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Chapter 07 - Selecting and Financing Housing

CHAPTER 7
SELECTING AND FINANCING HOUSING

CHAPTER OVERVIEW
This chapter provides a complete discussion of selecting housing based on life situation, needs, and
personal values along with the related financial aspects of this major expenditure. First presented is
material regarding factors related to renting a residence. This is followed by discussion of buying
alternatives and the home buying process including determining housing needs, evaluating potential
homes, and pricing the property. The financing section covers types of mortgages and closing costs of a
real estate purchase. Finally, suggestions for selling a home are offered.

LEARNING OBJECTIVES CHAPTER SUMMARY

After studying this chapter, students will be able to:

Obj. 1 Assess costs and Assess renting and buying alternatives in terms of their
benefits of renting. financial and opportunity costs. The main advantages of renting
are mobility, fewer responsibilities, and lower initial costs. The
main disadvantages of renting are few financial benefits, a
restricted lifestyle, and legal concerns.

Obj. 2 Implement the home- Home buying involves five major stages: (1) determining home
buying process. ownership needs, (2) finding and evaluating a property to
purchase, (3) pricing the property, (4) financing the purchase,
and (5) closing the real estate transaction.

Obj. 3 Determine costs The costs associated with purchasing a home include the down
associated with payment; mortgage origination costs; closing costs such as a
purchasing a home. deed fee, prepaid interest, attorney’s fees, payment for title
insurance, and a property survey; and an escrow account for
homeowner’s insurance and property taxes.

Obj. 4 Develop a strategy for When selling a home, you must decide whether to make certain
selling a home. repairs and improvements, determine a selling price, and choose
between selling the home yourself and using the services of a
real estate agent.

INTRODUCTORY ACTIVITIES
 Ask students to comment on the “3 Steps to Financial Literacy" feature at the start of the chapter (p.
218).
 Point out the learning objectives (p. 219) in an effort to highlight the key points in the chapter.
 Provide an overview of the “Your Personal Financial Plan Sheets” for this chapter (p. 219)
 Ask students to discuss the relationship between housing selection and other financial goals.

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Chapter 07 - Selecting and Financing Housing

CHAPTER 7 OUTLINE

I. Evaluating Renting and Buying Alternatives

A. Your Lifestyle and Your Choice of Housing
B. Renting versus Buying Your Housing
C. Rental Activities
1. Selecting a Rental Unit
2. Advantages of Renting
3. Disadvantages of Renting
4. Legal Details
5. Costs of Renting
II. Home-Buying Activities
A. Step 1: Determine Home Ownership Needs
1. Evaluate Home Ownership
2. Types of Housing Available
3. Determine How Much Can You Afford
B. Step 2: Find and Evaluate a Home
1. Select a Location
2. Services of Real Estate Agents
3. The Home Inspection
C. Step 3: Price the Property
1. Determine the Home Price
2. Negotiate the Purchase Price
III. The Finances of Home Buying
A. Step 4: Obtain Financing
1. The Down Payment
2. The Mortgage
3. Fixed Rate, Fixed Payment Mortgages
4. Government-Guaranteed Financing Programs
5. Adjustable-Rate, Variable-Payment Mortgages
6. Interest-Only Mortgage
7. Other Financing Methods
B. Step 5: Close the Purchase Transaction
C. Home Buying: A Summary
IV. A Home-Selling Strategy
1. Preparing Your Home for Selling
2. Determining the Selling Price

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Chapter 07 - Selecting and Financing Housing

3. Sale by Owner
4. Listing with a Real Estate Agent

CHAPTER 7 LECTURE OUTLINE Instructional Suggestions

I. EVALUATING RENTING AND BUYING  Text Highlight: Exhibit 7-1

ALTERNATIVES (p. 219) (p. 220) compares renting and
buying.
 Your needs, lifestyle, and financial resources will  Use PPT slides 7-1 to 7-5.
determine whether you decide to rent, buy, or have a
home built.
Your Lifestyle and Your Choice of Housing (p. 219)
 Your lifestyle (how you spend your time and money)
is reflected in almost all consumer purchases
including housing.
 While personal preferences and tastes are the
foundation of your housing decisions, financial
factors may modify your final choice.
Renting versus Buying Your Housing (p. 219)
 Choosing between renting and buying your residence  Text Highlight: The “Figure it
is an essential decision related to housing. Out” feature on page 221
 Economic conditions can influence this decision as provides a framework with a
financial analysis to compare
well as a personal desire for ease of mobility or pride renting and buying.
of ownership.
Rental Activities (p. 220)  Assignment: Have students
survey people who rent to
 At some point in your life, you are likely to rent your determine factors that influenced
place of residence. You may rent when you are first this housing decision over
buying.
on your own and cannot afford to buy a home or later
in life when you want to avoid the activities required
to maintain your own home.
Selecting a Rental Unit (p. 221)  Supplementary Resource: Talk
to a lawyer about common
 An apartment is the most common type of rented problems associated with renting
housing. and leases.
 People who need more room should consider renting a  Use PPT slides 7-6 to 7-11.
house.
Advantages of Renting (p. 221)
 The main advantages of renting are:
 ease of mobility
 fewer responsibilities
 lower initial costs

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Chapter 07 - Selecting and Financing Housing

CHAPTER 7 LECTURE OUTLINE Instructional Suggestions

Disadvantages of Renting (p. 222)  Text Highlight: Pages 222 lists

the main conditions of a lease
 The main drawbacks of renting are: agreement.
 few financial benefits in the form of tax
deductions,
 restricted lifestyle, restrictions on decorating,
having pets, and other activities
 legal details

 A lease is the legal document that defines the

conditions of a rental agreement. It is designed to
protect the rights of both the landlord and tenant.
 Text Highlight: “From the
Costs of Renting (p. 223) Pages of Kiplinger’s Personal
Finance” (p. 224).
 A security deposit is usually required when you sign a  Practice Quiz 7-1 (pp. 223).
lease. This money is held by the landlord to cover the
cost of any damages that may be done to the rental  Text Reference: “Apply
Yourself” activity (p. 223).
unit during the lease period.

II. HOME-BUYING ACTIVITIES (p. 225)

 Owning a home is a goal of many people and involves
various activities as well as personal and economic
trade-offs.
Step 1: Determine Homeownership Needs (p. 225)
 Exercise: Create a list of
factors that could encourage or
discourage a person to purchase
a certain type of housing.
 Use PPT slides 7-12 to 7-14.

 The main advantages of home ownership are pride of  Supplementary Resource:

Obtain information from a
ownership, financial benefits, and flexibility in using condominium sales office about
the property. the purchasing and management
 Financial risks related to having down payment funds, of this type of housing.
obtaining a mortgage, and changing property values.  Discussion Questions: What are
 Limited mobility may result if a home is difficult to common perceptions about
sell. mobile houses and modular
 Higher living costs due to repairs and maintenance. housing units? Are these beliefs
as valid as in the past?

Types of Housing Available (p. 225)  Assignment: Have students talk

to people who have had their
 Single-family dwellings are the most popular type of own house built, or to
housing. contractors who work with
 Multiunit dwellings include duplexes and town people having a house built.
Obtain information on the
houses. process and potential
 A condominium is an individually owned housing difficulties.
unit in a building with a number of such units.
 Use PPT slides 7-15 to 7-19.
Individual ownership does not include common areas
such as hallways, outside grounds, and recreational
facilities.

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Chapter 07 - Selecting and Financing Housing

CHAPTER 7 LECTURE OUTLINE Instructional Suggestions

 Cooperative housing is a form of housing in which a
building containing a number of units is owned by a
nonprofit organization whose members have the right
to live in the units by paying rent.
 Manufactured homes are housing that is fully or
partially assembled in a factory before being moved to
the living site. These include prefabricated homes and
mobile homes.
 Some people want a home built according to their
specifications. Before you begin such a project, be
sure you possess the knowledge, the money, and the
perseverance that are needed to complete it.
Determine What You Can Afford (p. 226)  Use PPT slide 7-20.

