Planning to buy a house this year? Follow these simple steps

Buying a house is a big step in one’s life and with the real estate sector offering plenty of promise, now is a good time to invest in property. A recent report by a third-party realtor website revealed that there was a 25% rise in property listings between October and December 2020.

Moreover, easier availability of financing options such as home loan has boosted consumers’ confidence considerably.

While the prospect of a new home seems exciting, the steps towards it should be planned prudently. A well-thought move can save you the financial strain and ensure a comfortable life as a homeowner.

If you are planning to buy a house this year, follow these simple steps to make an informed decision

1. Get an idea of the property value
It’s wise to start considering investing in properties only after ascertaining that you are getting them at the right price. Thus, some legwork is required before you start house-hunting.

Check different real estate agents and estimate property prices in the region you like to get a sense of the prospective financial burden.

2. Check your CIBIL score
Unless you are planning to purchase a house with savings alone, you may want to pay heed to your credit score. A score of 650+ is necessary to secure a home loan from a reputed source.

To ensure a low home loan interest rate, you will need a healthier CIBIL score. Keep track of your credit score and work towards improving it several months before you plan to buy a house. Your credit score can determine home loan EMIs and it’s always a financially wise habit to minimise monthly obligations.

3. Peg monthly instalments
A home loan is a fairly long-term commitment. The repayment tenor can be as long as 360 months. To service a loan for such a prolonged period, it’s imperative to ensure you have a robust repayment plan.

Experts recommend that home loan EMIs should not exceed 25%-30% of one’s monthly disposable income. Any proportion beyond that can be difficult to manage, leaving you susceptible to cash crunches when other obligations arise.

You can use a home loan calculator to determine the instalment amount you will be comfortable with before you apply. Take into consideration your loan amount, tenor, rate of interest and other aspirations you may have.

4. Compare lenders
Once you have clarity concerning the housing loan EMI you are comfortable with and the down payment you can afford, it’s time to compare different lending institutions. Check the interest rates and other associated fees they levy, other than the loan amount and tenor. These charges usually depend on eligibility factors such as income, age, and CIBIL score.

Specific lenders also provide pre-approved offers that can help you secure a home loan faster. These simplify the application process and speed up disbursal. You may only need to submit a few essential details to check your pre-approved offer.

5. Figure out the down payment
It’s financially smart to have savings to the tune of 20%-30% of the value of the property that you are eyeing. Although financial institutions offer a fairly good amount of the property’s price as a home loan, it may be unwise to proceed based on the premise that you will be eligible for the highest Loan To Value (LTV) percentage.

Besides, saving more than what you need as a down payment can help cover the ancillary costs of owning a new home, such as furnishing, moving and packaging. A higher down payment can also improve chances of approval if you are facing difficulty securing a home loan.

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6. Check prepayment charges
In case your repayment plan includes foreclosure of the home loan, check whether the financier will charge any penalty on that. Lenders are not supposed to levy any prepayment penalty on floating-rate housing loans with an individual as a borrower, as per the RBI mandate. In case you opt for a fixed-rate housing loan, you may have to bear foreclosure charges.

7. Browse properties
Once you have decided on the finance for buying a house, the next and final step involves locking in on a suitable property. Make a list of the must-have features you need in your home. For instance, you may want a house that is east-facing, spacious, has enough greenery and is close to a railway station or bus stop. Sort your priorities and start house-hunting.

Note that your price range might not cover all the features and amenities you are looking for. In such a case, it’s vital to stick to your budget so as to not over strain your finances.

Consider a lender like Bajaj Housing Finance Limited that offers home loans at competitive interest rates with a hassle-free application process with an online part-payment facility. Share a few simple details to download the digital sanction letter and take the first steps of your home-buying journey.