Buying a home for oneself is a dream for many in the working-class population. That feeling you get when you save up enough and zero in on the house; that feeling when you see the happiness on your mother’s face on the day of housewarming; that feeling of creating a safe place for yourself — words aren’t enough to portray that.

Times have changed, and how. If people in their 40s were the ones buying or building houses until a decade back, millennials have now taken over the baton — they like to start early, so their retirement period is peaceful and their bank accounts, full of savings.

If you are looking to buy a house for the first time, we are here to help you wade through a couple of obstacles that you may face in the journey.

Did you know you could save tax?

First things first — do you have any advantages of being a first-time home buyer in India, other than getting a house for yourself? The answer is yes. As a first-time home buyer, you can enjoy deductions on interest rates under Section 80C of the Income Tax Act, under the old tax regime. Upon repaying the principal amount of the home loan, you are eligible to claim a tax benefit of up to Rs 1.5 lakh.

As per Section 24, upon repaying the interest amount on the home loan, you are eligible to claim a tax benefit of up to Rs 2 lakh.

You can also claim an additional tax benefit of up to Rs 2.7 lakh if your annual family income does not exceed Rs 18 lakh.

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Downpayment, the first step

Venturing into the real estate space could be tricky for some. One of the easiest methods would be to find a small, cosy, decently-priced home for which you may not have to take a hefty loan from the bank. Now, how do you go about buying the house? The first and foremost is to save up enough for a downpayment.

It’s never too early or late to start saving. You may want to set small, easily-achievable goals to start with, so that it boosts your confidence and fills up your bank account. To make sure you have adequate money for an unforeseen expense, you also may look at an emergency fund, parallelly.

Consult a financial advisor or mortgage expert to determine how much money you will need to save for a downpayment. They can also help you develop a savings strategy that fits your financial situation and time frame. They may also help you understand the different types of home loans and which one is right for you.

If you are having difficulty saving for a downpayment, you may want to consider getting a joint loan with your spouse, a family member, or a close friend. This can help you to reduce both the down payment requirement and your overall loan obligation.

Finding the right lender — choice is yours

There are scores of lenders in the market, both banking and non-banking players, who offer home loans ranging from 8.40 percent to 15.00 percent per annum. How do you choose which one fits your bill?

Deciding on the right lender requires a lot of research, reading testimonials and comparing the interest rates they offer to customers. Bargaining for a favourable interest rate on your home loan can save you a significant amount of money over the long term. You can also use online tools like home loan EMI calculators to compare the total interest cost of different loan options.

This brings us to the next point — credit score. Maintaining a good credit score and credit history by paying your EMIs and other debts on time and avoiding defaults or late payments can improve your chances of getting a lower interest rate from the lender. This is because a good credit score reflects your creditworthiness and repayment capacity. Lenders use your credit score to assess your risk as a borrower. A higher credit score indicates that you are a lower-risk borrower, and therefore more likely to repay your loan on time.

As a result, lenders are willing to offer you lower interest rates on loans. Here are some other ways to improve your credit score:

  • Pay your bills on time, every time. This is the most important factor in your credit score.
  • Keep your credit utilisation low. This means using less than 30 percent of your available credit.
  • Keep your credit accounts open for a long time. The length of your credit history is a factor in your credit score.
  • Avoid applying for too much new credit in a short period of time. This can lower your credit score.

Pre-approved loan — bridging your dreams and funds

The loan approval process can be lengthy and may derail your plans, especially given the ever-increasing demand and prices in the real estate market. This is where a pre-approved home loan comes in handy. It bridges the gap between your dream home and the necessary funds, ensuring that both ends of the spectrum are met.

What is a pre-approved home loan? It is a written commitment from a lender that you qualify for a loan of a certain amount. This can be helpful when you’re making an offer on a home, as it shows the seller that you’re serious about buying and that you have the financial means to do so.

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To get pre-approved for a home loan, you’ll need to provide the lender with information about your income, assets, and debts. The lender will then calculate your debt-to-income ratio and credit score.

Once you’re pre-approved for a home loan, you will have a better idea of how much you can afford to spend on a home. However, keep in mind that the pre-approval is only valid for a certain period of time — so be sure to act quickly.

The pre-approval is also not a guarantee of a loan, as the lender will still need to approve your loan application based on the final terms of the sale.

Buying a home is a big step, but it can be a rewarding one. In addition to the tips mentioned above, it is also important to do your research and understand the home-buying process. It is also important to talk to a financial advisor to get personalised advice.

This column has been written by Atul Monga, CEO and Co-Founder, Basic Home loan. Views expressed are personal