 The amount you can afford to spend for a house will  Additional Example: The
practical aspects of a home most
be affected by the cash you have available for a down desired by buyers in order of
payment, by your regular income, and by your current popularity:
living expenses and financial obligations. 1. dishwasher
 You may not get all the features you want in your first 2. dead-bolt locks
3. walk-in closets
home, but financial advisers suggest that you should 4. trash disposal
get into the housing market by purchasing what you 5. fireplace
can afford. 6. bay windows
 Studies show that the most desired features in a home 7. upgraded carpeting
8. microwave oven
are a basement, a large garage, abundant closet and 9. walk-in pantry
storage space, and a large, modern kitchen. 10. ceramic tiles in tub.
 You may want to buy a handyman’s special—a home
that needs work but that you are able to get at a lower
price because of its poor condition.
Step 2: Find and Evaluate a Home (p. 226)  Use PPT slides 7-21, 7-22.

 In selecting a neighborhood, consider the character of  Discussion Question: Why is

home location considered more
the community. important than any other factor
 Zoning laws are restrictions on how the property in when making a housing
an area can be used. purchase?
 If you have or plan to have a family, you should  Additional Example: In
assess the school system. Homeowners without addition to the location, be sure
children also benefit from strong schools since the to:
educational advantages of a community affect  consider the entire
community
property values.
 be aware of possible malls
 A real estate agent can help you assess your housing or highways
needs and determine the amount you can afford to  consider cost and time of
spend on a home. commuting
 A real estate agent can be helpful in presenting your  remember that yards, home
conditions, and other items
offer to the seller, negotiating a settlement price, in view are an indication of
assisting you in obtaining financing, and representing the lifestyles and values of
you at the closing people in the community.

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Chapter 07 - Selecting and Financing Housing

CHAPTER 7 LECTURE OUTLINE Instructional Suggestions

 Before reaching your decision about a specific home,  PPT slide 7-23_presents a
conduct a complete evaluation of the property. This checklist for use when
home inspection can help minimize future problems. conducting a home inspection.

Step 3: Price the Property (p. 227)  Use PPT slides 7-24, 7-25.

 The main factors you should consider in determining
the home prices are recent sales prices in the area, the
current demand for housing, the length of time the
home has been on the market, the owner’s need to
sell, the financing options, and the features and
condition of the home.
 Supplementary Resource: Use
local newspapers and an online
search to obtain information on
the price range of houses and
other housing in your
community.

 In times of high demand for housing, negotiating is

minimized; this is referred to as a seller’s market
since the current homeowner is likely to have several
offers for the property. In contrast, when home sales
are slow, a buyer’s market exists and a homebuyer is
likely to purchase the property at a lower price.

 Once a price has been agreed upon, the buyer must  Practice Quiz 7-2 (p. 228)
deposit earnest money—a portion of the purchase  Text Reference: “Apply
price that the buyer deposits as evidence of good faith Yourself” activity (p. 228).
to show that the purchase offer is serious.
III. THE FINANCES OF HOME BUYING (p. 229)
 Use PPT slides 7-26 to 7-32.
 Financing a home purchase requires obtaining a
 Assignment: Have students
mortgage, being aware of the types of mortgages, compare mortgage qualifications
and settling the real estate transaction. requirements and procedures of
several lenders in your area.
Step 4: Obtain Financing (p. 229)
 Text Highlight: Exhibit 7-6
 Personal savings, pension plan funds, sales of (p. 230) may be used to
investments or other assets, and assistance from calculate the amount of
relatives are the most common sources of down mortgage a person can afford.
payment money.
 Private mortgage insurance (PMI) is usually  Assignment: Have students use
required if the down payment is less than 20 Exhibit 7-7 (p. 231) to
percent. determine the amount of the
monthly payment for different
mortgage amounts at different
rates with different term lengths.

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Chapter 07 - Selecting and Financing Housing

CHAPTER 7 LECTURE OUTLINE Instructional Suggestions

 A mortgage is a long-term loan on a specific
piece of property, such as a home or other real
estate. Payments on mortgages are made over an
extended period, for example 15 or 30 years.
 To qualify for a mortgage, you must meet criteria
similar to those that must be met for other loans.
 The major factors that affect the affordability of
your mortgage are your income, other debts, the
amount available for a down payment, the length
of the loan, and current mortgage rates.
 The mortgage loan for which a person can qualify
is larger when interest rates are low than when
they are high. As interest rates rise, fewer people
are able to afford the cost of an average-priced
home.
 Points are prepaid interest charged by the lender.
Each discount point is equal to one percent of the
loan amount and should be viewed as a premium
being paid for obtaining a lower mortgage rate.
 Obtaining a mortgage requires the potential
borrower to submit an application form
containing personal and financial data. Most
 Text Highlight: On page 232,
lenders charge a loan application fee of between
students can see how a portion
$100 and $300. of each mortgage payment goes
 Other common charges associated with the toward both interest and
mortgage application process are loan origination principal. As the amount owed
fees, property appraisal fees, and a credit report declines each month, more of
the payment goes to cover
charge. principal and less for interest.

Fixed-Rate, Fixed-Payment Mortgages (p. 231)  Use PPT slides 7-33 to 7-35.

 The conventional mortgage has equal payments

over 15 or 30 years based on a fixed interest rate.

Government-Guaranteed Financing Programs (p.

232)
 Government-guaranteed financing programs
include insured loans by the Federal Housing
Authority (FHA) and loans guaranteed by the
Veterans Administration (VA).

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Chapter 07 - Selecting and Financing Housing

Adjustable-Rate, Variable-Payment Mortgages (p.

232)
 The adjustable rate mortgage (ARM), also
referred to as a flexible rate mortgage or a
variable rate mortgage, has an interest rate that
increases or decreases during the life of the loan
based on changes in market interest rates.
 A rate cap restricts the amount that the interest
rate can increase during the loan term.
 A payment cap keeps the payments on an
adjustable rate mortgage at a given level or limits
the amount to which those payments can rise.
 Convertible ARMs allow the homeowner to
change an adjustable rate mortgage to a fixed rate
mortgage during a certain period, such as time
between the second year and the fifth year of the
loan.
Interest-Only Mortgage (p. 233)
 An interest-only mortgage allows a homebuyer
to have lower payments for the first few years of  Supplementary Resources: Go
the loan. During that time, none of the mortgage to the websites of the Federal
Trade Commission
payment goes toward the loan amount. Once the (www.ftc.gov), and the
interest-only period ends, the mortgage adjusts to Consumer Information Center,
be interest only at the new payment rate. Or, a (www.pueblo.gsa.gov) to obatin
borrower may obtain a different type of mortgage current information related to
home buying and mortgages.
to start building equity.

7-8
Chapter 07 - Selecting and Financing Housing

CHAPTER 7 LECTURE OUTLINE Instructional Suggestions

Other Financing Methods (p. 233)  Use PPT slides 7-36, 7-37.

 A buy down is an interest rate subsidy from a

home builder or a real estate developer that
reduces the mortgage payments during the first
few years of the loan.
 A second mortgage, more commonly called a
home equity loan, allows a homeowner to
borrow on the paid-up value of the property.
 Reverse mortgages provide an elderly
homeowner with tax-free income in the form of a
loan that is paid back (with interest) when the
home is sold or the homeowner dies.
 Refinancing refers to obtaining a new mortgage
on your current home at a lower interest rate.
 Another financing decision involves making extra
payments on your mortgage. Since this amount
will be applied to the loan principal, you will save
interest and pay off the mortgage in a shorter
time.

Step 5: Close the Purchase Transaction (p. 234)  Use PPT slides 7-38 to 7-40.

