Buying a Home

Essential Question: “What do I need to know about buying a house?”

Investigate: Borrowing Cash

[Time Required: 25 minutes]

1. Have you ever loaned something to a friend like money or a laptop? How were you sure your friend would return the item or repay the money? What factors did you consider when loaning something to a friend?
2. Download the activity sheet Loans, Loans, Loans. You will review the scenario and decide who would be the best “borrower” and why. Allow ten minutes to complete the activity.
3. Which “borrower” Shaun should lend money to and why? Why is one “borrower” is a better investment than the other?
4. Asking for money to buy a house is not a gift but a mortgage. A mortgage is a type of loan borrowed from a bank or credit union and paid back within a certain time frame.
5. Understand that in the activity scenario, Rachel has good credit, collateral, and the ability to make a down payment—all of which make her a better candidate for a mortgage than Hayden.
6. We make mortgage payments every month, but it can take many years to pay off the entire amount—often 30 years. When taking out a mortgage, banks also charge interest on the money borrowed, and a down payment is required to secure a loan, most commonly set at 20%.
7. Why do you they think you would need a down payment? When buying a house, paying anything less than 20% up front means you are a high-risk borrower and will have to pay insurance to protect the bank’s money. Understand this is the same concept presented by Rachel, who contributed $20 of the $100 total (or 20%) up front.

Student Preparation: Dream Homes

[Time Required: 20 minutes] 

1. Write in your notebook for five minutes about what your dream house looks like, taking into consideration location, size, color, and neighborhood.
2. Download the activity sheet Home Sweet Mortgage and allow ten minutes to research your dream home online.
3. What attributes makes someone a “savvy” borrower? What did you consider when choosing their mortgages? (e.g., interest rate, terms, down payment, etc.)
4. How credit can affect a person’s ability to get a mortgage and why? What makes someone a good borrower?
5. “Creditworthiness” is considered when applying for a mortgage. An especially important warning sign for mortgage lenders is a foreclosure. Understand that a foreclosure is when someone stops making payments on a mortgage and the lender forces the sale of the home to recoup the borrowed money. People can go into foreclosure for a variety of reasons, including job loss, medical conditions that limit employment, snowballing debt, divorce, etc.
6. Even if buying a home seems far off in the future, “creditworthiness” will also impact your ability to rent an apartment. This is one reason it is so important to build and maintain good credit. 

Challenge: Buy It or Pass?

[Time Required: 15 minutes] 

1. Download the activity sheet Buy It or Pass? and allow ten minutes to complete the activity.
2. What have you learned about buying a home? Do you have a different view now than you did at the beginning of the lesson?
3. Consider how owning a home can contribute to financial security or wealth accumulation. For example, if the value of a home increases or decreases over time from the original purchase price, this can influence whether money was made or lost on the investment. What are the costs and benefits of owning a home? 

Reflection

[Time Required: 5 minutes] 

Write in your notebook about what you can do to make your dream home a reality (e.g., pay bills on time to build credit, save for a down payment, etc.).