Having a roof over one’s own head is a dream that most of us cherish. After all who does not want to live independently without being answerable to landlords about everything from a nail being driven into the walls to a leakage that needs to be fixed. Sometimes, leading the life of a tenant can really get to you, and you want to do everything possible to turn homeowner. But buying your own house is far more than availing of the best home loans in India, the math goes far beyond making the down payment on your house. Here are things you need to asses before you decide it’s time for you to make your first property purchase.
Asses your affordability
The first thing you need to ask before you even check out the type of home loans you can avail of, is whether or not you can afford to buy the house of your dreams. Firstly, asses your financial situation by listing out all the sources of income you are sure you will continue to have for the next five years. This includes your monthly salary, your annual bonuses and incentives, your income from other sources, if any. Secondly, take a raincheck on your debt situation. List out the other credit lines that you are already servicing such as your car loan, personal loans, student loans or any other loan and the duration for which you need to be servicing them. Now, take stock of all your other assets such as money in savings accounts, fixed deposits, investments, value of gold and other cash assets.
Now that you have worked out all the figures, its time to assess your debt to income ratio. Your debt to income ratio can be calculated by dividing your total monthly debt/total monthly income. To be eligible for a home loan your debt to income ratio should not exceed 40%. In fact, this is the ratio that lenders will calculate when you compare home loans.
Is your credit score up to the mark?
Most people in India are not aware that they need to increase their CIBIL rating and keep it at a satisfactory level of at least upwards of 750 (out of 900) in order to access a home loan. RBI, the central banking authority of India has made it mandatory for all lenders to check out the credit scores of individuals as a part of their credit assessment process. Since a home loan is a long term commitment, a high CIBIL score of 750 and above becomes all the more relevant. So, before you think you making an application for a home loan, check out your CIBIL report and CIBIL score and see whether you are sorted on the credit score front. If you need to know how to clear some CIBIL issues or need to improve your CIBIL score, make sure you do so before you make the home loan application, to ensure that your application goes through smoothly.
Can you make the EMI repayments comfortably
This is a question that you need to answer honestly to yourself. Assuming that you have already saved up for the down payment component of your own house, ask yourself how taking on the mortgage payment affects your long term financial plan. While it is alright to stretch yourself by a little bit, a mortgage should not come in the way of your long term savings for your retirement, insurance repayments and others investments that you have made for the future. If it seems like too much of a stretch, it is better to wait it out for a while before you invest in your first property.
It’s time for some crystal ball gazing
Buying your own house maybe a dream that you have cherished for long but do bear in mind that it is a long term commitment. Do not compare yourself to others while investing in your first house and make a rash decision simply because you need to jump on the bandwagon. Buying your own house should be a carefully considered decision. Ask yourself if you are settled down in your life both on the personal and professional front.
Are you mulling over a change in your job, or about to take a leap on the business front? Also if there is any big change happening on the personal front like a marriage or the arrival of a baby, go back to step three and ask yourself honestly if you are ready to enter a long term commitment like a mortgage and if you are ready to make the EMI repayments comfortably. If there is even a niggling doubt in your mind, it is best to take a step back and wait for a while till you are completely ready.
Buying your first home is the biggest financial decision you will ever make and it is important for you to be thoroughly prepared. Take your time and make sure things are a perfect when you finally buy your first home. There is literally nothing that matches to the satisfaction of having done it right, so do not be in a tearing hurry! You may even consider renting out a place close to the location to conduct better research till such time you are ready to buy your own home.