 The closing involves a meeting of the buyer,

seller, and lender of funds, or representatives of
each party, to complete the transaction.
 Closing costs, also called settlement costs, are the
fees and charges paid when a real estate
transaction is completed.  Text Reference: The “Personal
Finance in Practice” feature (p.
 An escrow account is money, usually deposited 235) provides a summary of
with a financial institution, for the payment of home buying activities.
property taxes and homeowner’s insurance
 Practice Quiz 7-3 (pp. 236).
 Text Reference: “Apply
Home Buying: A Summary (p. 236) Yourself” activity (p. 236).

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Chapter 07 - Selecting and Financing Housing

CHAPTER 7 LECTURE OUTLINE Instructional Suggestions

IV. A HOME SELLING STRATEGY (p. 236)  Use PPT slides 7-41 to 7-46.
 Additional Example: Real
Preparing Your Home for Selling (p. 236) estate professionals suggest that
your home be made as appealing
 The effective presentation of your home can result in as possible so potential buyers
a fast, financially favorable sale. Real estate can imagine themselves living
salespeople recommend that you make needed home there.
repairs and paint the exterior and interior areas.  Discussion Question: What
types of improvements would
Determining the Selling Price (p. 237) add to the sale value of homes in
 Putting a price on your home can be a difficult this area?
decision. You face the risk of not selling it  Assignment: Have students talk
immediately if the price is too high, and you may not to people who have sold their
houses on their own.
get a fair settlement if the price is too low.
 An appraisal, which is an estimate of the current  Supplementary Resource: Talk
value of the property, can provide a good indication to a real estate agent, use
newspaper and online housing
of the price you should set for it. ads, and other online research to
determine the factors that
Sale by Owner (p. 238)
influence the selling price of
 If you decide to sell your home without the use of a homes.
real estate professional, price the home and then
advertise it through local newspapers and through a
flier describing it in detail.
 Use the services of a lawyer or title company to assist
you with the contract, the closing, and other legal
matters.
Listing with a Real Estate Agent (p. 238)
 If you decide to sell your home with the assistance of
a real estate agent, you can probably choose among
real estate businesses in your area.
 Your real estate agent will provide you with various
services. These services include suggesting a selling
price, making potential buyers and other agents aware  Practice Quiz 7-4 (p. 238).
of your home, providing advice on features to  Text Reference: “Apply
highlight, conducting showings of your home, and Yourself” activity (p. 238).
handling the financial aspects of the sale.

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Chapter 07 - Selecting and Financing Housing

CONCLUDING ACTIVITIES
 Discuss “Your Personal Finance Dashboard" and possible financial planning actions (p. 239).

 Point out the chapter summary (p. 239) and key terms in the text margin.
 Assign and discuss selected end-of-chapter Problems, Questions, Case in Point, Continuing Case.
 Discuss “Your Personal Financial Plan” worksheets.
 Use the Chapter Quiz in the Instructor’s Manual.

YOUR PERSONAL FINANCIAL PLAN WORKSHEETS FOR USE WITH

CHAPTER 7

Sheet 22 Renting vs. Buying Housing

Sheet 23 Apartment Rental Comparison
Sheet 24 Housing Affordability and Mortgage Qualification
Sheet 25 Mortgage Company Comparison

CHAPTER 7 QUIZ ANSWERS

True-False Multiple Choice

1. F (pp. 222) 6. A (p. 225)
2. F (pp. 222) 7. C (p. 226)
3. F (p. 226) 8. B (p. 229)
4. T (p. 225) 9. B (p. 230)
5. F (p. 229) 10. C (p. 233)

7-11
Chapter 07 - Selecting and Financing Housing

Name Date

CHAPTER 7 QUIZ

TRUE-FALSE
_____1. Several financial benefits are associated with renting your place of residence.
_____2. A lease is mainly designed to protect the rights of the landlord.
_____3. Cooperative housing involves the purchase of an individual living unit in a
multiunit complex or building.
_____4. Financial risks are associated with the purchase of a home.
_____5. Most mortgage rates are established by government agencies.

MULTIPLE CHOICE
_____6. A common advantage associated with home ownership is
a. financial benefits.
b. ease of mobility.
c. limited financial risks.
d. low initial costs.

_____7. Most real estate professionals believe that the most important factor in
selecting a home is
a. price.
b. style.
c. location.
d. desired features.

_____8. The major factor that affects a person’s qualification for a mortgage is
a. current interest rates.
b. the applicant’s credit rating.
c. the value of the property being purchased.
d. the source of the down payment funds.

_____9. Most lending institutions believe that a person can afford a monthly payment
of about __________ percent of gross income less any long-term debts.
a. 25
b. 35
c. 45
d. 55

_____10. A __________ allows a person to borrow on the paid-up value of a home.

a. conventional mortgage
b. VA mortgage
c. home equity loan
d. buy-down

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Chapter 07 - Selecting and Financing Housing

SUPPLEMENTARY ACTIVITY

For each of the following types of mortgages, describe life situations and economic conditions that could
make this type of home loan an appropriate choice.

Type of mortgage Description of life situation Description of economic conditions

Conventional, fixed-rate,
fixed-payment

FHA or VA

Adjustable rate mortgage

Buy Down

Second mortgage

Reverse mortgage

Interest-only mortgage

Refinance

(Note: This activity may be done as a discussion in a large group, as a small group exercise, or as an out-
of-class assignment.)

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Chapter 07 - Selecting and Financing Housing

ANSWERS TO PRACTICE QUIZZES, PROBLEMS,

QUESTIONS, AND CASES

PRACTICE QUIZZES

Practice Quiz 7-1 (p. 223)

1. What are the main benefits and drawbacks of renting a place of residence?
Advantages of renting are mobility, fewer responsibilities, and lower initial costs. Disadvantages are
few financial benefits, restricted lifestyle, and legal concerns.

2. Which components of a lease are likely to be most negotiable?

Some people will tell you that just about everything in a lease is negotiable; however, certain things
are likely to be more flexible than others. Most negotiable items include rent, amount of security
deposit, starting date of lease, and decorating

3. For the following situations, would you recommend that the person rent of buy their housing?
(Circle your answer)
A person who desires to reduce income taxes paid rent Buy
A person who expects to be transferred for work soon rent buy
A person with few assets for housing expenses rent buy

Practice Quiz 7-2 (p. 228)

1. What are the advantages and disadvantages of owning a home?

The advantages of owning a home are pride of ownership, financial benefits, and lifestyle flexibility.
Disadvantages are financial uncertainty, limited mobility, and higher living costs.

2. What guidelines can be used to determine the amount to spend for a home purchase?
In general, a person should make payments on the purchase of a home that involve about 25 to 30
percent of his or her income. This is a guideline and could be influenced by other factors such as the
amount available for a down payment and other household expenses.

3. How can the quality of a school system benefit even homeowners in a community who do not have
school-age children?
The quality of a school system is an important factor affecting home prices in a community. By
maintaining quality schools, all homeowners in an area benefit from stable and increasing property
values.

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Chapter 07 - Selecting and Financing Housing

Practice Quiz 7-3 (p. 236)

1. What are the main sources of money for a down payment?

The main sources of a down payment are personal savings, pension plan funds, investments, and
assistance from relatives.

2. What factors affect a person’s ability to qualify for a mortgage?

The major factors that affect mortgage affordability are income, other debts, the amount available for
a down payment, the length of the loan, and current mortgage rates.

3. How do changing interest rates affect the amount of mortgage a person can afford?
As interest rates decline, home buyers can afford to take on a larger mortgage.

4. Under what conditions might an adjustable-rate mortgage be appropriate?

An adjustable rate mortgage may be appropriate when interest rates are relatively high and they are
expected to decline. This situation would benefit the borrower as rates decline, or the homeowner
may refinance when rates drop at a lower-rate, fixed-rate mortgage.

