Activity: What You Should Know about Mortgage Loans

Van Chau, Santa Ana College, CA

On completion of this activity, students should be able to demonstrate a basic understanding of the terms used when shopping for a mortgage loan. They will also be able to figure out how expensive a house they can afford.

In addition, students should show competence in using modals (must, have to, may, should):

1. Have students review terms: principal, interest, fixed mortgage loan, adjustable-rate mortgage loan, term, points, down payment, closing costs.

2. Have students scan Sunday newspaper to find a house in the area of their choice that they like and feel they can afford. Have them cut out the ad and paste it on a piece of paper.

3. Have students figure out how much their down payment is going to be (5–10 percent of asking price).

4. Have students figure out the mortgage amount by subtracting the down payment from the asking price.

5. With closing costs at 1 percent and interest at 7 percent, ask students to figure out how much their mortgage payments will be and if they can afford the house.

6. Finally, ask students to write down how much money they need to purchase a house, using the following modals: must, have to, may, should.

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