“A home for myself”, has recently taken shape as the unanimous dream cry of every young adult in the city. As a first-time home buyer, there will be a lot of questions running on the back of your mind. “Do I need an agent or can I just go through the DIY’s online?” “How can I make an offer that falls within my financially secure zone and is also accepted by the client?” If you are bogged down by any such questions or even more, we are here to help you. The transition from a renter to an owner is a roller coaster of emotions – basically from nervousness to joy! With the home-buying season in full swing, here is a checklist before you step into the housing market!
- CHECK YOUR CREDIT SCORE
Yes, this comes in even before you can start house-hunting! Your credit score can range anywhere from 300 to 900. What is this score? It is a standard that evaluates how you will turn out to be as a borrower based on your previous payment history. A figure closer to 900 will give the credit bureaus a greater confidence in your ability to repay the loan leading to immediate approvals. A score of over 750 is considered a good sign to grant loans. However, if you’ve fallen below the mark, you aren’t alone. It might, however, jeopardize your chances of getting any financial support. So, before planning on a house, plan your finances thoroughly.
- DETERMINE YOUR BUDGET CONSTRAINTS
A home is a major milestone in life. It is not just a status symbol but a financial commitment that promises better returns on proper investment. A realtor will not count you in until you put forth the numbers in terms of affordability. Although there a number of online tools that help you come to a conclusion, getting a pre-approval from a lender is a more promising choice that comes with no added costs. A middle-class family man/woman will not be able to afford a two-crore rupee house. Hence, a proper house with an affordable budget within the buyer’s constraints must be selected. Bankers will definitely need to check your income and your credit score for any history of defaulted payments. Getting pre-approved for the loan will give the exact figures of how much you could afford.
- OBTAIN A MORTGAGE
Not a lot of people have hard cash ready when they are ready to buy a house. Indian Banks are ready to pay up 80% of your home’s price. However, lenders would like to see 20% of the costs as a down payment. But, this 20% is no easy sum, taking over 5 years of your working life. Not to forget the additional fees for insurance, appraisal and the like. As a first-time home buyer, make sure that your monthly loan EMI does not exceed 40-45 per cent of your monthly income. Also, with an increase in income, increase your repayment capability to put yourself in a financially secure sector. The last thing you’d want after finding your dream home is to be held back by the down payment.
- FIND A REALTOR
Given the impact that the Internet has had on all of us, most of us might find a realtor as an insignificant mediator. However, their professional expertise and a deep understanding of the market will most definitely come in handy while going through the intricacies of the buying procedure. It is, therefore, important to know how to choose the right real estate agent.
- START YOUR SEARCH
Now, that you’ve handled all your financial constraints, a home is all that is needed. Figure out the neighbourhood and the people you’d want to live amongst. Keep in mind your essentialities – nearby hospitals for the aged or schooling for the kids. All-around security is also a must while making your decision. Hand your agent an unnegotiable list of details. Now, your agent wouldn’t waste your time showing you properties that do not fit into your wish list. However, it is important to give your agent some leeway with the cost or the location.
- THE INITIAL OFFER
Once you’ve found the home of your heart, you might probably want to fast forward the procedure before anyone else gets their hands on the property. Analyse the pattern of sales in the neighbourhood and come up with a competitive offer. Go by the market trends. The offer made must be smart, that is, neither too much, and neither too less. Agents are adept at figuring out tomfoolery offers made and will see right through them.
- THE INSPECTION
As a buyer, who is going to put in a lot of money into that house he/she has decided to buy, it is very important to give the house that you are going to buy a final round of inspection. If the house is second hand, and you find that the tap is not working, or a switch, for instance, it is imperative to let the house owner know, so that he/she can fix it, and they should. You get what you pay for and a faulty switch or a creaky door should be fixed by its previous occupants. Be a perfectionist. A house is an investment, like gold per se. Plus, there will be a lot of appreciation and depreciation and therefore, it is very important that malfunctioning components are fixed before you seal the deal! Although it might add up on the additional costs, it is almost unavoidable. An inspection before closing the contract will help you unearth fallacies in the structure. Accordingly, you might have your price lowered or the repair costs be taken up by the seller himself/herself.
- THE FINAL CONTRACT
Before closing the deal, try, one last time, if you could crunch the numbers. Weigh in the closing costs, moving expenses and the like to work it in your favour. Keep in mind the “good faith deposit” that will be deposited in the escrow account which the seller would receive at the end of the deal. Finally, have a lawyer review the paperwork.
The paperwork predominantly includes:
- Sale deed/title deed /conveyance deed
- Building plan sanctioned by a statutory authority
- Layout approval plan sanction
- NOC from electricity department/pollution control board/water works/ airport authority
- Supplementary agreement/ratification deed (if any)
- Allotment letter from the builder/co-operative society/housing board/BDA.
- Approved plan of construction/extension and license for construction.
- Detailed cost estimate/valuation report from chartered engineer/architect (if applicable)
If all of this works in your favour, seal the deal! You are now an owner of a property, and a celebration is all that is left on the list now!