Everyone wants to buy his or her own house. That is both an aspiration and financial goal of many individuals and families in India. However, buying a house is not easy. You need to do a lot of financial planning and get ready with overall financial stability to ensure you have sufficient funds to buy your own dream house.
Here are some tips to help you know whether you are ready to buy a house now.
How much do you save every month is important as it plays a key role in helping save enough for your own house. It is advisable that you must have at least 20-30% of your income per month. When you take a home loan, financial institutions will assess your repayment capability based on your income and employment.
Funds for Down Payment
Besides the funds that you get from the financial institutions, you also need to pay certain percentage from your own pocket to convince lenders that you have funds to handle the repayment. Many financial institutions need borrowers to pay a down payment towards their home loans. This amount ranges between 10% and 20% of the property’s value but it may vary from property to property and lenders to lenders. Suppose you want to buy a property of Rs 30 lakh. The 20% down payment would be Rs 6 lakh. The higher the down payment, the lower will be your EMIs and loan.
Apart from down payment, you would also need funds for registration of your property, legal fee, brokerage, and other charges.
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Can You Pay the EMI?
Let’s say you take a home loan of Rs 50 lakh for 20 years at 9%. Your EMI for this loan would be somewhere around Rs 45000. If you are not able to pay this EMI for 20 years, there is no point going ahead with the home purchase decision. Because, if you default or delay your EMI, your entire financial health would crumble and you would come under immense pressure to handle anything. So, buy a house if you have sufficient funds to manage your regular expenses and EMI payments without stress.
If you have just started a career and you are in your 20s, you have a long career ahead. You will have more opportunities and your income will grow as well. If you think your income will increase, go for the loan that you can pay off along with other expenses and liabilities. You can always pay off your loan before the tenure.
Your credit score works like your health score. It tells lenders whether you can repay your loan or not. If your credit is high, lenders will not hesitate you lending the loan and they might also offer you attractive interest rates.
Adhil Shetty, CEO, Bankbazaar.com, says, “Your credit score has a direct bearing on your loan application. A score of 700 and above is favoured by lenders and may fetch you lower rates and better loan terms. If you have a low credit score, the chances of your loan getting rejected are higher. Take steps to improve your credit score, if it is low, before applying for a loan.”
Keep checking all these financial parameters before you sign up the loan agreement and go ahead with your decision to purchase your dream house. This due diligence will help you make a wise decision.