Evening star. [volume] (Washington, D.C.) 1854-1972, 1925-03-14
BETTER HOMES PLANS
GIVE BUYERS POINTERS
Warnings Against Assuming Burdens
Too Heavy Emphasize What Prospec-
the OaUners Should AUOid.

depends on the interest rates one can
get on the unpaid balance of the pur-
chase price and the rate at which the
principal is to be paid off. 1t Is al
ways best to allow a margin of
safety to meet unexpected drains on
the family purse, such as Illness.
Proportion to Be Paid.
If family pays sixth of its in
come for rent, 1t may be able to
AFFORD quarter of its income toward
payment for a house. Allowance must
be made for repairs and renewals and
taxes and insurance. as well as inter-
est payments and regular reduction
of the principal
The Importance of written agree
ments in regard to financing, building
and purchasing, properly signed by
all parties and drawn with careful at
tention to legal detail, cannot be too
strongly stressed. True, the great
majority of individuals and companies
with whom home seekers deal are
honest and wish to do business on
that basis, but If either party to the
agreement should die or wish to re-
move to another city it is important
that the obliga lions of both should
have been clearly defined beforehand.
No good business man can object to
having his obligations set down in
writing and in accordance with legal
procedure
1t is usually desirable to pay at
least a fifth of the total purchase
price in cash for "A house and lot.
The larger the cash payment, the
lower the rate of interest, as a rule,
that will be required on the unpaid
balance. In rapidly growing cities
the risks taken by lenders are not so
great, because of the increasing land
values, hence the interest rates are
likely to be lower.
Saving is essential to the prospec-
tive home-owner. 1t is wiser to save
with a budget. Carefully consider
the family's expenses and determine
in what directions economy may be
practiced with good results Form a
budget and adhere to it strictly. Each
item should be made to come within
the limit set for it. Do not run over
one item and try to balance it by
skimping another. The budget loses
its value if this is done.
Dangerous Speculation.
One of the most common ways in
which family savings are lost is
through speculation in flots. Buying
a lot in an improved section when one
is ready to build is far different from
buying a lot where streets have not
been put through and gas, electric and
sewerage improvements have not been
made. A purchase of this kind is al
ways a speculation. The outgo in
holding this lot is certain; the In
come highly uncertain. Money In a
savings account, on the other hand,
keeps earning money continually.
First mortgages are usually easily
obtained when 40 or so per cent of
the purchase price of house and
lot has been paid in cash. When less
is paid down, however, it is often
necessary to obtain a second mort
gage. The risk taken by the lender
is great, consequently the interest
rate is higher. and sometimes it is
necessary to pay a commission or
bonus of as high as 10 per cent to
obtain a second mortgage.
Building and loan associations will
In many cases prove the best means
of financing home. In some States
they are able to loan as high as 70
which is generally above the limit
allowed by law for insurance COM
panies and savings banks.
No matter how little or how much
IS borrowed, it is wise policy to pay
off parts of the. principal at regular
intervals. This process. called amor
tization, is recognized as a standard
and sound practice. Thus on a loan
of $1,000 payments of $40 a month, or
S120 a year, would take care of the
interest at per cent and pay off the
entire principal in less than IL years.
AS the payments are met, the interest
charges decrease steadily. 1t has been
compared to the efficacy of attacking
an army in detail. Second mortgages
should be amortiZed as quickly as
possible