5. For the following situations, select the type of home financing action that would be most appropriate:
a. FIXED-RATE: A mortgage for a person who desires to finance a home purchase at current
interest rates for the entire term of the loan.

b. REFINANCE: A homebuyer wants to reduce the amount of monthly payments since interest
rates have declined over the past year.

c. HOME EQUITY LOAN: A homeowner wants to access funds that could be used to remodel the
home.

d. VA MORTGAGE: A person who served in the military, who does not have money for a down
payment.

e. REVERSE MORTGAGE: A retired person who wants to obtain income from the value of her
home.

Practice Quiz 7-4 (p. 238)

1. What actions are recommended when planning to sell your home?

When planning to sell your home, make needed repairs, consider new paint, clear out living and
storage areas, and remove unnecessary furniture and other items.

2. What factors affect the selling price of a home?

Home prices are affected by location, size, condition, features, and current market demand.

3. What should you consider when deciding whether to sell your home on your own or use the services
of a real estate agent?

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Chapter 07 - Selecting and Financing Housing

If you decide to sell by owner, you will need to price, advertise, and show the house. Some people
would like to save money by taking on these tasks and not use a real estate agent. If you would like
someone else to handle these and other duties, you may decide to use the services of a real estate
agent.

DISCUSSION QUESTIONS (p. 240)

1. What do you believe are the most important factors a person should consider when selecting housing?

Student answers will vary. Encourage students to consider both their financial situation and
personal factors.

2. What are some common mistakes a person might make when renting an apartment or other housing?

Answers may include not comparing rental units and living costs, not reading and understanding
the lease, not having renters’ insurance, and not caring for the rental unit and losing the security
deposit.

3. What actions would you recommend to a person who was considering buying a home that needed
several improvements?

Have a home inspection to make sure the needed repairs are not more severe than they appear.
Obtain estimates for the cost of the repairs. Determine the time and cost involved if you plan to
do the repairs yourself.

4. Describe how knowledge of current interest rates would help you better plan when obtaining a
mortgage.

Knowledge of current interest rates could mean obtaining a better mortgage rate by timing your
home purchase to avoid high rates and to take action when rates are lower.

5. Prepare a list of actions to take when selling a home.

Actions might include presenting the home for sale in an appealing manner. Making necessary
repairs and painting areas. Obtain assistance in setting the selling price. Deciding whether to
sell the home on your own or to use the services of a real estate agent.

PROBLEMS (p. 240)

1. Based on the following data, would you recommend buying or renting? (LO 7.1)
Rental Costs Buying Costs
Annual rent, $7,380 Annual mortgage payments, $9,800 ($9,575 is interest)
Insurance, $145 Property taxes, $1,780
Security deposit, $650 Down payment/closing costs, $4,500
Growth in equity, $225
Estimated annual appreciation, $1,700
Insurance/maintenance, $1,050

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Chapter 07 - Selecting and Financing Housing

Assume an after-tax savings interest rate of 6 percent and a tax rate of 28 percent.

Rental Costs Buying Costs

Rent $7,380 Mortgage payments $9,800
Insurance 145 Taxes, insurance, maintenance 2,830
Interest lost on security 39 Interest lost on down payment, 270
deposit closing costs
Growth in equity -225
Annual appreciation -1,700
Tax savings for mortgage interest -2,681
Tax savings for property taxes -498
Total rental costs $7,564 Total buying costs $7,796

2. When renting, various move-in costs will be encountered. Estimate the following amounts: (LO 7.1)
First month rent $ _______________
Security deposit $ _______________
Security deposit for utilities (if applicable) $ _______________
Moving truck, other moving expenses $ _______________
Household items (dishes, towels, bedding) $ _______________
Furniture and appliances (as required) $ _______________
Renter’s insurance $ _______________
Refreshments for friends who helped you move $ _______________
Other items: ____________________________ $ _______________

Student responses will vary. Encourage students to point out ways for obtaining this information and for
minimizing their rental move-in costs.

3. Many locations require that renters be paid interest on their security deposits. If you have a security
deposit of $1,800, how much would you expect a year at 3 percent? (LO 7.1)

$ 36 = $1,800 × .02

4. Condominiums usually require a monthly fee for various services. At $235 a month, how much would
a homeowner pay over a 10-year period for living in this housing facility? (LO 7.2)

$28,200 = $235 × 12 months × 10 years.

5. Ben and Carla Covington plan to buy a condominium. They will obtain a $220,000, 30-year mortgage,
at 5 percent. Their annual property taxes are expected to be $1,800. Property insurance is $480 a year,
and the condo association fee is $220 a month. Based on these items, determine the total monthly
housing payment for the Covingtons. (LO 7.2)

Monthly mortgage payment: $5.37 × 220 = $1,181.40

Monthly property taxes: $1,800/12 = $150
Monthly property insurance: $480/12 = $40
Monthly association fee: $220
Total monthly housing payment: $1,591.40

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Chapter 07 - Selecting and Financing Housing

6. Estimate the affordable monthly mortgage payment, the affordable mortgage amount, and the
affordable home purchase price for the following situation (see Exhibit 7–6). (LO 7.3)

Monthly gross income, $2,950 Down payment to be made—15 percent of purchase price
Other debt (monthly payment), $160 Monthly estimate for property taxes and insurance, $210
30-year loan at 6 percent

$2,950 × 0.38 = 1,121 - 160 - 210 = Affordable monthly mortgage payment, $751
$751 ÷ 6.00 × 1,000 = Affordable mortgage amount, $125,167
$125,167 ÷ 0.85 = Affordable home purchase, $147,255

7. Based on Exhibit 7–7, what would be the monthly mortgage payments for each of the following
situations? (LO 7.3)

a. A $160,000,15-year loan at 6.5 percent.

$8.71  160 = $1,393.60

b. A $215,000, 30-year loan at 5 percent.

$5.37  215 = $1,154.55

c. A $190,000, 20-year loan at 6 percent.

$7.16  190 = $1,360.40

8. Which mortgage would result in higher total payments? (LO 7.3)

Mortgage A: $985 a month for 30 years
Mortgage B: $780 a month for 5 years and $1,056 for 25 years

A: $985  360 months = $354,600

B: ($780  60 months) + ($1,065  300 months) = $366,300

9. If an adjustable-rate 30-year mortgage for $120,000 starts at 4.0 percent and increases to 5.5 percent,
what is the amount of increase of the monthly payment? (Use Exhibit 7–7.) (LO 7.3)

120 × $4.77 = $572.40; 120 × $5.68 = $681.60; $681.60 – $572.40 = $109.20

Or, $5.68 – $4.77 × 120 = $109.20

10. Kelly and Tim Jarowski plan to refinance their mortgage to obtain a lower interest rate. They will
reduce their mortgage payments by $56 a month. Their closing costs for refinancing will be $1,670. How
long will it take them to cover the cost of refinancing? (LO 7.3)

$1,670 ÷ $56 = 29.82 (about 30 months; two and a half years)

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Chapter 07 - Selecting and Financing Housing

11. In an attempt to have funds for a down payment in five years, James Dupont plans to save $3,800 a
year for the next five years. With an interest rate of 4 percent, what amount will James have available for
a down payment after the five years? (LO 7.3)

$3,800 × 5.416 = $20,580.80

12. Based on Exhibit 7–9 , if you were buying a home, what would be the approximate total closing costs
(excluding the down payment)? As an alternative, obtain actual figures for the closing items by
contacting various real estate organizations or by doing online research. (LO 7.3)

Student answers will vary based on estimates using Exhibit 7-9.

13. You estimate that you can save $3,450 by selling your home yourself rather than using a real estate
agent. What would be the future value of that amount if invested for five years at 3 percent? (LO 7.4)

$3,450  1.159 = $3,998.55

CASE IN POINT (p. 241)

1. How could the Bowmans benefit from buying a home that needed improvements?

Buying a home that needs improvement can make sense for two reasons. First, it may be the only
affordable choice, and the buyer may be willing to fix up the residence. Second, the location or style may
be exactly what is desired and improvements a tradeoff that must be made.

2. How might Beth Young have found out when mortgage rates were at a level that would make
refinancing her condominium more affordable?

