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Be Our Home? Next to choosing a wife and a career, choosing a house ranks among the most important decisions a man will make during his lifetime. Sir Winston Churchill put it this way, "First we shape our buildings, and afterward our buildings shape us." A house represents far more than 10 to 20 tons of building materials. It can represent a way of life, because it exerts a major influence on how a family lives. It will also represent a major financial investment, which will usually overshadow all other family expenditures. Housing accounts for nearly 30 percent of the average American family's living expenses, versus about 25 percent for food. Beyond the economics of home-buying, a house can hold enormous personal meaning to a professional man's family, and particularly to a wife and children—the younger the children, the more so. Obviously, home-buying should be done logically and sensibly, with some good knowledge to guide you. Even if you have bought a house or two before and think that you are a seasoned hand at the home-buying A. M. Watkins, who trained as an engineer, is a leading writer and consultant in the homebuilding and housing fields. He is the author of many magazine articles and four books on housing and homebuilding. He has contributed articles to such national magazines as The American Home, Better Homes <tr Gardens, Harper's, Redbook, and the Saturday Evening Post. His latest book, just published, is "How to Avoid the 10 Biggest Home-Buying Traps" (Meredith Press, $3.95). Mr. Watkins wrote this article especially for HirS Reports. game, you can still pick up useful tips when you go shopping again. How much house can you afford? In other words, what's the maximum price to pay for a house? A good rule of thumb is that your basic monthly housing expenses (mortgage payments, taxes, insurance) should not exceed your gross annual income divided by 60. A man earning $12,000 a year therefore can spend up to $200 a month for basic housing expenses, or an $18,000 man can spend up to $300 a month. This rule will apply to a gross income of up to about $25,000 to $30,000. Those earning more should make allowances for a higher income tax bracket. The rule should not, however, be applied too strictly. For example, a young man going up the ladder in his job generally can expect future salary increases. He usually can stretch the rule and buy a little beyond his present salary range. But he should not miscalculate by counting on the earnings of a young wife, who may soon leave her job to raise a family. There is also the hoary old rule that says you can buy a house priced up to two-and-a-half times your annual income. This rule is obsolete, and it can be highly misleading, because it does not take into account possible large variations in the actual owning expenses of a house, regardless of its purchase price. The real estate taxes on one house we know, for example, run about $500 a year, whereas the taxes on another house we know, priced at virtually the very same figure but located in another suburb, run three times that amount, or about $1,500 a year. The second house obviously costs more to own. In this case, it's $1,000 a year more, which isn't peanuts to a lot of people. Yet both houses are for sale at very similar prices. The rule of 60 takes such housing expense variables into account. It also emphasizes that you should closely determine the total annual expenses for a house before buying so you are not misled by considering the sales price alone. Besides the basic housing expenses, other ownership bills can add up to another 5 percent or so of your family budget, sometimes more. There is the cost of winter heating, which will vary according to house size and climate. You also can expect certain outlays for inevitable upkeep and repair. Ordinarily these will run about 2 to 3 percent of house price. If a major improvement or remodeling is needed the expense could be even more. That's more likely, though, with an old house. It goes almost without saying that a young professional man should be able to afford keeping the appearance of his house up to the neighborhood standard. For his own self-esteem and that of his family, the paint, masonry and grounds should reflect on him with credit. This brings up the main differences between new and used houses, of any age. Which is better to buy? One of the main features of a new house is that it generally can be bought with a cash down payment as little as 5 to 10 18
Object Description
Title | Should this house be our home? |
Author |
Watkins, A. M. |
Subject |
Home ownership |
Abstract | Illustrations not included in the Web version. |
Citation |
H&S Reports, Vol. 05, (1968 no. 2), p. 18-21 |
Date-Issued | 1968 |
Source | Originally published by: Haskins & Sells |
Rights | Copyright and permission to republish held by: Deloitte |
Type | Text |
Format | PDF page image with corrected OCR scanned at 400 dpi |
Collection | Deloitte Digital Collection |
Digital Publisher | University of Mississippi Library. Accounting Collection |
Date-Digitally Created | 2010 |
Language | eng |
Identifier | HSReports_1968_Spring-p18-21e |