When you plan to buy a house, finance is the most important aspect that you must keep in check as all the other factors revolve around it. When you are a first-time home buyer, you do not have complete knowledge about how the actual process work and what you should do to maintain your funds accordingly. To buy a house today, one has to utilize their savings and opt for a home loan. The process of getting a housing loan has become easier today as many people are looking forward to this option.
Buying a home in India is a tough and tiring process. The first and foremost thing is to be financially prepared as mentioned already. This includes many processes such as figuring out your budget, deciding where to get a loan, calculating the tax fee, and many other expenses that come on the way. This whole process looks challenging, but with a proper understanding of your financial ability and the real estate market you can do a better job the first time. So, to make your first investment process simple here are a few things that you should consider before investing in your first home.
Maintain a Good Credit Score
Your credit score is a major factor in applying for home loans and mortgages, which are necessary if you want to buy a home. So, you must maintain a good credit score from the beginning or must repair any black marks on your credit that you have such as outstanding loans, late payments, and accounts in collections. To maintain a good credit history, you must also make timely credit card payments, use credit cards for big transactions and get your credit limits increased every year. The credit score is to indicate how well your capacity to pay back the EMIs and to know whether there is any risk associated with the borrower. It would be ideal that you pay off your previous loans before applying for a new home loan.
Analyze Your Debt to Income Ratio (DTI)
It is essential to figure out your debt-to-income ratio after you have cleared your credit score. Loans use DTIs to know how your expenses stack up against your income. It is a good indicator of how comfortable your finances are and whether or not you can take on the additional debt of a house loan. To improve your DTI there are a few things that you can do such as pay your bills on time, reduce your nonessential spending and avoid applying for new credit accounts.
Know How Much You Can Afford
It is very essential that you have a proper idea of how much you could afford as buying a home is a big financial task. The DTI that has been mentioned is a good indicator of whether you can afford to pay back your home loan. Anyways, there are other payments that you must consider before fixing a budget for your new home. The other payments include property taxes that you must pay annually which depend upon the value of your property. Then there are other factors such as maintenance charges, utility bills, furniture, upgrades, and many others.
Have Money Prepared for Down Payment
The bank will help you cover a significant part of your house’s cost, but you just need some money in hand to cover the down payment. It does not essentially require you to pay any down payment, but you have to pay some processing fees. So, it is ideal that you consult with your financial representative about what kind of down payment or fees to expect while inquiring about home loans.
Build up Your Emergency Fund
It is essential to have an emergency fund in hand for perfect financial planning. Managing a home takes a lot of work and expenses, so it is essential to prepare for unforeseen expenses. An emergency fund will help you with all the sudden expenses your home may have. So, to prepare for a strong emergency fund, start allocating some of your income to build at least three to six months of your home expenses.