This number of square feet is within the amount allowed, which is 950, but additional area must be added to this for closets, say 3 feet by 4 feet for the closet of the master bedroom, and 3 feet by 3 feet for the closets of the other rooms, and other closets for linen and space for chimneys and the like, making about 60 square feet, which should be left for this part of the plan. This makes the area about 868 square feet, and no allowance has been made for porches or passageways. It is quite evident from this that the number of bedrooms desired, their approximate size, and the size of the toilet and closets is nearly up to the maximum which the limitations of cost will permit. Working with these approximate figures, the plans of the house can be roughly prepared, the area required for the second-floor rooms being used as a basis for the allowable area of the first floor, since it is more than enough, for the second-floor area of a house, as has been said, is always greater than the minimum area for the first floor.
When roughly prepared plans and elevations have been arranged on this basis, the cubage can again be checked, and if it is over the allowed amount, the size should be cut down; if under, increased. The cubical contents of porches may be computed at one-quarter of the cubage of the main portion of the house, but if enclosed with glass they should be estimated at their full cubic contents.
Having thus roughly arrived at the plans and elevations of the house which is within the allowed cubage, a rough outline specification should be prepared in which the essential materials, workmanship, and mechanical equipment are defined. Enough information will then be had from which a rough estimate can be secured from a local contractor, or even the architect may make an estimate, based upon previous examples of other houses. If this rough estimate comes within the allowable figure which is to be spent for construction, then the contract drawings can be safely started, and a reasonable assurance can be had that the cost of the house will not go beyond the amount of money available. As most contractors will give an outside price on any preliminary estimates of this kind, unless radical changes are made in the plans, it can almost surely be the case that the final estimate on the contract documents will be less. However, there are often times when the final figures exceed these preliminary estimates, and one should always be prepared to shrink parts of the building or withdraw some of the finest requirements of the specifications.
But one of the prime essentials in financing any building operation is to be sure that the contract drawings contain everything which is desired in the finished building, and that none or very few changes are made in the building after the contract is let and the building is in process of construction. Alterations from the original plans, after construction work has begun, come under the bugbear title for all architects, “Extras.” They always mean waste of money. Likewise, things which were omitted from the plans and specifications, which are later found to be necessary, run up extraordinary bills, and the general impression which most people have that a building operation always costs more in the end than was originally counted upon is due largely to the neglect of these factors. Competent architects make such complete plans and specifications that extras of the “omission type” are avoided, but most small houses are built from plans that are not complete, or prepared by architects who sell their services at such low rates that they cannot afford to take the time to check up the plans carefully. It is right here that the architect has a real business point to give the client, namely, that if he does not pay for carefully prepared plans and specifications in the beginning, he will pay out much more in the end for extras.
Up to this point the financing of the small house, for the one who has the money, is not complicated, but this is the unusual condition, because the average person who builds the small house has not the ready cash to put into it, for that is the reason he builds a small house. The average individual who builds the small house generally has a certain amount which can be invested and the rest must be borrowed, and there are many who advise that even if one did have the whole amount to invest, it would be better to borrow some for the building operation, and keep out as much as possible for investments in other lines where the money might bring in greater returns.
The problem naturally turns upon where and how much can be borrowed for the building operation. Here again a very personal matter is involved. Some will have very close friends from whom they can secure a large first and second mortgage at a fairly reasonable rate, others may be able to secure a first mortgage from some financing institution which will be an amount equal to one-half the total cost of land and house, and then they may be able to secure a second mortgage from some friend, for most business houses are not prone to take second mortgages. Often a greater sum can be raised on the contract system, for by this method the person lending the money is more certainly assured of securing quick control of it in case of the necessity of action when payments on the interest fail. By the contract method, the individual lending the money holds the deed of the property, and can secure control of the property more quickly than if he had a mortgage and the owner held the deed. In many cases where foreclosure of mortgages are found necessary, there may be a delay of a year or more before the money-lender can secure control of the property, but if he holds the deed the delay is shortened, and because of this fact he is apt to lend more money than 50 per cent of the total value. Of course, in the contract method the owner secures the deed to the property when his last payment is made upon the principle and he has wiped out all of his interest indebtedness.
But probably one of the most satisfactory systems yet devised for financing the small house is through the various building and loan associations which have grown to great strength in this country. These associations not only offer investment opportunities for small investors, but they make excellent and easy terms for those to whom they lend money for home-building. The arrangements with these institutions make the payments on mortgages almost like the payments in monthly rents, and yet at the same time the principle is continually being reduced, so that in about twelve years it is completely paid off. Then, too, one is assured of not being in the hands of some unscrupulous money-lender, as sometimes one discovers a friend to be, however trustworthy he may have seemed before this business relation developed.
These building-loan associations will lend as high as 80 per cent on the value of house and grounds, provided the character of the individual in the community warrants it. Their average-size loans have been computed to be about $4,000. If the minimum payment is adhered to, the loan is usually paid up in twelve years, although arrangements can be made by which this can be shortened. The interest charged is from 6 per cent to 8 per cent.
If the money is not secured through the above source, then it is customary to pay a commission to the agent who secures a loan from some financing institution or private investor. This commission differs, according to the locality, ranging from 1 to 4 per cent on first mortgages, and from 5 per cent upward on second mortgages. If a contract is desired on a second mortgage, the agent will be obliged to secure it from some private individual, for first-mortgage companies will not purchase them. This often leads to discounts of from 15 to 30 per cent on second mortgages and contracts.
It is well for every prospective owner, before he considers financing the construction of a small house, to sit down and figure out all of the incidental expenditures which are connected with it, for often some of the minor items are not taken into account, and they may spoil the whole scheme. Taking a typical example, the items of expense are as follows: