The NoBroker Real Estate Report has shown that a whopping 82% of people are looking to buy property in 2021. And what’s even more surprising is that a majority of this number are millennials who are looking to buy homes.
The younger generation does not see any merit to wait to buy a house, they wish to buy a house as an investment and are making use of the ideal market conditions to do so. Unfortunately buying a home is not so easy, there is planning and research that goes into buying one, and we’re here to help you with how to buy a house in 2022.
The first step to buying a house is to figure out how much you can afford to pay for a house. It is not wise to spend more than 30% of your take-home salary on loans, so if you have other loans or if you have many other financial commitments you need to sit and figure out how much of your take-home salary you actually can spend on your home. You also need to see how much savings you have in the bank and if there is the possibility of more money/additional sources of income that you can add to your monthly income.
Don’t buy a house that is beyond your budget, some people make the mistake of buying a house with the aim to sell it and clear the loan and enjoy profits. This is very risky decision as there is a chance that the market may crash. You need to buy a home that you can afford today, and not in the future. Buying a house beyond your budget will also mean many months of struggling with finances until you can sell the house. You won’t have enough money to live each month comfortably, and in case there is an emergency you won’t have the resources you need to manage.
If you’re just starting your career, you probably won’t have any other loans and no credit cards, in this case you might need to work towards getting a good CBIL score before you start looking for loans.
For those who have been working, those who have loans and credit cards, you should know how your CIBIL score is calculated and how to improve your score.
Your CIBIL score is calculated based on
Payment history – if you pay your EMI on time or default
Credit mix – a mix of secured loans and unsecured loans
Multiple enquiries – don’t have many loan enquiries
You can improve your CIBIL score by always clearing your dues on time, be it credit card bills or EMIs, no matter how big or small the amount might be. Get a mix of secured loans (auto loans and home loans) and unsecured loans (personal loans and credit cards) too many unsecured loans will give you a lower score. Don’t apply for credit very often, apply only when you really need it. If you have co-signed, or stood guarantor or have joint accounts, you will be held equally liable for missed payments, you need to check that those payments go out on time so that your score is not tarnished.
It’s important to figure out why you’re buying a home, is it because you wish to live there or is it just for investment purposes. If you are going to live there, then you need to choose a home based on location and amenities. Choose a home that is comfortable for you and those you are living with. If you have children then ensure it is close to good schools, if you have elders at home then ensure there is easy and fast access to medical facilities, if you have working professionals, then see that the home is close to tech parks or is in a locality that is well-connected and has easy access to transport options.
If you’re buying a home as an investment, then you need to look at the real estate forecast for the next 5 years, see if you can predict if the locality you choose to invest in will flourish or fail. You also need to decide if you actually want to invest in a house or in commercial property, which could also be a good option for you.
Before buying a house in 2022, you need to study housing market predictions of 2020 and housing market predictions of 2019. You can also look for real estate forecasts of the city and locality you’re looking at. A good real estate forecast can help you place a safe bet on localities that are always in demand, localities that have increasing demand due to infrastructure and other factors, and localities that are witnessing a sharp fall in demand.
You can even try to talk to experts to find out their views and takes on the housing market outlook. Real Estate forums like NoBroker Forum are a great place to seek answers before taking a leap and making any sort of huge investment.
To counter the devastation that the pandemic brought to the economy, the government has introduced many measures to encourage spending and investments, one of them is reduced interest rates, especially on home loans.
When you compare the interest rates from the year before to the interest rates that were offered last year you can see that there is more than a 2% drop in the rates charged. This might not seem much, but when you’re borrowing lakhs from the bank, every percent makes a huge difference. Even so, you shouldn’t go with a lender that has the lowest rates, you need to find out of the interest is fixed or floating or you could end up paying a lot more than you bargained for. Check out Some Of The Best Banks for Home Loan from here.
Once you have a fair idea of how much you will be borrowing, and how much your EMI will work up to, you need to start preparing to pay this EMI amount. It is agood idea to put away a certain sum of money (the EMI amount) even before you take up the loan this will help you learn to manage with less money in hand. This way when your EMI starts you won’t feel the pinch of having less spending money and you will be an ace at managing without that money.
You can put away this amount for a few months not only as a way to manage with less money, but also as a way to save up money for the down payment.
Many of us think that buying a home is easy because you can take a loan. The good news is home loan interest rates are at an all-time low. The bad news is you still need 20% of the cost of the house as a down payment or you won’t be eligible for a home loan!
This RBI has mandated that all banks and lending institutions can grant only 80% of the property value as loan. This means the minimum down payment for home loans in India is 20%. If you’re looking to buy a house worth one crore rupees, then you need to have a minimum of Rs.20,00,000.00 as down payment ready. If you calculate the extra expenses like registration fees, loan application fees, furniture and interior designing costs, you will actually need to have close to Rs.40 lakhs saved up before you can buy a house for Rs.1cr.
The good news is the more you save up for your down payment, the less you will have to borrow from the bank and the less you’ll have to spend each month as EMI.
When you have your budget and requirements in place you can start looking for homes. Searching for a home is never easy, you can either get very critical or too relaxed with what you need. It is a good idea to make a checklist of things that you need in a home that are non-negotiable and those that you can do without.
Don’t choose a home that is out of your budget just because it has all that you’re looking for. You need to be patient and flexible while looking to buy a home. Look at as many options as possible, be open to neighbouring localities and going up or down a few square feet, you should even look at new as well as resale homes. Keep options open but make sure the home you choose gives you the feeling of ‘home’. It should be a place that you are happy in and that you can see yourself living in, at least for the next few years.
When you finally find a home you want to buy don’t be in a rush to pay up and sign the documents. There are still 2 critical steps you need to take before you call that house your home. The first is getting a home inspection done.
Home inspections are not very popular nor are they very common in India, but this is a must before you buy a home. A home inspection will tell you just how sturdy, strong and reliable the structure of the home is. These home inspectors are trained to look for faults and signs of problems in the house. They can help you save time and money by highlight potential problems in the house. You can either get the builder to fix these issues before you move in so that you don’t have to bear the cost, or you can choose a different house if the problems are too serious and can’t be fixed. A home inspector will provide you with a hand checklist of things that need to be taken care of before you move in as well. They will help you in the long run and you’ll save time and money thanks to them.
Now, with RERA, you have a fair idea of all the permissions and sanctions the house you buy has. However, you still need to get all the documents checked by experts to ensure that everything is done legally and you won’t be held responsible for anything.
There are plenty of cases where buyers have been duped when builders or sellers have shown false documents and taken money away or have lied about certain things. When you get a lawyer or real estate expert to come in and look at the documents, the floor plans, the approved blueprints and so on, you can invest without having much to worry about. You don’t want to make the mistake of buying a home and then realizing that it is worth much less than what you paid for, or that there is so many issues that you can’t resell it! This small step can save you plenty of money and worry, it is worth it, even if you feel it is an unnecessary waste of money.
When you’re planning to buy a house, you need to keep all of these factors in mind. It is not just about the money you need to buy the house, but you need to be aware of all the other factors that go into the purchase.