Purchasing a Home

Purchasing a Home

Purchasing a Home:
Buying a home is the biggest single investment or purchase that most individuals make.
This project is designed to give you some insight into the home-buying process and the associated costs.

Find all the costs associated with buying a home by making a 20% down payment and borrowing 80% of the cost of the home.
1)

Decide how much your home will cost (and how much you’ll have to put

down and how much to mortgage). Call a realtor to determine the cost of a

home in your area (this could be a typical starter home, an average

home for the area, or your dream house). Ask the realtor to identify and

estimate all the closing costs associated with buying your home.

Closing costs include your down payment, attorney’s fees, title fees,

and so on.

2) Call at least three different banks to determine

mortgage loan rates for 15 years, 25 years, and 30 years and the costs

associated with obtaining your loan. These associated costs of a loan

are paid at closing and include an application fee, an appraisal fee,

points, and so on.

3) For each bank and each different loan duration, develop a summary that contains
(a) An itemization and explanation of all closing costs and the total amount due at closing.
(b) The monthly payment.
(c) The total amount paid over the life of the loan.
(d) The amortization schedule for each loan (use a spreadsheet or financial software package).

4) For each duration (15 years, 25 years, and 30 years), identify

which bank gives the best loan rate and explain why you think it is

best. Be sure to consider what is best for someone who is likely to

remain in the home for 7 years or less compared with someone who is

likely to stay 20 years or more.

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