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  • General

    Can You Afford to Buy a House

    Creative Commons License

    Buying a House by Steve Durant and Wyandotte Public Schools is licensed under a Creative Commons Attribution-NonCommercial 3.0 Unported License.

    Deciding whether you can afford to purchase a house can be complex. The decision relies on how much you can afford to pay each month and it involves more than just a house payment. Interest rate, house insurance, taxes and expenses all contribute to how much you are actually paying for a house. Below are a set of exercises that will help you make good economic decisions when deciding whether you can afford to purchase a house. Click here for a Word File of the Buying a House lesson. You may want to print the Word File and use it as a worksheet.

    You will need your Profile Card to complete the lesson because it provides a great deal of information to you that will help you decide what type of house you can afford.

    If you have questions or do not have your Profile Card please contact me by phone at ???.???? or email at .

    • Download a copy of this course. File 142KB Moodle backup
    • A Note to the Teacher Page

  • Topic 1

    Finding a Job
    Using the internet or local newspaper find three to five ads for employment based on your Profile Card educational/work background. Be sure to print or cut out your ads. Using what you have learned in this course calculate the monthly gross income.
    1. What is your job?

    2. What is your monthly gross income? (Please show your work)

    Note your response in the Finding a Job Wiki below.
    • Finding a Job Wiki

  • Topic 2

    Building a Budget
    The second step of this project is to find a house you can afford. Remember no more than 35% of your total gross monthly income should be used for monthly housing expenses. It is also suggested that no more than 50% of your monthly housing expenses should be used for the mortgage. Calculate your total monthly budget for housing and what should be allocated for the mortgage.
    1. What is your budget for monthly housing expenses?

    2. What is the targeted monthly payment for a mortgage? (Be sure to show calculations)

    Note your response in the Building a Budget Wiki below.
    • Building a Budget Wiki

  • Topic 3

    The Dream House

    For the third step, go to www.realtor.com and search for homes in the area. You are looking for a home that fits your profile and budget. The real estate listing will not tell you your monthly payment. So for now you look for something you estimate is in your price range. Find three to five homes that suit your needs and style. Be sure to print out listings. The listings have the tax information.
    • But How Much

      Banks and other lending institutions investigate people before loaning them money. Banks check your salary, your work history and your credit report and the percentage down. Your will be using Durant Bank and Trust to finance your home. In order to qualify for a 5% interest rate you will need very good to excellent credit scores (a score 720 or higher) and at least a 20% down payment. Applicants need to have good credit (score of 660 to 719) and a down payment of at least 10% to qualify for 6% interest loan. If you have poor credit or have less than 5% down payment the interest rate will be 7%.
      1.
      A. What is your credit score?

      B. What is the payment amount and percentage down?


      2.
      What interest rate, based on your Profile Card, do you qualify for?

      Now calculate your monthly payment using the apps feature of the graphing calculator or the following formula: Monthly Payment = $$ \frac{pr \cdot \left(1+r\right) \cdot n}{\left(1+r\right) \cdot n-1} $$ P= principal r= rate per payment, that is, divided by 12 n= number of payments. Assume you are going with a 30 year fixed rate mortgage.
      3. What is the cost of your monthly mortgage payment? (Be sure to include all calculations)

      4. What is the total amount paid to the lender?

      5. How much of this is in interest?

      Repeat your calculations using a 15 year fixed mortgage.
      1. What is the cost of your monthly mortgage payment? (Be sure to include all calculations)

      2. What is the total amount paid to the lender?

      3. How much of this is interest?

      Click on the But How Much Worksheet link to access a worksheet and assignment containing the directions seen above. Use the worksheet to complete this part of the lesson.
    • But How Much Worksheet Assignment (2.2)

  • Topic 4

    Getting Insured


    The fourth step will be to get an insurance quote for your home. Go to www.statefarm.com and fill out the appropriate information. If you do not feel comfortable call an insurance office to get a quote. Your replacement value will be the actual amount of your mortgage. You are looking at insuring your home for 80% replacement value. You want a 5% deductible.
    1. What is the amount of coverage?
    2. What are your property, loss of use, and other building coverage?
    3. How much are you paying in annual insurance premiums? (Be sure to print out the quote)
    Note your answers in the Getting Insured Wiki below.
    • Getting Insured Wiki

  • Topic 5

    But can I afford it?
    The next step will be looking at calculating your monthly housing expenses. Look at your real estate listing and find the total amount for taxes. We will also assume your estimated utilities are $200/month per 1000 square feet. You also have a sprint cell phone with a $69.99 simply everything plans. You pay $260 per year in water. The cable/internet bill is $99.95 per month.

    Type
    		 Yearly
    		 Monthly
    Water

    Utilities

    Cable/Internet

    Phone

    Mortgage

    Insurance

    Taxes

    Total



    1. What are your monthly housing expenses?
    2. Does this fit within the maximum of 35% of monthly gross income rule?
    If not, you are living outside your means and you need to go back to www.realtor.com and find a similar square foot home for rent. Be sure to print this listing out as well. Renting could be significantly cheaper, you are no longer paying for water, taxes, or insurance. Find a home and recalculate your monthly living expenses if you rented.

    We will still assume your estimated utilities are $200/month per 1000 square feet. You also have a sprint cell phone with a $69.99 simply everything plans. The cable/internet bill is $99.95 per month.
    Type

    		 Yearly
    		 Monthly
    Utilities

    Cable/Internet

    Phone

    Rent

    Total



    3. What are your new monthly housing expenses?
    4. Are you now within the 35% budget?
    5. If not what are some ways you can make living with in this budget based on your Profile Card?

    Click on the But Can I Afford It Worksheet link below and download and complete the worksheet. Upload the completed worksheet.
    • But Can I Afford It Worksheet Assignment (2.2)

  • Topic 6

    Let's Reflect
    Choosing to buy or rent a home depends on many factors.
    • What do you think these factors are?
    • What type of housing would most likely attracts your personal profile card?
    • The interest paid on your home mortgage is huge! What are some ways you could eliminate paying so much interest?
    Write a paragraph explaining your opinions about the advantages and disadvantages of buying and renting. Please write a paragraph for each (buying and renting)

    Clink on the Lets Reflect Link below to complete the assignment.
    • Lets Reflect Assignment (2.2)

  • Topic 7

    This is the Practice Topic
    The purpose of this topic is to review with the students the three ways assignments are to be completed.
    • Practice Wiki
    • Practice Uploading Assignment (2.2)
    • Practice Writing Assignment (2.2)
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