Financial Planning before buying a house is one of the best things that you can do. Before you start planning the locality or planning the colour scheme of your house, you should plan your finances. Initial planning is very important as it will determine all the major aspects of the home purchase. How much loan you might need, EMI amount that you should fix and whether you should opt for the EPFO scheme or not? You have to think and ponder upon many things before you plan the purchase of a new house. To help you understand the financial needs and planning in a better manner, we have compiled this post. So, if you are planning to purchase a new home, you should read this post in order to take better decisions in relation to Financial Planning before buying a house.
Financial Planning to buy a house – Understanding the various dynamics:
- Checking the Credit Scores is a must!
Start with checking the credit scores. Even if you are applying for a small amount of loan, your credit score will be a major factor in the process. It will represent your ability to repay the loan. If you have a bad credit score, the loan application might be rejected or you might not be able to get the desired loan amount. Hence, you should try to keep the credit score in a good shape; at least for the account from which you are going to do the loan transactions. In case your credit score is bad, you can take some time to improve it and then reconsider the loan.
There is another way out of the situation where you can give legible answers to the lender. You can show the receipts and other documented proofs for your current transactions so as to show that you are in a position to pay the loan back!
- Job History – It should be steady!
Your job history, job profile and employment status are also considered at the time of taking the loan. The lender needs to know what kind of income sources you have and whether or not you will be able to pay the EMIs. You must have a stable employment history. Even if you have job changes, it would be better if they are not because of sacking. So, try to be in a stable job for some time, before you set out to apply for a loan to buy your house.
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- Down Payment:
You must decide the amount of down payment as a beginner. The down payment should be planned such that it doesn’t leave you into shambles. Your finances should be in better shape even after you remit the amount. Further, the down payment should not be this less that you end up paying a lot of money via EMIs. Hence, planning the amount of a down payment is a big financial decision that you should take after a lot of consideration.
- Finding the balance in between the down payment and the mortgage payment:
The modern-day policies and banking allow people to buy homes with even ZERO down payments. However, the buyers fail to identify the massive wrong-doing this decision can do to their finances. You have to ultimately pay the amount. So, if you are not going to pay it as the down payment, you will have to pay it as the mortgage. Mortgage can really make your finances crunch while leaving you in a juice! So, plan well, and opt for a safe down payment amount. Don’t burn the pockets, but don’t leave them completely untouched. Find the balance between the mortgage and down payment before buying the house.
- Maintenance Costs:
Don’t think that just because you have purchased the home, you don’t have any other expenses. You have to plan the monthly expenses and the maintenance costs at that time as well. You have to pay the bills, the taxes, the monthly food expenses and miscellaneous expenses that come your way regularly as well as out of the blue. Hence, plan well and spend some time mandatorily for Financial Planning to buy a house. Planning the EMIs and expenses should be done such that you don’t face extreme cash crunches. Further, the house will also need maintenance on a regular basis. You might be required to buy some new furniture, or you might also need a replacement for some fittings etc. There are many hidden costs that come along with buying the house. You must take them into consideration while planning the finances. If you are buying the house in a colony or posh area, you might be required to pay some fixed annual or biennial maintenance charges. The amount varies from location to location. But, this is a fixed expense that you have to bear. Similarly, there can be many other surprise expenses that you might encounter.
- Documentation Charges:
While buying a home, you have to do a lot of paperwork. There are deeds, registration documents, NOCs, electricity and water applications and many other things that simply EAT your money away! You might be required to pay a lot more money than your expectations. Hence, don’t play recklessly with the loan amount or finances when you are doing a hefty investment such as buying a new home.
- Planning the EMI amount:
You have to pay the monthly EMIs as well! Don’t forget them, like, NEVER EVER! People tend to ignore the fact that they have to pay them monthly and finalize a value that becomes a burden after some time. Hence, you should opt for an EMI amount that you can pay every month without putting all the other expenses in a questionable range!
So, follow these tips for Financial Planning before buying a house and make your dream home an affordable place to enjoy Sweet Dreams!