By regularly reading the business section of the newspaper or monitoring rates online, it is possible to
keep up to date on changing home mortgage interest rates. Regularly talking to a real estate agent or a
loan officer at a financial institution will also help in keeping informed on mortgage rates.

3. Although the Zorans had good reasons for continuing to rent, what factors might make it desirable for
an individual or a family to buy a home?

Renting is desired by those who may need to move frequently or who do not want the responsibilities
associated with the home ownership. But people who buy their place of residence wish to take advantage
of the financial benefits of home ownership along with the stability of residence and flexibility in
decorating their home.

4. What actions might each of these home buyers take to use websites or apps to enhance their home-
buying and financing activities? Based on a web search, what advice would you offer when using
the online sources for various phases of the home-buying process?

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Chapter 07 - Selecting and Financing Housing

Student responses will vary. Possible actions might include obtaining additional information and
comparing features of various housing alternatives, analyzing mortgage sources and costs. Students
should be reminded to assess the validity of information presented on various websites.

CONTINUING CASE (p. 242)

1. Using Your Personal Financial Plan Sheet 22, compare the advantages and the disadvantages of
renting a home or apartment versus the purchase of a home.

Solution:
Student solutions may vary. The following are suggested responses.

Advantages
Renting a Home/Apartment Purchasing a Home

1. Mobility- you can move easily (subject to lease Permanence- your home is not subject to a
agreement) lease renewal

2. Fewer responsibilities for maintenance or The upgrades you make to the home may
repairs enhance its value in the long run

3. Minimal financial commitment The mortgage payments you make on the

principle of the loan go towards equity in the
home
4. Small up-front payment for rent and security Mortgage interest may be tax deductible

5. A wise choice if moving to an unfamiliar area – Pride of ownership

may want to be sure you want to move there

6. You are only committed to rental for term of Privacy

lease

7. Renter’s insurance is less expensive than Value of the home may increase over a
homeowner’s insurance number of years

8. You may have more disposable income as rent is Equity in the home may be used as collateral
typically less expensive than a mortgage for other loans
payment

9. No major up-front fees, such as closing costs Mortgage payments are the same month to
associated with home purchases month (on a fixed rate mortgage)

Disadvantages
Renting a Home/Apartment Purchasing a Home

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Another random document with
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she had cause to complain, she would accuse the child of
ingratitude.
“She is a little ingrate, a little viper, that stings me after I have
warmed her. And to think of what I’ve done for her, and the worry
and anxiety I’ve suffered! After all, I’m poorly paid, and get but little
for all my studying and planning. She’s a little upstart, a little
aristocrat, who will trample on me some day. Well, it’s what one gets
in this world for doing a good deed. If I’d turned her and her mother
out to die in the street, I’d been thought more of than I am now, and
perhaps I’d been as well off.”
 CHAPTER XIII
ONE OF THE NOBILITY

O N the next block, above little Gex’s fruit stall, was a small
cottage set close to the sidewalk, with two narrow windows
covered with batten shutters that no one remembered to have ever
seen opened. On one side was a high green fence, in which was a
small door, and above this fence some flowering trees were visible.
A pink crape-myrtle shed its transparent petals on the sidewalk
below. A white oleander and a Cape jasmine made the air fragrant,
while a “Gold of Ophir” rose, entwined with a beautiful “Reine
Henriette,” crept along the top of the fence, and hung in riotous
profusion above the heads of the passers.
Every day, in rain or shine, when Lady Jane visited little Gex, she
continued her walk to the green fence, and stood looking wistfully at
the clustering roses that bloomed securely beyond the reach of
pilfering fingers, vainly wishing that some of them would fall at her
feet, or that the gate might accidentally open, so that she could get a
peep within.
And Lady Jane was not more curious than most of the older
residents of Good Children Street. For many years it had been the
desire of the neighborhood to see what was going on behind that
impenetrable green fence. Those who were lucky enough to get a
glimpse, when the gate was opened for a moment to take the nickel
of milk, or loaf of bread, saw a beautiful little garden, carefully tended
and filled with exquisite flowers; but Lady Jane was never fortunate
enough to be present on one of those rare occasions, as they always
happened very early, and when her little yellow head was resting on
its pillow; but sometimes, while she lingered on the sidewalk, near
the gate, or under the tightly closed shutters, she would hear the
melodious song of a bird, or the tinkling, liquid sound of an ancient
piano, thin and clear as a trickling rivulet, and with it she would hear
sometimes a high, sweet, tremulous voice singing an aria from some
old-fashioned opera. Lady Jane didn’t know that it was an old-
fashioned opera, but she thought it very odd and beautiful, all the
same; and she loved to linger and listen to the correct but feeble
rendering of certain passages that touched her deeply: for the child
had an inborn love of music and one of the most exquisite little
voices ever heard.
Pepsie used to close her eyes in silent ecstasy when Lady Jane
sang the few simple airs and lullabies she had learned from her
mother, and when her tender little voice warbled

“Sleep, baby, sleep,

The white moon is the shepherdess,
The little stars the sheep,”

