Purchasing a new house is one of the biggest financial commitment one makes and in between the excitement and stress of financials, one may get caught in the net of errors and mistakes which could have otherwise been avoided.
With heavy financials involved, there are a lot of things that need to be looked into when getting a new house. From papers to payments to fines and charges, one needs to understand everything from what’s written in fine lines to what is best suited for you and make a rational choice.
Set let’s see what mistakes one can avoid while getting their dream home;
Going beyond what you can afford: With the excitement of buying a first home, buyers could get lured with bigger houses which are beyond their financial capacity. This could lead to excessive borrowing and more debts. There are many expenses involved even after buying the house like getting the interiors done and setting it up.
Believe that loan can be attained easily: Getting a loan is not easy as it is said. Banks don’t disburse the amount once you apply for it. There is a personal eligibility criteria based on your CIBIL score, income and liability. The bank will also evaluate your property before they decide on how much they would lend as loan which would not be more that 80-90% of its overall value.
No Research before applying for loan: While banks do their own research before approving the loan, you as an applicant also need to do proper research to get the best possible offer and deal when applying for a loan. Don’t settle for the first bank that approaches you. Shop around. Compare the rates that are being offered and also keep an eye on the terms and conditions. Banks charge late fee and pre-payment penalty on loans. You need to understand all these things well before you sign on the dotted lines. Proper research would help you take a good decision which you would not regret later.
Loan eligibility: One needs to know how much loan one can actually get before finalizing the house. If you already have other loans and debts, chances are, bank will not approve the amount you desire or reject your application. Check your Debt to Income ratio about which I had mentioned in my earlier blog Manage your Debt as well. Take all your debts and divide it by your total income. The percentage should be low to get your loan approved swiftly. Banks also check the applicants Debt to Income ratio before approving the loan to gauge their ability to pay. So always keep your eyes on it when applying for a loan.
Joint Loan: When you have more than one earning member in the family, apply for a joint loan. If apply for a loan with your spouse, this way, chances of the loan getting approved is more and also you can go for a better property. But this will make the joint person liable to pay the loan too and in case of dispute, call for lots of complications too.
Unaware about taxes: You need to be aware about the taxes that you need to pay when acquiring a new house and also know the rebates and benefits in taxes that you get to enjoy under various sections of income tax. Depending on which income tax bracket one falls, you can claim benefit under Section 80EE and 80EEA
Buying a house is an emotional process and if you allow these emotions to overpower your other decisions, you could fall prey to various mistakes that new homeowners make. Your adobe should be a place you love and can afford as well. You would want to stay worry free in the house that you have created with so much love and efforts and not with persistent tension about how to pay for it.
So, be rational, take your time, investigate and do your research. Be realistic and don’t act on impulse and make a decision which pleases your heart and your finances both.
My next blog will be “All about Down Payment”. So stay tuned and
Till Next Time
Stay Home, Stay Strong
This blog is a part of Blogchatter’s #blogchatterA2Z challenge.