FINANCING A HOME
PREPARED BY THE DIVISION OF BUILDING AND HOUSING, DEPARTMENT OF COMMERCE
1.—What You Buy and How to Buy It
In purchasing a home a misstep may be unfortunate, so get the best advice you can, and watch every step. First of all, what you buy is the site and the improvements on it. If a building and loan association, or bank, loans you money on the property, it has a direct financial interest in helping you guard yourself on certain points, such as making sure that there are no old mortgages, no unpaid back taxes, or bills for building materials, or other claims against the property.
Be certain your title is clear, or have it insured or guaranteed. Learn of any easements, such as the right of a telephone company to place its poles upon your lot.
If you make a purchase offer with a cash deposit, include a statement as to whether window shades, stoves, and other movable property are included. Risk from loss by fire or elements should be assumed by the owner until the title passes to you.
Your offer should be dependent on your obtaining a satisfactory loan to finance the proposition, and the ability of the owners to furnish papers to show a good marketable title, free from liens or encumbrances. In other words, do not bind yourself to the purchase until you are sure of what you are paying for, and that you can finance it.
You must be prepared to pay taxes on your property, and special assessments for installation of water, sewerage, electric light, gas or other public utilities, or street paving and sidewalks. Note what improvements are already made, and what additional ones you may have to pay for.
2.—How to Pay for Your Home
In buying a house and lot you must borrow what you cannot pay in cash. Remember that the more risks you assume, the fewer the lender will have to charge you for. Your promise to pay back what you borrow will be secured by a mortgage or trust on the property. A first mortgage loan on not over one-half or two-thirds of the value of a piece of property is a very safe investment, and the rates of interest should be low. The lender on a second mortgage takes more risk, and rates of interest and discounts are higher. If you agree to buy a home without the title passing to you at once, the seller takes less risk, and you may save money.
3.—Where to Get Loans
There are building and loan associations throughout the country, usually organized to serve the needs of people like yourself, who wish to finance a home. Their plan of weekly or monthly payments, both on principal and for interest, has proved sound from the experience of millions of people as an aid to systematic saving. Loans may often be obtained from savings banks, trust companies, state banks, individuals, and trustees for estates.
Obtaining money on a second mortgage is usually not so easy. Remember that when the owner of a house takes a second mortgage in payment he may plan to sell it for four-fifths or less of its face value, and that he probably charges you accordingly.
Above all, when you start to save for a home do not throw your money into glittering schemes that promise big dividends and the chance to borrow money at 3 per cent or less. The concerns behind such schemes cannot be trusted.
4.—How Much Can You Afford?
It is said that a man may own a home worth one and one-half to two and one-half times his annual income but the payments you make during the first few years after purchasing are what you should pay most attention to. Rent ordinarily requires from ten per cent, to twenty-five, or even more, of a family's annual income. In addition to what you ordinarily pay for rent, you can devote your customary savings, or more, to paying off the principal of loans on your home.
Following is an example: A man who earns $2,000 a year buys a house and lot costing $4,000. He has $1,000 cash to pay down on it, and obtains a loan of $3,000, or 75 per cent, of the value of the property, from a building and loan association.
Cost per year for a $4,000 house (not including depreciation)
Payments on $3,000 B. & L. Shares at
1/2% a month or 6% a year (savings) $180.00 a year
Interest on $3,000 loan at 6% 180.00 " "
Interest on $1,000 cash at $% 50.00 " "
Taxes (vary locally) 75.00 " "
Insurance 5.00 " "
Upkeep at 1-1/2% 60.00 " "
————
$550.00
Of the total income of $2,000, the $550 represents 27-1/2% divided as follows: 18-1/2% for rent; 9% for savings. In about twelve years the loan is paid off, and the home owned free and clear.
Zoning and What it Means to the Home
By DR. JOHN M. GRIES
CHIEF DIVISION OF BUILDING AND HOUSING, DEPARTMENT OF COMMERCE
Zoning helps home owners by establishing residential districts from which garages, and business and factory buildings are excluded. Apartments or houses covering more than 30 or 40 per cent. of the area of a lot may be prohibited in some sections. This all means a better and fairer chance for each family to have a home with enough light and air, and healthful, decent surroundings, near to schools, playgrounds and transportation facilities.
It may be added that zoning, when wisely carried out, provides for grouping of neighborhood stores at convenient points, and for guided growth of business and industrial districts, in the directions best suited for them.
In the words of the Advisory Committee on Zoning appointed by Secretary
Hoover:
"Zoning is the application of common sense and fairness to the public regulations governing the use of private real estate. It is a painstaking, honest effort to provide each district or neighborhood, as nearly as practicable, with just such protection and just such liberty as are sensible in that particular district. It avoids the error of trying to apply exactly the same building regulations to every part of a city or town regardless of whether it is a suburban residence section or a factory district, or a business and financial center.
"Zoning gives everyone who lives or does business in a community a chance for the reasonable enjoyment of his rights. At the same time it protects him from unreasonable injury by neighbors who would seek private gain at his expense.
"Zoning regulations differ in different districts according to the determined uses of the land for residence, business, or manufacturing, and according to the advisable heights and ground areas.
"But these differing regulations are the same for all districts of the same type. They treat all men alike."
But the benefits of zoning are not confined to safeguarding the home and its surroundings. It can reduce losses due to topsy-turvy growth of cities, and cut the cost of living. Every year millions of dollars are wasted in American cities from the scrapping of buildings in "blighted" districts. For instance, fine residential districts may be threatened by sporadic factories or junk yards, and owners may become panicky and sell at a sacrifice millions of dollars worth of valuable dwellings which will be left to stand practically idle. The public must pay for this loss in one way or another. Frequently money for street, sewers and other utilities need never be spent if it is known in advance that large factories are to occupy new developments. Industry and homes are both more efficient if kept generally separate, though separation need not mean great distances for workers to travel.
"How has zoning worked?" "What has it accomplished?" About 70 cities and towns have adopted zoning ordinances since 1916, and the idea has worked well. Reliable authorities declare that "the New York zoning regulations have prevented vast depreciation in many districts and effected savings in values amounting to millions of dollars in established sections." The highest class residential districts in New York, in which only 30 per cent of the lot area may be used for dwellings, have developed with much greater confidence, due to the knowledge that houses built would be safe from invasion by apartments or industry.
In St. Louis "it was found that residences tended to follow the residence districts, and did not even attempt to seek locations in industrial or unrestricted areas. Except commercial buildings which were built partly in commercial and partly in industrial districts, the development of St. Louis is said to be fitting itself very closely to the zoning plan.
"In New Jersey it has been found that the unzoned suburban town is at a distinct disadvantage as compared with the community protected by a zoning ordinance."
It is sometimes said that zoning is arbitrary and restricts the liberty of the individual to do as he wishes; but when zoning laws have been sensibly and comprehensively drawn, the courts have approved them as a reasonable exercise of the police power "for the public health, safety and general welfare."
Zoning should always be undertaken in close relation to a city plan. It is essentially a neighborly proposition, and there should be neighborhood meetings to explain it and gather suggestions.
The purpose of a zoning ordinance is to insure that growth, instead of taking place sporadically and wastefully, should go on in an orderly way in response to generally recognized needs, and with due notice to all concerned.
Zoning today is giving security and the sense of security to hundreds of thousands of families in America, in the enjoyment of happy homes amid the right kind of surroundings.
Is your city zoned?
End of Project Gutenberg's Better Homes in America, by Mrs. W. B. Meloney