Raman promised his wife Radha, This year we’ll have our own home!
Digging his feet in, he said, “I need my own space, where Dhani (the couple’s six-year old daughter) can live the life of a princess.”
Over the years, Raman, who has worked as an investment banker with a brokerage house has saved enough to be able to invest enough in a luxury apartment, in one of the upcoming territories of the National Capital Region (NCR). A home would be among the biggest purchase, the young couple would be making and the decision cannot be taken in haste.
The question is- Can Raman build his house on his savings alone?
What other factors should Raman keep in mind while taking this most important decision in his life?
If you’re in the market for your very first home purchase, the sheer number of things to consider could afflict you with analysis-paralysis. Being familiar with some of the commonest mistakes that first-time home buyers often make—and how to avoid those—can keep you safe from blundering with a big chunk of money.
Here are some of the things to consider before finalizing your first home:
What would fit your budget?
What is your credit worthiness? Get your CIBIL score, which is a measure of your loan eligibility. You can download your credit report from the CIBIL site for a small fee.
If you detect errors in your CIBIL report (believe us, there can be huge bloomers), get those rectified by the agency immediately.
Get a pre-approval letter from the financial institute you bank with
Choosing your real estate broker you can work with. He should be someone well-networked in the industry, even if he charges a slightly higher brokerage. Alternatively, you can try your luck with an online realty classified portal like NoBroker or Nestaway.
Remember to avoid the following mistakes while purchasing your new house
Buying a home that’s too expensive
One of the commonest mistakes first-time home buyers make is buying a home that’s way beyond their budget. You may have the loan eligibility but how much you can afford must be worked out on the basis of your debt to income ratio. According to experts, the maximum DTI ratio that can be considered a safe bet is 41%, but the ideal DTI is 36% to keep your head above water. Bear in mind the many hidden costs – on insurance, property taxes etc. Your equated monthly installments (EMI) on the home loan should not upset your monthly cash flows.
Negotiate with more than one bank
If the interest rates are more or less similar, you could at least negotiate on other terms and conditions, such as longer tenure, free insurance, waive off on the loan processing fee etc. It might be a good idea to negotiate with at least three banks, after all they would all require, nearly the same set of papers from you.
Budget for incremental expenses
Buying a home is different from leasing out one. If something break down, you have to have it fixed, out of your expenses. You can’t call the landlord. Make sure you leave some room for such emergency expenses on the house.
Investing in a roof over your family’s head is an exciting proposition. It’s one of the major milestones in your life. Treat each step with care.
Read More About… Checklist for First-Time Home Buyers