Definitive Guide to Buying a House
Each one of us desires a house of our own, our own cozy love nest where our family can live together happily for years to come. It is easy to dream about such a dream house, but in reality it is far more difficult to find and more importantly finance it. Buying a house is a huge financial decision that involves committing huge amount of financial commitments over many years. Therefore it is something that should be given a considerable amount of thought and planned properly. It is essential that you take appropriate steps to protect yourself during and after the purchase to avoid any pitfalls in the future. Proper thought should be given to and certain things that must be adhered to strictly by every prospective home buyer before finalizing the deal include:
Always Assess your Needs and Make a Future Plan:
You need to carefully decide the parameters upon which to base your decision of the area you wish to buy your house. Paying heed to the locality and its scope of future development ought to be the most imperative factors to consider. Must look for the historic price trend (per square feet) of the area as it will give a fair idea about the expected gain of real estate investment. Other factors to look for include family-friendly locality with reasonably developed social and physical infrastructure, closeness to nature, transport facilities for easy accessibility and future growth potential.
Cross-check Developer’s Credentials:
Always diligently enquire about the developers, track record and reputation, his Past and Current Projects. It is always a very financially prudent decision to opt for a renowned and experienced developer of that region with a good project delivery track record. Home buyers must also watch out for the quality of construction material used in the shortlisted project and the developer’s commitment of executing projects as per approved plan and within complete legal framework.
Review Proposed Project Layout Plans:
Scrutinize the layout plans thoroughly to ensure if all that has been promised is being included in the project layout. Projects with a plethora of amenities are preferred by most home buyers. Check if the amenities offered cater to the needs of all your family members and more importantly if the builder has the goodwill and reputation of fulfilling all that is promised.
Do a Thorough Checklist of all the Documents and Permissions before the Deed:
Home buyers must look for transparent dealings. Ask your developer if the project is approved by leading home loan companies. This would enable you in getting quicker loan approvals. Also, insist on receiving the Occupation Certificate or Completion Certificate from the developer after completion of the project. Before Signing the Sale Deed peruse its clauses very carefully to avoid any unpleasant surprises later.
Along with the due diligence that must be followed about the property, the locality, the legal aspects another most important factor is the viability of that particular house keeping in mind your current and financial disposition. Before you sign up for a new house you should always thoroughly check other important related factors like:
Evaluate Your Current Finances:
Your current personal financial situation determines your budget so you have to think about your short-term and long-term financial and lifestyle goals, such as having children and being able to relocate for a job etc. You always have to buy a home keeping in mind your salary or income. Consolidate your finances and figure out how much money you can raise for the down payment of the house. Remember, the bigger the down payment, the smaller is your EMI and the lesser is the stress on your monthly budget. However, in your attempt to enhance the down payment amount, don’t dip into investments meant for retirement and other critical goals such as your child’s education and marriage. You also need to assess how much loan are you eligible for. Lenders typically keep the EMI at 30-40% of the net take home pay of the individuals. Check your credit score before you borrow so that you don’t get a nasty surprise when you apply for the loan. If there is something amiss in your credit history, it may take some time to repair it. If your credit history is not clear, your choices shrink. You should be able to afford the mortgage and experts suggest that your EMI should ideally not be more than 50% of your gross monthly income.
Before setting up a house budget, both partners need to have an honest conversation about the amount of debt they’re comfortable living with. Money problems are one of the leading causes of relationship troubles, for married or unmarried couples. Just because you can borrow the maximum amount doesn’t mean it’s a good idea. Stretching your budget too far is never a good idea as any unexpected expense will likely have you coming up short when the monthly payments are due.
Your Home loan eligibility depends upon your repayment capacity, income, existing loans or debts and your age. The lending company or banks provide online services such as Home loan eligibility calculator to calculate loan eligibility of the home loan borrower. The maximum loan that can be sanctioned varies with the banks and the eligibility criteria may vary according to the bank or RBI regulations. As home loan rates increase, the loan eligibility for a borrower becomes stiffer.
Stamp Duty & Registration Fee:
This is an important expense or tax, much like the sales tax and income tax that are collected by the Government. When planning your budget for property buying and deciding to buy a property, you need to know the rate and charges applicable in your city. If you want to know the market value of your property and the stamp duty amount on it, you need to contact the Ready Reckoner to locate your valuation zone and sub-zone. Find out the stamp duty amount applicable to you as per the market value.
Include fees or service charge by real estate agents, lenders or mortgage brokers, home inspector, land surveyor, lawyer or notary, maintenance charge, car parking charges etc .These charges are often neglected and not taken into account while buying a house and end up being major financial irritants or hiccups later. It is always prudent to account for these expenses beforehand.
Property insurance safeguards your financial future if certain damages occur to your property. The cost is relatively low and provides coverage in case of problems with the property title, certain damages or any legal issue. There are many different home insurance policies to choose from, with varying levels of protection. When taking a decision to protect your major assets, it is important to have a resource you can trust, to guide you along the way.
Choosing the right house insurance protects your property and makes the process of buying easy.
Tax planning is a legitimate exercise and should not be confused with tax avoidance or tax evasion. Tax benefits can be claimed on both the principal and interest components of the home loan as per the Income Tax Act. You can also purchase property in joint names. Joint home loan is an option that might prove fruitful for married couples. Know about your home loan and tax benefit available on it.
Good Resale Value:
Resale Value is an important thing to consider before you plan to invest or buy a property. Property buyers never consider resale value when they buy. They make the mistake of focusing solely on a prime locality or the budget of the property. If you choose the wrong property or location, it is possible that your future sales price will always be less than the other homes around it.
Buying a house is a very serious decision and often involves making financial commitment for years; hence it is always prudent to take utmost care while investing in property and more importantly investing in the right property.