Pepsie would cover her face, and cry silently. No one ever heard her
sing but Pepsie. She was very shy about it, and if even Tite Souris
came into the room she would stop instantly.
Therefore, little Gex was very much surprised one day, when he
went out on the banquette, to see his small favorite before the closed
shutters with Tony in her arms, his long legs almost touching the
sidewalk, so carelessly was he held, while his enraptured little
mistress was standing with her serious eyes fixed steadily on the
window, her face pale and illumined with a sort of spiritual light, her
lips parted, and a ripple of the purest, sweetest, most liquid melody
issuing from between them that Gex had ever heard, even in those
old days when he used to haunt the French Opera.
He softly drew near to listen; she was keeping perfect time with
the tinkling piano and the faded voice of the singer within who with
many a quaver and break was singing a beautiful old French song;
and the bird-like voice of the child went up and down, in and out
through the difficult passages with wonderful passion and precision.
Gex slipped away silently, and stole almost guiltily into his little
den. He had discovered one of the child’s secret pleasures, as well
as one of her rare gifts, and he felt that he had no right to possess
such wonderful knowledge.
 “Ma foi!” he thought, wiping way a fugitive tear, for the music had
awakened slumbering memories, “some one ought to know of that
voice. I wish Mam’selle d’Hautreve wasn’t so unapproachable; I’d
speak to her, and perhaps she’d teach the child.”
Presently Lady Jane entered, carrying Tony languidly; she said
good-morning as politely as usual, and smiled her charming smile,
but she seemed preoccupied, and unusually serious. With a tired
sigh she dropped Tony on the floor, and climbed up to her chair,
where she sat for some time in deep thought. At length she said in
an intensely earnest voice: “Oh, Mr. Gex, I wish I could get inside
that gate some way. I wish I could see who it is that sings.”
“Vhy, my leetle lady, it’s Mam’selle Diane vhat sings so fine.”
“Who is Mam’selle Diane?”
“Mam’selle Diane is the daughter of Madame d’Hautreve vhat live
all alone in the leetle shut-up house. Madame and Mam’selle Diane,
they are noblesse, of the nobility. Vell, you don’t know vhat is that.
Attendez, I vill try to make you understand.”
“Is it rich?” asked Lady Jane, anxious to help simplify the situation.
“Oh no, no, they are vairy, vairy poor; noblesse is vhat you’re born
vith.”
“Like the spine in the back,” suggested Lady Jane eagerly. “Pepsie
says you’re born with that.”
“No, it’s not that,” and Gex smiled a grim, puzzled smile, and
pushing his spectacles on the top of his head, he wiped his forehead
thoughtfully. “You’ve heard of the king, my leetle lady, now haven’t
you.”
“Oh, yes, yes,” returned Lady Jane brightly.
“They wear crowns and sit on thrones, and Pepsie says there is a
king of the carnival, King Rex.”
“Yes, that’s it,” said Gex, rubbing his hands with satisfaction, “and
the king is vay up high over everybody, and all the peoples must
honor the king. Vell, the noblesse is something like the king, my
leetle lady, only not quite so high up. Vell, Mam’selle’s grandpère vas
a noble. One of the French noblesse. Does my leetle lady
understand?”
“I think I do,” returned Lady Jane doubtfully. “Does she sit on a
throne and wear a crown?”
“Oh, no, no, no, they are poor, vairy poor,” said Gex humbly, “and
then, my leetle lady must know that the comte is naiver so high up as
the king, and then they have lost all their money and are poor, vairy
poor. Once, long ago, they vas rich, oh, vairy rich, and they had one
big, grand house, and the carriage, and the fine horses, and many,
many servant; now there’s only them two vhat lives all alone in the
leetle house. The grandpère, and the père, all are dead long ago,
and Madame d’Hautreve and Mam’selle Diane only are left to live in
the leetle house, shut up behind that high fence, alone, alvay alone.
And, my leetle lady, no one remembers them, I don’t believe, for it is
ten year I’ve been right in this Rue des Bons Enfants, and I naiver
have seen no one entair that gate, and no one comes out of it vairy
often. Mam’selle Diane must clean her banquette in the dark of the
night, for I’ve naiver seen her do it. I’ve vatched, but I have seen her,
naiver. Sometime, when it is vairy early, Mam’selle Diane comes to
my leetle shop for one dime of orange for Madam d’Hautreve, she is
vairy old and so poor. Ah, but she is one of the noblesse, the
genuine French noblesse, and Mam’selle Diane is so polite vhen she
come to my leetle shop.”
“If I should go there early, very early,” asked Lady Jane with
increasing interest, “and wait there all day, don’t you think I might
see her come out? You might, my leetle lady, and you might not.
About once in the month, Mam’selle Diane comes out all in the black
dress and veil, and one little black basket on her arm, and she goes
up toward Rue Royale. Vhen she goes out the basket it is heavy,
vhen she comes back it is light.”
“What does she carry in it, Mr. Gex?” asked Lady Jane, her eyes
large and her voice awe-stricken over the mysterious contents of the
basket.
 “Ah, I know not, my leetle lady. It is one mystery,” returned Gex
solemnly. “Mam’selle is so proud and so shut up that no one can’t
find out anything. Poor lady, and vhen does she do her market, and
vhat do they eat, for all I evair see her buy is one nickel of bread,
and one nickel of milk.”
“But she’s got flowers and birds, and she plays on the piano and
sings,” said Lady Jane reflectively. “Perhaps she isn’t hungry and
doesn’t want anything to eat.”
“That may be so, my leetle lady,” replied Gex with smiling
approval, “I naiver thought of it, but it may be so—it may be so.
Perhaps the noblesse don’t have the big appetite, and don’t want so
much to eat as the common people.”
“Oh, I nearly forgot, Mr. Gex, Pepsie wants a nickel of cabbage,”
and Lady Jane suddenly returned to earth and earthly things did her
errand, took her lagniappe, and went away.
 CHAPTER XIV
LADY JANE VISITS THE D’HAUTREVES

O NE morning Lady Jane was rewarded for her patient waiting; as

usual, she was lingering on the sidewalk near the green fence,
when she heard the key turn in the lock, and suddenly the door
opened, and an elderly lady, very tall and thin, with a mild, pale face,
appeared and beckoned her to approach.
For a moment Lady Jane felt shy, and drew back, fearing that she
had been a little rude in haunting the place so persistently; besides,
to her knowledge, she had never before stood in the presence of
“genuine French nobility,” and the pale, solemn looking woman, who,
in spite of her rusty gown, had an air of distinction, rather awed her.
However, her good breeding soon got the better of her timidity, and
she went forward with a charming smile.
“Would you like to come in, my dear, and look at my flowers?” said
the lady, opening the gate a little wider for Lady Jane to enter.
“Yes, thank you,” and Lady Jane smiled and flushed with pleasure
when she caught a glimpse of the beautiful vista beyond the dark
figure. “May I bring Tony in, too?”
“Certainly, I want to see him very much, but I want to see you
more,” and she laid her hand caressingly on the beautiful head of the
child. “I’ve been watching you for some time.”
“Have you? Why, how did you see me?” and Lady Jane dimpled
with smiles.
“Oh, through a little chink in my fence; I see more than any one
would think,” replied the lady smiling.
“And you saw me waiting and waiting; oh, why didn’t you ask me
in before? I’ve wanted to come in so much, and did you know I’d
been here singing with you?”
 “No, I didn’t know that.”
“Are you Mam’selle Diane?”
“Yes, I am Mam’selle Diane; and what is your name?”
“I’m called Lady Jane.”
“Lady Jane,—Lady? Why, do you know that you have a title of
nobility?”
“But I’m not one of the nobility. It’s my name, just Lady Jane. Papa
always called me Lady Jane. I didn’t know what nobility was, and Mr.
Gex told me that you were one. Now I’ll never forget what it is, but
I’m not one.”
“You’re a very sweet little girl, all the same,” said Mam’selle Diane,
a smile breaking over her grave face. “Come in, I want to show you
and your bird to mama.”
Lady Jane followed her guide across a small, spotless side gallery
into a tiny room of immaculate cleanliness, where, sitting in an easy-
chair near a high bed, was an old, old lady, the oldest person Lady
Jane had ever seen, with hair as white as snow, combed back from a
delicate, shrunken face and covered with a little black silk cap.
“Mama, this is the little girl with the bird of whom I’ve been telling
you,” said Mam’selle Diane, leading her forward. “And, Lady Jane,
this is my mother, Madame d’Hautreve.”
The old lady shook hands with the child and patted her head
caressingly; then she asked, in a weak, quavering voice, if the bird
wasn’t too heavy for the little girl to carry.
“Oh, no, Madame,” replied Lady Jane, brightly. “Tony’s large, he
grows very fast, but he isn’t heavy, he’s all feathers, he’s very light;
would you like to take him?”
“Oh, no, no, my dear, oh no,” said the old lady, drawing back
timidly. “I shouldn’t like to touch it, but I should like to see it walk. I
suppose it’s a crane, isn’t it?”
“He’s a blue heron, and he’s not a common bird,” replied Lady
Jane, repeating her little formula, readily and politely.
 “I see that it’s different from a crane,” said Mam’selle Diane,
looking at Tony critically, who, now that his mistress had put him
down, stood on one leg very much humped up, and making, on the
whole, rather an ungainly figure.
“Tony always will do that before strangers,” observed Lady Jane
apologetically. “When I want him to walk about and show his
feathers, he just draws himself up and stands on one leg.”
“However, he is very pretty and very odd. Don’t you think I might
succeed in copying him?” And Mam’selle Diane turned an anxious
glance on her mother.
“I don’t know, my dear,” quavered the old lady, “his legs are so
long that they would break easily if they were made of sealing-wax.”

