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Calculating your down payment
Go over each item on the Down Payment Calculator Worksheet
to make sure students understand the language. Point out
that assets include any accounts or items of value you own.
People may have savings bonds, stocks, personal property,
or other assets that can be cashed in to pay for the down
payment.
Although it is very common for parents to help their adult
children with the down payment for a house, there are some
special rules regarding the use of money from gifts. For
example, often lenders underwriting a traditional loan will
allow no more than half of a10 percent down payment to be
from a gift and none of a 5 percent down payment. Some special
programs will allow a higher percentage. In some cases,
employers or community housing organizations can help with
the down payment.
Extension activities
1. Look in the Yellow Pages for movers. Often movers will
give estimates based on weight or on the number and kinds
of rooms in the house. Call one or
two movers to get an estimate. Then, call one or two do-it-yourself
moving companies to see how much it would cost to rent a
truck. Ask students to think of other ways to cut down on
moving costs.
2. Bring in some newspaper ads for major appliances. Do
some comparison shopping to see how much refrigerators,
stoves, washers, dryers, and air-conditioning units cost.
3. Financial planners agree that an individual or a family
needs to name a set amount of funds saved, in case of job
loss, family medical emergencies, or other unplanned events.
Does a family need six months of savings? Are two months
enough? Ask students to discuss the importance of having
an emergency fund.
Working with numbers
Use Sue Johnson’s Down Payment Calculator Worksheet
to answer the questions in this section. Since the questions
may require some thought, you may want to have students
work in pairs to answer them. If this is a beginning-level
class, answer the questions as a group. Set aside plenty
of time for this exercise.
Here are a few questions you may want to discuss:
Question 2: Sue Johnson’s mother is giving her $1,000
as a gift. Since this is less than half of the down payment,
and since Sue’s mother will be living in the house,
the lender will probably allow this amount. Assume that
the house will be in Sue’s name alone and that her
mother is not a co-borrower.
Question 7: It is not uncommon for lenders to require buyers
to have two months of mortgage payments saved ahead of the
closing. Part of the reason for this is to make sure the
buyerdoesn’t get in over his or her head during the
first couple of months in the new house. Another reason
is to cover insurance and tax costs.
Question 9: Add all the amounts together to get $1,084
as Sue’s estimated monthly cash needs. See Unit 4 for
more information about how to plan a household budget.
Question 10: Although some lenders would like a buyer with
six months
of living expenses saved up, this isn’t always possible.
A good credit record often may allow a borrower to have
less.
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