Module 18

Buying Your First Home

This module helps students discover the fundamental role of real estate in the economy and explore its significance in the housing market.

We provide insights in the basics of real estate, its impact on the economy, and the key aspects of residential real estate to help equip students with the knowledge required for a path towards home ownership.

Module At A Glance

Grade Levels:

7th - 12th

Est. Length:

2-3 Hours (24 slides)

Activities:

3 Activities

Articles:

6 Articles

Languages:

English & Spanish

Curriculum Fit:

Math, Business, Economics, CTE, Social Studies

Standards Alignment:

CEE National Standards, Jump$tart National Standards & Relevant State Standards

Guiding Questions

What is real estate and what does it encompass?
How does real estate contribute to economic growth?
Why is real estate considered a crucial component of the economy?
What are the key steps involved in the residential real estate buying process?
How do the characteristics of residential real estate differ from commercial real estate?

Enduring Understandings

Real estate is an essential asset class and serves as one of the bedrocks of our economy because everyone needs a place to live.
Although demand for real-estate is high, making money is tricky and not easy.
The relationship between supply, demand and market dynamics in determining property prices.
Understanding real estate can provide financial security and for long-term wealth.

Module Vocab & Key Topics

Real Estate: Refers to land, properties, and assets, including buildings and natural resources, that have tangible value and can be bought, sold, or leased for various purposes
Real Estate Agent: Licensed professional representing buyers or sellers in transactions.
Mortgage: A loan used to finance property purchases, with the property acting as collateral to ensure that the loan is repaid.
Amortization: Gradual repayment of both principal and interest associated with debt, such as a mortgage, through regular, equal installments.
Appraisal: Property value assessment by a licensed professional to determine its market worth for sale, purchase, or loan purposes.
Home Equity: Caculated as the difference between a property's market value and the outstanding mortgage balance, which represents the ownership stake unencumbered by debt.
Title: Legal ownership of a property, evidenced by a deed or title certificate.
Down Payment: Initial payment made by the buyer towards the property's purchase price.
Lease: Rental agreement between landlord and tenant.
Deed: Legal document transferring property ownership from seller to buyer.
Condo: Individual ownership within a shared property complex, with common areas and amenities.
Closing: Final stage of real estate transaction where ownership transfers, and funds and documents exchange.
Homeowners Association (HOA): Governing body managing common areas and enforcing rules in a community, typically charging a monthly fee to homeowners in the community.
Escrow: Neutral third-party holding funds and documents during real estate transactions until all conditions are met.
Multiple Listing Service (MLS): Databases used by real estate agents to list and access different properties for sale. Popular listing services include Zillow, Realtor and Trulia.
Capitalization Rate: A rate which helps estimate an investment property's value and potential return by providing a rough estimate between the prices of rents and the cost of homes.
Foreclosure: The process where the lender takes possession of a piece of property due to a borrower's failure to continue paying their mortgage, which causes the borrower to enter default.
Comparative Market Analysis (CMA): A process whereby an individual can evaluate a property's value based on recent sales of similar properties in the same community.
Assigned Value: The value assigned to a property by a tax assessor, sent by the government, to determine the value of a piece of property for taxation purposes.
Buyer's Market: This references conditions favoring real estate buyers due to high inventory and low demand. Low interest rates typically favor borrowers who require debt to make purchases.
Seller's Market: This references conditions which favor real estate sellers due to low inventory and high demand. High interst rates can benefit sellers, however, it reduces demand because fewer potential buyers can afford loans.

Worked Examples

Mortgages In Action

Four numbers that decide what a house actually costs each month and over thirty years.

Figures current · August 2026

15 vs 30 year

Payment Now or Interest Later

total interest grows with the termsame loan

At Freddie Mac's August 2026 rates — 6.65% for 30 years, 5.95% for 15 — a $320,000 loan costs $2,054 a month over 30 years or $2,692 over 15. The shorter term charges interest for half as long, so far less of it piles up.

$255,037extra interest the 30-year paysbut $637/mo lower payment

Cutting the term in half lifts the monthly payment by about a third but cuts total interest by more than half, from $419,544 to $164,507.

Down payment & PMI

The Cost of Less Than 20%

PMI applies when down payment < 20%of the price

Private mortgage insurance covers the lender whenever the down payment is under 20%, and it runs about 0.46%–1.5% of the loan a year. At a representative 0.8% on a $400,000 home, a 5%-down buyer owes $253 a month; a 20%-down buyer owes nothing.

$253monthly PMI at 5% down20% down → $0

The premium barely moves between 5% and 10% down; only crossing 20% equity removes it entirely.

PITI

The Real Monthly Payment

PITI = principal + interest + taxes + insuranceevery month

Buy the $400,000 home with 20% down and the 30-year mortgage at 6.65% costs $2,054 a month. Property tax at 1.1% adds $367 and $1,800-a-year homeowners insurance adds $150, so the check the lender collects each month runs well past the loan payment alone.

$2,571true monthly payment (PITI)mortgage alone: $2,054

Taxes and insurance add $517 a month — a fifth of the payment — riding on top of the mortgage itself.

Affordability

The 28% Rule

housing ≤ 28% × gross incomethe front-end ratio

Lenders cap housing at 28% of gross monthly income — the front-end ratio. A $60,000 salary is $5,000 a month, so 28% leaves $1,400 for housing. Raise the income and the ceiling rises with it: $90,000 allows $2,100 and $120,000 allows $2,800.

$2,100housing budget at $90,000 income$120k income → $2,800

Each extra $30,000 of income lifts the housing ceiling by exactly $700 a month — 28 cents of every added dollar.

Sources: Freddie Mac Primary Mortgage Market Survey, August 20, 2026 — 30-year fixed 6.65%, 15-year fixed 5.95% (checked 2026-08-24); PMI range 0.46%–1.5% of the loan per year, Urban Institute via Experian (checked 2026-08-24). Home price, property tax (1.1%), insurance ($1,800/yr), and incomes are stated illustrative inputs; all monthly payments are derived from them. Reviewed August 2026.

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Reading Company Financials

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Business Of Buildings & Ownership