First time home buyers often make the mistake of sticking their neck too deep in the sand. This is why it is important for them to keep a tab on their financial health situation while buying their first home. In this article, we discuss five financial tips for first time home buyers.
The Real Estate market in India has witnessed a lot of action in recent times. Due to the easy availability of finance and high disposable income, a lot of young Indians are now keen on making real estate investments. Purchasing a home is perhaps one of the major financial decisions you will ever make in your life, so here are five tips you certainly need to know before buying your first home:
Know what you can afford
You will have to find out how expensive home you can truly afford. It is advisable to keep your mortgage along with additional charges less than 30% of your income. Another good rule of thumb is to limit your home cost to 2.5X times your yearly earnings. If your mortgage is high, it’s going to be difficult for you to meet your daily needs, forget to save for retirement. Therefore, it becomes important to determine your budget limit, so you don’t end up purchasing a home you can’t quite afford.
Find the best home loan types and payment options
When it comes to finding the best home loans, you will be amazed at the diverse loan categories and payment options available. So many options can easily baffle you. One wrong decision could end up crippling you financially. If the real estate market crashes, or if you have to sell your house earlier than you had imagined, you’re quite likely to find yourself sunk in debt.
Shape up your credit card score
You may think the credit score isn’t that important, but your credit score decides what kind of mortgage loan rate you’ll qualify for. This means, a higher credit score will ensure lower monthly payments. If your credit score is low, you will either need to make a bigger down payment or pay higher EMIs. So, make sure your score is at its best before you start applying for loans.
The sooner you start saving for your home down payment, the better it is. If you don’t want to pay mortgage insurance or PMI, it is recommended that you save up at least 20% of your potential home’s total worth as a down payment. Even though it is something that’s easier said than done, but it is essential for you to start saving for your future home right away.
Make a realistic wish list
Figure out what you truly want from your home and why you’ve decided to buy it. It’s kind of unusual to come across a home that fulfills all you desires. However, it’s important to pick a home that meets most of your present and future requirements, while staying within your budget. Additionally, you also don’t want to make an extravagant wish list that’s unfeasible to accomplish within the budget.
Buying your first home can be a daunting task, but if you understand the procedure beforehand, you’ll be more than prepared for this wonderful and exciting experience: house hunting!