Buying a first home is never easy. It is a very exciting prospect but the process can be overwhelming at times. The budget is of course, the most vital aspect, but other than that there are a number of things that have to be taken into account so that your home buying process is an easy and hassle free one. Here are some things to consider:
Down Payment and saving up for it
Paying for the down payment of your home would require some planning. Yes, banks can finance up to 80% of the total cost of the home but that will only happen if you have a repayment capacity to pay off the loan of such a huge chunk. Or else, the bank will only grant you what you can repay. Considering the fact that banks can only claim 50% to 60% of your salary for the loan repayment, only that amount of loan would be sanctioned that you will be able to pay off through your loan EMIs, for that particular tenure.
Hence, the lower amount you have to apply for your loan, the higher are the chances of your loan being sanctioned. In fact, even if your loan for a large sum is sanctioned, you will end up paying a lot more when you start repayment with the interests. Over a period of twenty years, for a loan amount of INR 30 lakhs, you could end up paying anywhere between INR 50 to 60 lakhs, perhaps more, depending on the interest rate.
Hence, it is always a good idea to pay as much as you can from your own pocket in the very beginning so that you can go for the lowest possible loan amount. To do that, you need to budget your expenses carefully. Many secondary expenses will have to go- and you have to invest your money and make it grow. Moreover, if you have plans of buying a home in your early thirties, then you should start planning for it from your mid- twenties. Make use of the various offers that the developers come up with from time to time and avail the discounts so that you can save.
Choosing a home (tips and tricks)
Once you have put your money saving scheme in place, you should start looking for the home. Yes, most of us would want to acquire the dream home at the very onset, but it is important not to go overboard. For a first time home buyer, it is good to show some restrain- remember, you can always upgrade later when you are more secure with your finances and when your family increases.
So the first step is to choose your priority. Do you want a home in a prime locality, or do you want a spacious home? Remember, a large home in a prime locality will cost you tones of money and unless you have the income to show for it, you cannot acquire it. So if locality is a priority, then you have to settle for a small flat. On the other hand, you can opt for a more spacious home in an upcoming locality where the infrastructure is still being developed. That would mean that the property would be more reasonably priced and you have to pay less for it. By the time the property construction is over, which takes a couple of years, and you are ready to move in, the infrastructure around too comes up. Hence, you get the benefit of lower prices and yet end up enjoying most of the amenities. By the time you are ready to sell your old apartment and ready to move into your new, dream home, the property appreciation kicks in, and you would get most of the money by selling your old apartment. The key is to identify a good location that will give your good returns in future.
Home loan tips worth keeping in mind
As mentioned earlier, although banks can finance 80% of your home cost, it will eventually only grant the loan amount depending on your repayment capacity. Hence, you need to convince the bank that you are a good risk and to do so, you need to have a good credit score. Be sure to keep up with your payments, and do not lag behind with your credit card payment. A good credit score- 750 and above, and a clean credit history goes a long way in convincing your creditor that will pay up.
To avoid being rejected by the bank, you can make use of the EMI calculator before you send in your application. This will help you determine how much EMI you have to pay each month for your desired loan amount for a particular tenure and then send in your application accordingly. If the EMI is too much, you will have to bring down the loan amount and wait till you have enough for the down payment to cover the entire cost of the home you have chosen. You also have to make room for inflation. It is important that you have a thorough understanding of your own finances before your apply.
You will also have to provide some documents at the time of verification and they are Photo ID and Age Proof, Address Proof and the IT returns for the last three consecutive years, which is the same for all. For salaried people, one would have to provide the salary slip of the last six months and the bank statement of the last three months. Those who are self employed or have their business will have to provide the TAN as a business proof, along with sales tax documents. Apart from these, the creditors could ask for any other documents as per their requirements.
Registration and other formalities
Last but not the least, you also have to have the apartment registered in your name once you have bought it. Depending on the state you are residing in, it can be anywhere between 7% and 10% of the total house cost. You also have to make room in your budget for the GST if you are buying an under construction property and other related expenses like lawyer fees.
You can consult a property consultant to advise you in details about all these aspects if you are a first time home buyer.