated terminology in local real estate listings. Match housing requirements with available personal and market resources. List costs associated with home ownership. Prepare a flowchart indicating the process of home selection. Compare and contrast different mortgage options. CPI 1 1 2, 5, 7 6,7 Purpose and Overview: Purchasing a home is one of the most costly and important decisions young people will have to make. Students will need to understand the process of home selection; know the resources available to first time home buyers; know the advantages and disadvantages of home ownership; be able to correctly complete a mortgage application; be able to budget for the monthly expenses involved in home ownership; and calculate the actual cost of home ownership over the life of the mortgage. Instructional Activities: 1. Using a budgeting simulation students have been involved with all year, ask students to determine how much money they have available for their first housing purchase. This will include both a down- payment and monthly mortgage payments. Students should refer to their savings accounts, investment accounts and paychecks. 2. Teacher will lead group discussion of the advantages and disadvantages of home ownership. Discussion might include the following: property taxes; real estate market; schools, proximity to post office, house of worship, shopping, supermarkets, etc. 3. Next, teacher will ask students to generate a list of what they personally find important when purchasing a home. 4. Teacher models using the overhead projector to demonstrate the true cost of a mortgage. Provide sample budgets in case scenarios to determine amount of money available for a down payment for a home purchase. Students should calculate the numbers; then switch papers with a partner to assess whether their completed calculations are correct. 5. Students will then complete problems on the cost of a mortgage. Teachers can find these problems in most texts, or from a broker, a banker or the Internet. Students should also develop a chart that compares and contrasts different mortgage options. Teacher should work with students to develop project headings and rubrics for assessment. 6. Next, teacher leads a discussion using overheads of real estate abbreviations found in local newspapers and what those abbreviations mean. Students will then find three classified ads and write a descriptive paragraph about these properties. 7. Questions for discussion include the following: Why use a realtor? Who pays the commission? Can you sell your own home? If so, what are the advantages and disadvantages? 8. Students should make use of the Internet (www.realtors.com, www.weichert.com, www.caldwellbankers.com or any other local realtor’s websites) to begin their investigation of local available residences. 9. Students should also refer to the hometown newspaper and local classified ads. Students will have their individual requirements for their home purchase (e.g., size of home, number of baths, etc., from a previous homework assignment.) Using the ads, find two homes that would meet the criteria and budget requirements. Write a summary of why these homes would be good choices. Additionally, students should develop a flow chart or graphic organizer showing the process of purchasing a home and the decisions to be made. Additional Information: Invite a local realtor or banker to visit the school and talk about the purchasing and payment process for purchasing a home. If possible, take students on a local home tour. Check for any liability insurance requirements on the part of the homeowner. It is important to note that there are local realtors who are generally eager to share their knowledge with schools and students. Encourage students to generate meaningful questions since these business people have a wealth of information to share. Assessment Strategies: Rubric Teacher develops rubric for key components of flow-chart or graphic organizer for making home buying decisions. Rubrics should be given to students at the beginning of this lesson. Use the state writing rubric for assessing written work. See http://www.njpep.org/assessment/TestSpecs/LangArts/Scoring/RubricsNJwritingHolistic.html.