How can we make home buying a smooth and a relatively painless experience? There are many factors that have to be kept in mind when making a decision, each one needs to be prioritised to ensure you are making the best possible decision. Studies show that most homebuyers compromise when making a decision to buy. Factors such as budget, location, facilities/amenities, neighbourhood, size of the house need to be considered while making such a decision.
Hence, it is imperative to keep in mind some essential guidelines that one must follow in order to limit the ills of compromise.
While speed is of essence at times to clinch a deal, never do it without doing your homework. Something that seems good today, may not be if you have to spend five plus years with your decision. These are not acts that can be undone without significant time and expense. So take your time, do your homework and ensure you have addressed the aspects highlighted below:
Adopt the stepping-stone approach: Most people wait till their late 30’s early 40’s to ensure adequate funds are saved to buy the “dream home”. We need to change our fundamental approach towards buying a house. Instead of looking at the long term, we need to take the stepping stone approach. First consider buying to meet needs for next 3-5 years then look at the next phase. This will enable you to own your first home earlier in life and build a good quality asset.
Gather adequate market knowledge: Before embarking on selecting your preferred apartment/house, make sure you are well versed with the market. To avoid unnecessary financial stress, search online to have a clear idea of what fits your budget and what does not.
Check with the banker: Before kick starting your hunt for your preferred property, its vital that you are aware of the funds that are at your disposal which is the budget that you need to stick to it. Consult your banker to find out exactly how much loan can availed.
Don’t consider your first purchase as your final home: Scout for properties that could easily sell to enable you to upgrade to a bigger and better home to meet your growing family needs/ aspirations. It would be a good idea to keep some time at hand in order to buy your final place of abode. This gives one more time to build equity and you are more aware of your needs and requirements which will come at a later stage in life as opposed to assuming what you might need.
Maintain favourable credit score: To maintain a favourable credit score, it is necessary to ensure timely repayment of loans. Check your credit score to ensure you have not defaulted or delayed on any loan or card payment. This small step ensures you will get access to funds when you need them most and with the loan amount that you need as opposed to what an impaired credit rating will permit to you get.
Account for additional expenses: Costs like registration, brokerage, repair work (existing homes), buying furniture etc are often not accounted for and drive up the final amount that needs to be paid. For example a house with gross value that seem to be Rs 35 Lakh, may shoot up to Rs 35.5 Lakh, if you account for the other miscellaneous expenses. This overshoots your budget considerably.
Prefer ready-to-move-in flats: Look at a ready property in order to avoid rent and EMI from running simultaneously. Lenders always look positively at a self-occupied home.
Happy home hunting!!
The author is CEO, India Mortgage Guarantee Corporation