How to Prepare Yourself for that First House Purchase?

Mar 10, 2017

You have been dreaming of it for years. And for last couple of years, you have been strengthening your mind and finances to do it. And now, the time has come for you to take the final decision to buy your first house.

Like your parents and grandparents, even you will be becoming a proud owner of something that you can call a house.

But given the sky-high prices these days, buying a house is no longer a small decision. It requires tons of money and for most people, a home loan. So you need to be actually prepared to buy a house before you can actually do it,

Here are few things you can do before you finally go ahead:

Find out How much can you pay for the House?

If you are taking a loan, you need to have atleast 20% of the cost of house available with you as downpayment. Lenders want borrowers to pitch in with their own funds as well. The remaining 80% is available as loan, for which you will be paying EMIs for next 10-15 years. So you need to have an income that is sufficient to pay this EMI. Lenders have a cap on the EMI-to-Income ratio and generally don't allow it to go over 40%.

Prepare yourself financially

Arranging downpayment (atleast 20% of the cost of house) is mandatory. But that is not the only thing.

You will only get a loan if you can prove that you are credit worthy borrower. Check your credit score and if it's below average, then you need to take steps to improve it and it can take some time. A poor score will lead to instant rejection of your loan no matter how high your income or down payments are.

Shop for Good Home Loan deals

Broad range for home loan interest rates is already set (generally 8.5 to 11%). But what rate you will get exactly differs from one lender to other. So you should find out who is offering you what deal. Remember that even a 0.5% cut in interest rates can save you several lacs in long term. So its in your best interest to take a home loan from the lender which offers you lowest rates.