We will all agree, buying a home for the first time takes a lot more than just flipping through the catalogs or adding your favorite item to the cart. It takes extensive research to get your desired property – purchase price, locality, facilities, and most importantly your financial planning. Buying your home for the first time is always exhausting unless you have a sound knowledge of the entire process.
Also, it is important to understand all the factors that come along with the buying of a home. You need to consider factors like – property purchase price, down payment, monthly EMIs, interest rates, etc. Although, the current situation is considered ideal if you are planning to get a home loan for your desired home. While Covid-19 has ravaged the economy, banks have lowered the interest rates on home loans.
If you are a first-time home buyer here are some tips to make the process of buying your home better!
- List out your needs
First and foremost, make a list of the expectations that you need in your desired home. It is important is examine the factors that determine your lifestyle and the type of neighborhood or locality you expect yourself to settle down.
If you wish to have an easier time accessing opportunities like educational, social, career options, and good connectivity, you can search for an option in the urban or suburban areas, ideal for settling in and raising your family. However, if you see yourself settling away from the hubbub of the cities – search for an ideal home on the outskirts.
Remember, driving around and checking in on these properties before making a decision I highly important. Check its connectivity and the essential places – schools, stores, nearest transportation facilities, etc. Your list of expectations of your home will help you make a better decision.
- Select your financer
Once you have decided on your ideal property location, start sorting your finances. The ideal option is to have a home loan from a reliable bank or lending institute to buy your desired home. Research and compare different financial institutes offering attractive interest rates with flexible repayment tenure.
Look for a lender that caters to your needs offering flexible tenure, lower interest rates, easy processing, and affordable monthly EMIs.
- Know your eligibility requirements
Before you apply for a home loan, it is important to check the eligibility requirements of your lender. Note that different lenders have different eligibility criteria for home loans. Typically, your credit history, work experience, CIBIL score plays an important role in determining your eligibility. Many lending institutions have their eligibility requirements mentioned on their website. It is better to check if you fulfill the eligibility requirements before applying for a home loan. As, if you can’t meet the eligibility requirements after applying, it can reduce your chances of getting a home loan and can also impact your CIBIL score negatively.
- Improve and maintain your CIBIL score
Your credit score reflects your creditworthiness to your lender. It is important to have a good credit score for getting a home loan approved. If you have a credit score of 750 and above, it improves the chances of getting a loan approved. It also helps you to avail attractive offers and lower interest rates on your home loan.
Along with improving your credit score, it is also important to maintain it. Closing your existing loan accounts by repaying your bills on time and consistently, can help you boost your credit score. Also, maintaining your credit score is essential for applying for a home loan or any other loan.
If you have a CIBIL score of more than 750, it increases your chances of getting a home loan and you can get quick processing and disbursement of the loan amount.
- Know about your repayment tenures
Knowing your repayment tenure is essential as it decides your financial budget. Depending on your finances, you can either opt for a longer repayment tenure with lower interest rates or a shorter repayment tenure with higher interest rates. Longer tenures provide you a longer time period of 20-30 years to repay your loan amount with affordable EMIs. Eventually, you end up paying a large amount of interest. But if you have a recurrently increasing income and a strict financial plan, it is better to opt for a shorter tenure with higher interest rates. It is advisable to preferably choose a lender offering flexible tenures and also discuss your repayment tenures options.
- Decide your EMI affordability
Before applying for a home loan, discuss your repayment plan with your lender, evaluating the affordability of your EMIs. Many lenders offer different EMI options to suit the needs of the applicants. You can choose your EMI options depending upon your down payment and repayment tenure. It is always better not to exceed 45% of your income in your EMIs.
- Knowing your foreclosures or pre-payment terms
Foreclosure is the process of repaying the entire loan amount in full before the decided tenure. Foreclosure is usually done when the applicants have a surplus fund on an increase in income. If you decide to foreclose your home loan account by repaying the remaining outstanding amount before the committed period of time. It saves you from added interest on your home loan.
You can also opt for the pre-payment option by pre-paying your loan amount in part or full. Before taking a home loan, discuss your foreclosure or pre-payment terms with your lender.
- Know your additional charges
It is always essential to know every nitty-gritty detail of your home loan. Ask about all the additional charges with your lender while discussing your home loan. There might be an additional processing fee, administrative fee, or service charges that your lender might levy upon you during the loan application, apart from your EMIs. Discuss them with your lender and plan your finances accordingly.
- Read all the documents carefully
Before signing your home loan papers, it is essential to read all the documents carefully and get an overall knowledge of your loan application. Take legal and financial advice if necessary.
Buying a home loan for the first time can be perplexing. The above-mentioned tips can help you to make a better decision if you are buying a home for the first time. Also, you can reach out to Fincity for guiding you throughout the process.