Lecture 7: The Economics of Home Ownership
% 7R EX\ D KRXVH \RX¶OO DOVR QHHG D GRZQ SD\PHQW *HQHUDOO\
OHQGHUVZLOOUHTXLUHDWOHDVWRUSHUFHQWRIWKHSULFHRIWKHKRXVH
+RZHYHULI\RXSXWGRZQOHVVWKDQSHUFHQW\RX¶OOKDYHWR
SD\SULYDWHPRUWJDJHLQVXUDQFHZKLFKFDQFRVWDERXWGROODUV
PRQWKO\IRUHYHU\GROODUV\RXERUURZ$QGLWSURWHFWVWKH
OHQGHUDJDLQVWGHIDXOWLWGRHVQ¶WSURWHFW\RX
% <RX FRXOG DOVR WU\ WR ERUURZ PRQH\ IURP \RXU IDPLO\ WR EX\
DKRXVH7KHUHDUHIHZLQVWDQFHVZKHUHLWFDQEHDJRRGLGHDWR
ERUURZPRQH\IURPDSDUHQWRUUHODWLYH+HOSLQJDFKLOGPDNHD
percent down payment on a home—repaid by setting up regular,
automatic withdrawals from your paycheck at the mortgage rate—
FDQEHDJUHDWZD\WRUHGXFHFRVWVIRUD¿UVWWLPHKRPHEX\HU
% The front-end ratio only considers your income and housing
H[SHQVHV 7KH EDFNHQG UDWLR LV DIIHFWHG E\ \RXU RWKHU GHEW
SD\PHQWV%HFDXVHWKHVHGHEWSD\PHQWVDUHDGGHGWRWKHPRUWJDJH
When buying a house, you need enough money for a down payment, which
should be at least 20 percent of the price of the house.
$OH[5DWKVL6WRFN7KLQNVWRFN