LADY JANE IS PRESENTED TO MADAME D’HAUTREVE

“I think I could use a wire with the sealing-wax,” said Mam’selle

Diane, thoughtfully regarding Tony’s leg. “You see there would be
only one.”
 “I know, my dear, but the wool; you’ve got no wool the color of his
feathers.”
“Madame Jourdain would send for it.”
“But, Diane, think of the risk; if you shouldn’t succeed, you’d waste
the wool, and you do the ducks so well, really, my dear, I think you’d
better be satisfied with the ducks and the canaries.”
“Mama, it would be something new, something original. I’m tired of
ducks and canaries.”
“Well, my dear, I sha’n’t oppose you, if you think you can succeed,
but it’s a great risk to start out with an entirely new model, and you
can’t use the wool for the ducks if you should fail; you must think of
that, my dear, whether you can afford to lose the wool, if you fail.”
While this conversation was going on between Mam’selle Diane
and her mother, Lady Jane’s bright eyes were taking in the contents
of the little room. It was very simply furnished, the floor was bare,
and the walls were destitute of adornment, save over the small
fireplace, where hung a fine portrait of a very handsome man
dressed in a rich court dress of the time of Louis XIV. This elegant
courtier was Mam’selle Diane’s grandfather, the Count d’Hautreve,
and under this really fine work of art, on the small mantelpiece, was
some of the handicraft of his impoverished granddaughter, which
fascinated Lady Jane to such a degree that she had neither eyes nor
ears for anything else.
The center of the small shelf was ornamented with a tree made of
a variety of shades of green wool over a wire frame, and apparently
hopping about among the foliage, on little sealing-wax legs, with
black bead eyes and sealing-wax bills, were a number of little wool
birds of every color under the sun, while at each end of the mantel
were similar little trees, one loaded with soft yellow canaries, the
other with little fluffy white things of a species to puzzle an
ornithologist. Lady Jane thought they were adorable, and her fingers
almost ached to caress them.
“Oh, how pretty they are!” she sighed, at length, quite overcome
with admiration; “how soft and yellow! Why, they are like real live
birds, and they’re ever so much prettier than Tony,” she added,
glancing ruefully at her homely pet; “but then they can’t hop and fly
and come when you call them.”
Madame d’Hautreve and Mam’selle Diane witnessed her delight
with much satisfaction. It seemed a tardy, but genuine, recognition of
genius.
“There, you see, my dear, that I was right, I’ve always said it,”
quavered the old lady. “I’ve always said that your birds were
wonderful, and the child sees it; children tell the truth, they are
sincere in their praise, and when they discover merit, they
acknowledge it simply and truthfully. I’ve always said that all you
needed to give you a reputation was recognition,—I’ve always said
it, if you remember; but show her the ducks, my dear, show her the
ducks. I think, if possible, that they are more natural than the others.”
Mam’selle Diane’s sad, grave face lighted up a little as she led the
child to a table near the side window, which was covered with pieces
of colored flannel, sticks of sealing-wax, and bunches of soft yellow
wool. In this table was a drawer which she drew out carefully, and
there on little scalloped flannel mats of various colors sat a number
of small yellow downy ducklings.
“Oh, oh!” exclaimed Lady Jane, not able to find other words at the
moment to express her wonder and delight.
“Would you like to hold one?” asked Mam’selle Diane, taking one
out.
Lady Jane held out her pink palm, and rapturously smoothed down
its little woolly back with her soft fingers. “Oh, how pretty, how
pretty!” she repeated in a half-suppressed tone.
“Yes, I think they are rather pretty,” said Mam’selle Diane modestly,
“but then they are so useful.”
“What are they for?” asked Lady Jane in surprise; she could not
think they were made for any other purpose than for ornament.
“They are pen-wipers, my dear. You see, the pen is wiped with the
little cloth mat they are sitting on.”
 Yes, they were pen-wipers; Mademoiselle Diane d’Hautreve,
granddaughter of the Count d’Hautreve, made little woolen ducklings
for pen-wipers, and sold them quite secretly to Madame Jourdain, on
the Rue Royale, in order to have bread for her aged mother and
herself.
Lady Jane unknowingly had solved the financial mystery
connected with the d’Hautreve ladies, and at the same time she had
made another valuable friend for herself.
 CHAPTER XV
LADY JANE FINDS A MUSIC-TEACHER

O N the occasion of Lady Jane’s first visit to the d’Hautreve ladies,

she had been so interested in Mam’selle Diane’s works of art
that she had paid no attention whatever to the piano and the flowers.
But on the second visit, while Tony was posing as a model (for
suddenly he had developed great perfection in that capacity), she
critically examined the ancient instrument.
Presently she asked a little timidly, “Is that what you make music
on when you sing, Mam’selle Diane?”
Mam’selle Diane nodded an affirmative. She was very busy
modeling Tony’s leg in sealing-wax.
“Is it a piano?”
“Yes, my dear, it’s a piano. Did you never see one before?”
“Oh yes, and I’ve played on one. Mama used to let me play on
hers; but it was large, very large, and not like this.”
“Where was that?” asked Mam’selle Diane, while a swift glance
passed between her and her mother.
“Oh, that was on the ranch, before we came away.”
“Then you lived on a ranch. Where was it, my dear?”
“I don’t know,” and Lady Jane looked puzzled. “It was just the
ranch. It was in the country, and there were fields and fields, and a
great many horses, and sheep, and lambs—dear little lambs!”
“Then the lady you live with is not your mama,” said Mam’selle
Diane casually, while she twisted the sealing-wax into the shape of
the foot.
 “Oh, no, she’s my Tante Pauline. My mama has gone away, but
Pepsie says she’s sure to come back before Christmas; and it’s not
very long now till Christmas.” The little face grew radiant with
expectation.
“And you like music?” said Mam’selle Diane, with a sigh; she saw
how it was, and she pitied the motherless darling from the bottom of
her tender heart.
“Didn’t you ever hear me sing when I used to stand close to the
window?” Lady Jane leaned across Mam’selle Diane’s table, and
looked at her with a winsome smile. “I sang as loud as I could, so
you’d hear me; I thought, perhaps, you’d let me in.”
“Dear little thing!” returned Mam’selle Diane, caressingly. Then she
turned and spoke in French to her mother: “You know, mama, I
wanted to ask her in before, but you thought she might meddle with
my wools and annoy me; but she’s not troublesome at all. I wish I
could teach her music when I have time.”
Lady Jane glanced from one to the other gravely and anxiously.
“I’m learning French,” she said; “Pepsie’s teaching me, and when I
learn it you can always talk to me in French. I know some words
now.”
Mam’selle Diane smiled. “I was telling mama that I should like to
teach you music. Would you like to learn?”
“What, to play on the piano?” and the child’s eyes glistened with
delight.
“Yes, to play and sing, both.”
“I can sing now,” with a little, shy, wistful smile.
“Well then, sing for us while I finish Tony’s leg, and afterward I will
sing for you.”
“Shall I sing, ‘Sleep, baby, sleep’?”
“Yes, anything you like.”
Lady Jane lifted her little face, flushed like a flower, but still serious
and anxious, and broke into a ripple of melody so clear, so sweet,
and so delicately modulated, that Mam’selle Diane clasped her
hands in ecstasy. She forgot her bunch of wool, the difficulty of
Tony’s breast-feathers, the impossible sealing-wax leg, and sat
listening enchanted; while the old lady closed her eyes and swayed
back and forth, keeping time with the dreamy rhythm of the lullaby.
“Why, my dear, you have the voice of an angel!” exclaimed
Mam’selle Diane, when the child finished. “I must teach you. You
must be taught. Mama, she must be taught. It would be wicked to
allow such a voice to go uncultivated!”
“And what can cultivation do that nature hasn’t done?” asked the
old lady querulously. “Sometimes, I think too much cultivation ruins a
voice. Think of yours, Diane; think of what it was before all that
drilling and training; think of what it was that night you sang at
Madame La Baronne’s, when your cousin from France, the Marquis
d’Hautreve, said he had never listened to such a voice!”
“It was the youth in it, mama, the youth; I was only sixteen,” and
Mam’selle Diane sighed over the memory of those days.
“It was before all the freshness was cultivated out of it. You never
sang so well afterward.”
“I never was as young, mama, and I never had such an audience
again. You know I went back to the convent; and when I came out
things had changed, and I was older, and—I had changed. I think the
change was in me.”
Here a tear stole from the faded eyes that had looked on such
triumphs.
“It is true, my dear, you never had such an opportunity again. Your
cousin went back to France—and—and—there were no more fêtes
after those days, and there was no one left to recognize your talent.
Perhaps it was as much the lack of recognition as anything else.
Yes, I say, as I always have said, that it’s recognition you need to
make you famous. It’s the same with your birds as with your singing.
It’s recognition you need.”
“And perhaps it’s wealth too, mama,” said Mam’selle Diane gently.
“One is forgotten when one is poor. Why, we have been as good as
dead and buried these twenty years. I believe there’s no one left who
remembers us.”
“No, no, my child; it’s not that,” cried the old lady sharply. “We are
always d’Hautreves. It was our own choice to give up society; and
we live so far away, it is inconvenient,—so few of our old friends
keep carriages now; and besides, we have no day to receive. It was
a mistake giving up our reception-day; since then people haven’t
visited us.”
“I was thinking, mama,” said Mam’selle Diane timidly, “that if I did
as well with my ducks next year as I have this, we might have a ‘day’
again. We might send cards, and let our old friends know that we are
still alive.”
“We might, we might,” said the old lady, brightening visibly. “We
are always d’Hautreves”; then her face fell suddenly. “But, Diane, my
dear, we haven’t either of us a silk dress, and it would never do for
us to receive in anything but silk.”
“That’s true, mama. I never thought of that. We may not be able to
have a ‘day,’ after all,” and Mam’selle Diane bent her head
dejectedly over her sealing-wax and wool.
While these reminiscences were exchanged by the mother and
daughter, Lady Jane, whose singing had called them forth, slipped
out into the small garden, where, amid a profusion of bloom and
fragrance, she was now listening to the warbling of a canary whose
cage hung among the branches of a Maréchal Niel rose. It was the
bird whose melody had enraptured her, while she was yet without
the paradise, and it was the effigy of that same bird that she had
seen on Mam’selle Diane’s green woolen trees. He was a bright, jolly
little fellow, and he sang as if he were wound up and never would run
down.
Lady Jane listened to him delightedly while she inspected the beds
of flowers. It was a little place, but contained a great variety of plants,
and each was carefully trained and trimmed; and under all the
seedlings were laid little sheets of white paper on which some seeds
had already fallen.
 Lady Jane eyed the papers curiously. She did not know that these
tiny black seeds added yearly a few dollars to the d’Hautreve
revenues, and, at the same time, furnished the thrifty gardener with
all she needed for her own use. But whose hands pruned and
trained, dug and watered? Were they the hands of the myth of a
servant who came so early before madame was out of her bed—for
the old aristocrat loved to sleep late—to clean the gallery and
banquette and do other odd jobs unbecoming a d’Hautreve?
Yes, the very same; and Mam’selle Diane was not an early riser
because of sleeplessness, nor was it age that made her slender
hands so hard and brown.
 CHAPTER XVI
PEPSIE IS JEALOUS

