1. Bell Ringer In a full sentence explain what role subprime mortgage had in the housing market’s collapse in 2008.

2. Objectives Explain the Federal Housing Authority’s role in giving mortgages Articulate the 4 possible payment components of a mortgage Learn how to search for a home and create a list of possible homes to be bought

3. Credit Crisis 1. Which groups of people did the Credit Crisis bring together 2. Explain how leverage works in your own words 3. What did the brokers, lenders, and other parties do when everyone already owned a mortgage?

4. Federal Housing Authority – Assist in Providing Housing for Low Income Individuals Who uses it? Needs a low down payment – 3.5% Low credit requirement – 500 Flexible income requirements Only two previous years of steady employment required Mortgage insurance required (PMI – private mortgage insurance) 1.35% of total loan amount paid each month until 20% of the home is paid for Discussion: 1.Do you think these people should take out a mortgage? 2.At the end of the mortgage would this be a cheap or expensive mortgage?

5. PITI Mortgage Components Principal – a portion of the total home value, optimally 20% Interest – interest payment, adds to home value to be repaid 4.75% Taxes – property tax Nashville – mails tax during 1 st week of October, due last day of February If not paid, penalty fees plus interest (Appraised Value / 100) x 4.516 Example: ($25,000 / 100) x 4.516 = $1,129.00 Insurance – Property insurance (fire, theft, and other disasters) PMI

6. Looking for Homes: Realtor Most people use a realtor Realtor – an agent who assists in the sale and purchase of buildings and land Why use a realtor? Sort through a complex process and paperwork Keeps you in control of the search and in dealing with seller’s agent Beware: Paid a commission (5%) on the final price of the home

7. How can you find homes? Online listings www.realtor.com www.homes.com www.google.com Local newspaper classifieds Driving through neighborhoods Looking for Homes: Finding Homes

8. Looking for Homes: Variables What variables are important to you in selecting a home? Possibilities School district Lawn Proximity to certain locations: favorite coffee story, movies, etc. Crime Noise Number of baths, bedrooms, square feet, etc.

9. Looking for Homes: Mortgage Cost http://www.mortgagecalculator.org/

10. Looking for Homes: Mortgage Cost http://www.mortgagecalculator.org/

11. Looking for Homes: Mortgage Cost http://www.mortgagecalculator.org/

12. Submit a rough draft to lucas.sobchack@mnps.org by the end of class lucas.sobchack@mnps.org Find 3 homes for sale in Nashville that fit the following criteria: 1. A home under $100,000 2. A home between $100,000 and $300,000 3. A home over $300,000 In a PowerPoint or Poster for each home cover: Address, number of bedrooms, baths, and square feet, and any other relevant details Qualitatively state the income you believe you would need to pay for a home that would cost this much? Also state what job would give you that much annual income. How much would you pay for the house if you had an interest rate of 3% for 15 years for each mortgage or a 4% interest rate for 30 years. Keep property tax at 1.25% Use the mortgage calculator at: www.mortgagecalculator.org. Display principal, interest, tax, and PMI if anywww.mortgagecalculator.org Any other information you find to be relevant

13. Exit Ticket Do you think you will need to pay PMI for your mortgage? Explain why or why not in full sentences.