2. Harold and Maude just graduated from college, got married, and are starting their first jobs in Chicago.

Harold is a school teacher and Maude is a marketing representative for the Chicago Blackhawks hockey team. Harold is making $32,000 a year and because he is working in special education, his student loans are forgiven. Maude is making $28,500 and is paying $200 a month in student loans. They have no other debt. They both drive 10-year-old cars and have only the furniture they had in college. Both are working downtown, and they are looking for a place to live.

a. What are the benefits and drawbacks of renting downtown, renting outside of Chicago, or buying a small house or condominium? What would you recommend for Harold and Maude? (LO 7-2)

b. Harold and Maude decide to buy a house because that is what their parents did and what they encouraged them to do. Harold’s grandparents gave them $10,000 and Maude’s grandparents gave them $12,000 for a down payment. List the selection criteria they should use to find the perfect location and house to purchase. (LO 7-3)

c. Harold and Maude decide to buy a two-bedroom condominium, located a 25-minute drive (without traffic jams) or a 30-minute train ride from their work. They are looking at financing options for their first mortgage. For their first home loan, what would you recommend for them and why, given their life stage? Besides the down payment, what other expenses will they incur? (LO 7-3)

d. Harold and Maude have been in their condominium for two years and rates have dropped 2%.

They are expecting their first child in six months.

What should Harold and Maude consider before they decide to refinance? What would you advise Harold and Maude to do? (LO 7-3)

e. Fifteen years go by and Harold and Maude now have three children—14, 12, and 4 years old. Harold is now principal of the school where he started teaching, and Maude is now the director of sales and promotion for the Chicago Bears. They sold the condominium and have been living in their current house for 13 years. They would like to move to a bigger house in the same school district.

Advise Harold and Maude on their options for selling their home, the fees associated with a sale, the pros and cons of using a realtor versus selling the home on their own, and real estate loans they should consider. Harold and Maude would like this home to be the last home they live in while they finish their careers in Chicago and get their children through college. (LO 7-4)