Planning is everything

Your personal and financial readiness are very important while buying a house. It just may be the most expensive and emotionally charged purchase of your life. When looking for a new home to live, the first question you ask yourself will help drive the rest of your decision-making- “How much you can afford?”. If purchasing a house is the single largest purchase and hefty, long-time investment of your life, affordability is crucial. The current real estate market is one of the most competitive in decades, with record-high prices.

To determine how much you can spend on a home, take a close look at your budget. Review your bank statements and spending habits for the last couple of months to figure out how much you are spending on everything from your monthly bill payments to health check-ups to your weekly restaurant takeout. After analyzing your spending habits, you will be able to determine how much you want to allocate toward EMI payment for home. This includes your principal, interest, insurance payment etc. You should also estimate the total cost of ownership, including stamp duty, registration charges, cost for interior works, new furniture and appliances that you may have to purchase. You can check out the approximate EMI that you need to pay using EMI Calculator for Home Loans.

Check before you buy

One of the major factors to be considered while making a house purchase is the location of the property. You need to ensure that the location that you choose is surrounded by facilities such as markets, educational institutions, hospitals and pharmacies, shops, banks & ATMs etc. Keep in mind that the location of your home will also have a bigger impact on its resale value too! A dream home is more about fulfilling wishes than just meeting your needs. You need to have a clear idea on your requirements of home- size of the house, number of bedrooms, number of bathrooms, kitchen layout, age of the house etc. You should thoroughly check the quality of construction by inspecting the strength of the walls, kind of flooring used, type of paint / emulsion applied, check doors and window frames, the quality of bathroom fittings, ventilation, water supply, electrical requirements etc. While buying an old home, you should be extra careful.

If you are planning to buy a property which is under construction, pay a visit to other properties that were constructed by the builder recently to ascertain the builder’s construction style and quality.

Housing Loan Eligibility

Eligibility for availing a home loan depends upon various factors.  Your income and repayment capacity are the most important among them. If you have any existing loans, debts or other commitments, you need to consider those factors too. The maximum loan amount that you can borrow varies with the loan policies of the individual banks, so is the eligibility criteria too. Before applying for home loan, it is recommended to know more about the home loan product offered by the Bank. Banks will also assess your financial status by examining your credit score. Your credit score will show whether you are repaying your loans on time. A high credit score will significantly increase your chances for loan approval.

Interest rates on Housing Loans

Rate of interest for housing loan is a crucial element to be considered. You can take advantage of the lower interest rates to pay lower EMI. Consider all the other costs (like processing fee, expenses related to payment of advocate fee, external valuer fee, CIBIL score generation fee, CERSAI registration fee, site inspection fee, building insurance premium etc) and make a decision that will accommodate your finances and goals. Interest rate of Housing loan can be a fixed rate or floating rate. A fixed rate of interest is when the interest rate stays constant from the time the loan was sanctioned, regardless of any fluctuations in the financial market. Generally, the fixed rate is offered for a specific period. However, in the case of a floating interest rate, the interest rate may vary as per the market conditions. Preferring a floating rate of interest is proved to have more long-term benefits, as compared to a fixed rate of interest.

Additional costs

While availing home loan, you need to ensure that all the clauses of the documents are read in detail. It shall be also ensured that interest rates and penalty clauses are understood. You also need to consider additional costs that may be incurred while availing home loan such as Processing fee, Stamp Duty, Registration charges to be paid to Government, TDS to be paid if the amount is beyond a threshold limit etc. You are also required to pay home insurance premia and property tax (land tax and building tax) on time.

Bottom Line

Buying your dream home is one of the most crucial decisions of your life as it is a long-term investment. With the right amount of research and planning, it is possible. Use above important factors as points of consideration as you and your family begin the home buying process.