Buying a house for the first time is a major financial decision and needs a lot of planning. The average age of a home buyer has come down to mid -30s from 50s in 1970s but this is still a wary decision. There are a couple of things to keep in mind before embarking on such a major purchase.
- Assess your assets and liabilities
The first and foremost step is to assess your current financial situation. Look at current loans, insurance policies or any other commitments to understand how much money can you park for buying a home loan and pay the equated monthly instalments(EMI). A good rule of thumb is to keep your mortgage along with your taxes and insurance between 25 and 30 percent of your income. Besides the EMI, you should also plan for the additional incidentals such as stamp duty, registration and other charges that will add up.
- Understand clearly on why you want to buy a house
Have a clear focus about your purchase. Is to raise a family? Capital appreciation? Or a strategic shift to move closer to a workplace? Depending on these, you should evaluate what kind of locations, campuses and size of houses or apartments you want to zero down upon. It is also advisable to know about the upcoming developments in the locations you want to consider, given the nature of future goals which may arise out of planned or unplanned circumstances.
- Have your documents in place:
One of the first requirements for a home purchase is to have a good understanding of your credit score. The CIBIL or India’s Credit Information Company provides the TransUnion Score which plays a critical role in the loan application process in not only evaluating chances of a good loan but also in displaying credit worthiness. A loan for buying a house will be approved only when an applicant has a decent credit score.
- Research on locations & credible builders:
Once you have your requirements ready, do a thorough research on locations and the properties you wish to consider. Look out for reputed builders, assess their past and current projects, understand their construction quality and get insights on their current demand and the future value of the projects. Have a good grasp of the current rates prevailing, in order to have a good estimate of the property you want to purchase
- Understand about area calculations:
Builders generally mention super built-up area in brochures. This includes common areas such as staircase, lobby, etc. The carpet area of the flat could actually be 30 per cent less than the super built-up area. Have an idea of the built-up area you would need to set up your home. Also, add other costs to the basic cost that the builder will mention. Don’t compare the price tag, but the price per square foot, to know whether a project is cheaper than the others.
- Plan site visits:
A real-time check on the properties and a discussion at the builder offices will give a perspective on the time frame, legal requirements and paper work for the purchase. Do target to check if all agreements, approvals, sanctions are in place and the land documents etc are clear. Site visits will also help understand whether the research undertaken before zeroing on properties are in line with the actual assessment and favours your buying decision – if not, a relook at locations, builders and size of projects will have to be freshly estimated.
- Look at approved projects:
Take note of the banks who have approved the projects. Sometimes, sitting on unsold inventory means that no banks are ready to finance those projects. Price. Generally, builders sell projects under time linked plans (TLP), construction linked plan (CLP), subvention schemes. Most banks fund projects only under CLP. Some housing finance companies fund projects under TLP and subvention schemes as well.
- Understand your loan requirements & different interest rate options:
A lookout for a home loan will provide insights on the financing option for a house. Consumers can choose between fixed, floating or a combination of both. Understanding about co-ownership, prepayment penalty and foreclosure is important for planning the financial outlay. The eligibility depends on repayment capacity and property price.
Typically, a home buying process requires a few several months to culminate. Since it is an evolutionary process of buying a not so volatile asset, it is advised to take time while making a first time purchase.