W HEN Mam’selle Diane joined Lady Jane in the garden, she had
gained her mother’s consent to give the child a music lesson
once a week. The old lady had been querulous and difficult; she had
discussed and objected, but finally Mam’selle Diane had overcome
her prejudices.
“You don’t know what kind of people her relatives are,” the old lady
said, complainingly, “and if we once open our doors to the child the
aunt may try to crowd in. We don’t want to make any new
acquaintances. There’s one satisfaction we still have, that, although
we are poor, very poor, we are always d’Hautreves, and we always
have been exclusive, and I hope we always shall be. As soon as we
allow those people to break down the barrier between us, they will
rush in on us, and, in a little while, they will forget who we are.”
“Never fear, mama; if the aunt is as well bred as the child, she will
not annoy us. If we wish to know her, we shall probably have to
make the first advances, for, judging by the child, they are not
common people. I have never seen so gentle and polite a little girl.
I’m sure she’ll be no trouble.”
“I don’t know about that. Children are natural gossips, and she is
very intelligent for her age. She will notice everything, and the secret
of your birds will get out.”
“Well, mama dear, if you feel that she will be an intrusion upon our
privacy, I won’t insist; but I should so like to have her, just for two
hours, say, once a week. It would give me a new interest; it would
renew my youth to hear her angelic little voice sometimes.”
“Oh, I suppose you must have your way, Diane, as you always do.
Young people nowadays have no respect for the prejudices of age.
We must yield all our traditions and habits to their new-fashioned
ideas, or else we are severe and tyrannical.”
“Oh, mama, dear mama, I’m sure you’re a little, just a little, unkind
now,” said Mam’selle Diane, soothingly. “I’ll give it up at once if you
really wish it; but I don’t think you do. I’m sure the child will interest
you; besides, I’m getting on so well with the bird—you wouldn’t have
me give up my model, would you?”
“Certainly not, my dear. If you need her, let her come. At least you
can try for a while, and if you find her troublesome, and the lessons a
task, you can stop them when you like.”
When this not very gracious consent was obtained, Mam’selle
Diane hastened to tell Lady Jane that, if her aunt approved, she
could come to her every Saturday, from one to three, when she
would teach her the piano, as well as singing; and that after the
lesson, if she liked to remain awhile in the garden with the birds and
flowers, she was at liberty to do so.
Lady Jane fairly flew to tell Pepsie the good news; but, much to
her surprise, her merry and practical friend burst into tears and hid
her face on the table among the pecan shells.
“Why, Pepsie—dear, dear Pepsie, what ails you?” cried Lady
Jane, in an agony of terror, “tell me what ails you?” and, dropping
Tony, she laid her little face among the shells and cried too.
“I’m—I’m—jealous,” said Pepsie, looking up after a while, and
rubbing her eyes furiously. “I’m a fool, I know, but I can’t help it; I
don’t want her to have you. I don’t want you to go there. Those fine,
proud people will teach you to look down on us. We’re poor, my
mother sells pralines, and the people that live behind that green
fence are too proud and fine to notice any one in this street. They’ve
lived here ever since I was born, and no one’s seen them, because
they’ve kept to themselves always; and now, when I’ve just got you
to love, they want to take you away, they want to teach you to—
despise—us!” and Pepsie stumbled over the unusual word in her
passionate vehemence, while she still cried and rubbed angrily.
 “But don’t cry, Pepsie,” entreated Lady Jane. “I don’t love
Mam’selle Diane as well as I love you. It’s the music, the singing. Oh,
Pepsie, dear, dear Pepsie, let me learn music, and I’ll be good and
love you dearly!”
“No,—no, you won’t, you won’t care any more for me,” insisted
Pepsie, the little demon of jealousy raging to such a degree that she
was quite ready to be unjust, as well as unreasonable.
“Are you cross at me, Pepsie?” and Lady Jane crept almost across
the table to cling tearfully to her friend’s neck. “Don’t be cross, and I
won’t go to Mam’selle Diane. I won’t learn music, and, Pepsie, dear,
I’ll—I’ll—give you Tony!”
This was the extreme of renunciation, and it touched the generous
heart of the girl to the very quick. “You dear little angel!” she cried
with a sudden revulsion of feeling, clasping and kissing the child
passionately. “You’re as sweet and good as you can be, and I’m
wicked and selfish! Yes, wicked and selfish. It’s for your good, and
I’m trying to keep you away. You ought to hate me for being so
mean.”
At this moment Tite Souris entered, and, seeing the traces of tears
on her mistress’s cheeks, broke out in stern, reproachful tones.
“Miss Lady, what’s you be’n a-doin’ to my Miss Peps’? You done
made her cry. I see how she’s be’n a-gwine on. You jes’ look out, or
her ma’ll git a’ter you, ef yer makes dat po’ crooked gal cry dat a-
way.”
“Hush, Tite,” cried Pepsie, “you needn’t blame Miss Lady. It was
my fault. I was wicked and selfish, I didn’t want her to go to
Mam’selle Diane. I was jealous, that’s all.”
“Pepsie cried because she thought I wouldn’t love her,” put in Lady
Jane, in an explanatory tone, quite ignoring Tite’s burst of loyalty.
“Mam’selle Diane is nobility—French nobility—and Pepsie thought
I’d be proud, and love Mam’selle best,—didn’t you, Pepsie?”
“Now, jes’ hear dat chile,” cried Tite, scornfully. “If dey is nobil’ty,
dey is po’ white trash. Shore’s I live, dat tall lean one wat look lak a
graveyard figger, she git outen her bed ’fore sun-up, an’ brick her