Creditvidya.com | Last Updated: January 03, 2016 14:11 (IST) | NDTV Profit
A New Year brings with it fresh hopes, aspirations and dreams. Many of us like to make New Year resolutions, or promises we make to ourselves to achieve something, whether for mental, spiritual, financial or emotional betterment.
If your resolution for the New Year 2016 is to buy your dream home, here are some useful tips you can use:
Save for down payment
Planning to buy a house requires that you get your finances in order as buying a house involves a huge financial commitment. If you are planning to take a loan for buying a house, remember that banks do not offer 100 per cent of the property value as loan. Depending on a bank’s policy and loan amount, the loan value may be 80 per cent to 90 per cent of the property value.
Therefore, if you are buying a Rs 50-lakh house, you need to have Rs 5 lakh to Rs 10 lakh available to make a down payment. Also remember: the higher the self-financed amount the lower is the EMI and overall interest burden. So make sure you save enough for the down payment or plan ahead how you are going to meet the requirement – whether it is by dipping into your deposits, withdrawing from your PF corpus or liquidating your investments.
Focus on your CIBIL score
When you apply for a loan, apart from making sure that you meet the eligibility criteria, financial institutions also look at your CIBIL score. CIBIL score is a reflection of how you have treated your loans in the past; it will reflect your payments and defaults right from the days of your first credit card or your first loan. So in case you are preparing to take a loan, it is important that you focus on your CIBIL score and try to improve it (if required) at least a few month in advance. Credit restoration is a process that requires time and patience depending on how good or bad the situation is.
Even in case of an average score, it makes sense to try and improve it as a higher credit score could get you a better deal in terms of interest rate and also give you a choice about which bank to borrow from.
Do some homework
Before you actually apply for a loan or choose a house, it is a good idea to start your homework months in advance. On the property front, it is important that you focus on the area that you planning to buy a house in and find out if there are any issues and concerns specific to that area, and also focus on the property prices and see if they match your budget. If you are buying a house from a developer, check about the credentials of specific builders and projects: whether they have the requisite approvals etc., when the handover of the property will take place if it is under-construction and so on.
Also check about the policies and rates offered by various banks for loans. Though rates may change over time but generally, changes are not too frequent or sudden. Some research will help you shortlist some banks as per the rates they offer, loan duration, eligibility criteria, and help you understand whether you meet them. All this information is available online. You will have sufficient time to rectify any shortfalls that may be there.
Other things to keep in mind
There are a few other things that can come in handy when you are planning to buy a house:
Have a budget in mind: This is the most important aspect. Keep in mind how much you can pay every month as EMI and how much you have saved as down payment.
Plan you Finances: A loan means a fixed outflow every month towards the EMI, so make sure that you have your finances planned for the future by factoring in this expenditure.
Check EMI online: EMI calculators are available online; check the EMI for various loan amounts and duration combinations to ensure whether it is sustainable for your take a loan with you current financial position.
Do not stretch your finances: While you may be tempted to buy your dream house, it is important to be pragmatic. Do not buy a house that will stretch your finances and make it hard for you to pay EMIs. Remember, it is a long term commitment!
Do keep a contingency fund: Do not completely exhaust your savings while making the down payment. Keep some amount separately as a contingency fund to meet any unforeseen situation. If your entire funds are tied in the house, you may face a liquidity crunch in the time of some crisis.
All journeys begin with the first step. So, if you want that you celebrate 2016 in your new house then start planning. Make sure is planning is comprehensive yet practical.
Disclaimer: All information in this article has been provided by Creditvidya.com and NDTV Profit is not responsible for the accuracy and completeness of the same.