Housing: lesson plans
Rent, buy and borrow for a home without letting housing eat the whole budget. 11 lessons, about 45 minutes each, in the order students should take them.
- 1
How much rent can you afford?
Start at 30% of gross pay, then check it against your take-home budget and pick the lower number.
Students will be able to
- Thirty percent of gross pay is a ceiling.
- Your take-home budget gets the final say.
- Count utilities as part of housing.
45-minute plan
- Warm-up (5 min): is this true? "If the landlord approves me, I can afford the place."
- Read the lesson together (10 min)
- Work the example on the worksheet (10 min)
- Practice questions (10 min)
- Exit task (10 min): Find your last paycheck. Multiply your gross monthly pay by 0.30, then run the take-home check in the calculator with your real debts and saving. Write down the lower number as your rent ceiling.
Worksheet and answer keyOpen the lessonRent affordability calculator
- 2
How to rent your first apartment
Save two to three months of rent for move-in, read the full lease, and document the unit before you unpack.
Students will be able to
- Move-in costs about three months of rent.
- The lease is the whole deal.
- Photos on day one protect your deposit.
45-minute plan
- Warm-up (5 min): is this true? "I just need the first month's rent to move in."
- Read the lesson together (10 min)
- Work the example on the worksheet (10 min)
- Practice questions (10 min)
- Exit task (10 min): List every move-in cost for a place you like, using the example as a template, and compare the total with your savings. Then pull your free credit reports so there are no surprises when a landlord screens you.
Worksheet and answer keyOpen the lessonRent affordability calculator
- 3
Is it better to rent or buy a home?
Buy when you will stay several years and can afford the full monthly cost; otherwise renting is a sound choice.
Students will be able to
- Compare full monthly costs, not mortgage versus rent.
- How long you stay matters most.
- Only part of a payment builds equity.
45-minute plan
- Warm-up (5 min): is this true? "Renting is throwing money away. Buying is always the smarter move."
- Read the lesson together (10 min)
- Work the example on the worksheet (10 min)
- Practice questions (10 min)
- Exit task (10 min): Pick a home price you would consider. Put it in the mortgage calculator with a local tax estimate and insurance quote, add 1% a year for upkeep, and compare the total with your rent.
Worksheet and answer keyOpen the lessonMortgage payment calculator
- 4
How to save for a down payment on a house
Save the down payment plus closing costs in an insured account, on autopilot, with your emergency fund kept separate.
Students will be able to
- Your target is down payment plus closing costs.
- Keep the money safe, not invested.
- Under 20% down costs more, not nothing.
45-minute plan
- Warm-up (5 min): is this true? "I can't buy a home until I've saved 20% down."
- Read the lesson together (10 min)
- Work the example on the worksheet (10 min)
- Practice questions (10 min)
- Exit task (10 min): Open a separate savings account named for the house. Work out your cash to close with the example as a template, then set an automatic transfer for the day after your next payday.
Worksheet and answer keyOpen the lessonSavings goal calculator
- 5
How much house can you afford?
Keep the full monthly home payment near 28% of gross pay, then work backward to a loan and a price.
Students will be able to
- Keep the full payment near 28% of gross.
- Taxes and insurance shrink the loan you can carry.
- Approval is a ceiling, not a target.
45-minute plan
- Warm-up (5 min): is this true? "The bank approved me for $350,000, so that's my budget."
- Read the lesson together (10 min)
- Work the example on the worksheet (10 min)
- Practice questions (10 min)
- Exit task (10 min): Multiply your gross monthly pay by 0.28. Subtract a local estimate for property tax and insurance, then put the rest into the mortgage calculator at a realistic rate to see your loan and price ceiling.
Worksheet and answer keyOpen the lessonMortgage payment calculator
- 6
How does a mortgage work?
You borrow against the home and repay in fixed monthly payments; early ones are mostly interest, later ones mostly principal.
Students will be able to
- Each payment is principal plus interest.
- Most monthly payments also include escrow.
- Compare offers with the Loan Estimate.
45-minute plan
- Warm-up (5 min): is this true? "After a few years of payments, I'll have paid off a big chunk of the house."
- Read the lesson together (10 min)
- Work the example on the worksheet (10 min)
- Practice questions (10 min)
- Exit task (10 min): Open the CFPB's Explore Interest Rates tool and enter your state, credit score range and a down payment. Then put that rate into the mortgage calculator to see your payment and how much of it is interest.
Worksheet and answer keyOpen the lessonMortgage payment calculator
- 7
Should you get a fixed-rate or adjustable-rate mortgage?
Fixed keeps one rate for life. An ARM starts cheaper, then can rise. Choose an ARM only if its worst-case payment fits.
Students will be able to
- A fixed rate never changes for the loan's life.
- An ARM rate equals index plus margin.
- Test the worst-case payment before you sign.
45-minute plan
- Warm-up (5 min): is this true? "An ARM is fine because I'll just refinance or sell before the rate changes."
- Read the lesson together (10 min)
- Work the example on the worksheet (10 min)
- Practice questions (10 min)
- Exit task (10 min): Put your loan amount into the mortgage calculator twice: once at a fixed rate, and once at an ARM's starting rate plus its lifetime cap. If the worst-case payment would not fit your budget, cross the ARM off your list.
Worksheet and answer keyOpen the lessonMortgage payment calculator
- 8
What is PMI and how do you get rid of it?
PMI protects the lender on low down payment loans. Ask to drop it at 80% of original value; it ends at 78%.
Students will be able to
- PMI protects the lender, not you.
- You can ask to cancel at 80%.
- It must end automatically at 78%.
45-minute plan
- Warm-up (5 min): is this true? "If I can't put 20% down, I shouldn't buy a home yet."
- Read the lesson together (10 min)
- Work the example on the worksheet (10 min)
- Practice questions (10 min)
- Exit task (10 min): If you pay PMI, find your PMI disclosure or call your servicer and ask for the date your balance is scheduled to reach 80% of original value. Put that date on your calendar with a reminder to send a written cancellation request.
Worksheet and answer keyOpen the lessonMortgage payment calculator
- 9
How much are closing costs on a house?
Closing costs are lender fees, third-party services, government fees and prepaid bills. Your Loan Estimate lists every one.
Students will be able to
- Closing costs come on top of the down payment.
- Compare origination charges between lenders.
- Most lender fees can't rise after the estimate.
45-minute plan
- Warm-up (5 min): is this true? "If I save the down payment, I have enough to buy the house."
- Read the lesson together (10 min)
- Work the example on the worksheet (10 min)
- Practice questions (10 min)
- Exit task (10 min): Add a closing cost line to your down payment savings goal. Ask one local lender what buyers in your area usually pay, or pull the figures from a Loan Estimate, and add that amount to your target.
Worksheet and answer keyOpen the lessonMortgage payment calculator
- 10
What is an escrow account on a mortgage?
Escrow collects 1/12 of your yearly taxes and insurance each month and pays the bills for you. It's reviewed every year.
Students will be able to
- Escrow pays your property taxes and insurance.
- Your payment is reset once a year.
- The cushion is capped at 2 months.
45-minute plan
- Warm-up (5 min): is this true? "My mortgage is fixed, so my monthly payment should never go up."
- Read the lesson together (10 min)
- Work the example on the worksheet (10 min)
- Practice questions (10 min)
- Exit task (10 min): Find your latest escrow statement, or log in to your servicer's site. Check that the property tax and insurance amounts match your actual bills, and note the month of your next escrow analysis.
Worksheet and answer keyOpen the lessonMortgage payment calculator
- 11
When does it make sense to refinance a mortgage?
Refinance if your monthly savings repay the closing costs before you move, and you don't stretch the loan's term.
Students will be able to
- Break-even equals closing costs divided by monthly savings.
- Keep the term no longer than you have left.
- Refinancing has closing costs, like buying did.
45-minute plan
- Warm-up (5 min): is this true? "If rates drop by any amount, I should refinance right away."
- Read the lesson together (10 min)
- Work the example on the worksheet (10 min)
- Practice questions (10 min)
- Exit task (10 min): Find your current balance, rate and years left on your latest mortgage statement. Then ask one lender for a Loan Estimate with a term no longer than your remaining years, and divide its total costs by your monthly savings.
Worksheet and answer keyOpen the lessonMortgage payment calculator
Unit vocabulary
Free to print, copy and share for non-commercial classroom use. General education, not personalized financial, tax or legal advice. Figures are examples. Check current rates and limits before you act.