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Are you prepared? Quick self assessment for home buyers

home buyers

Buying your first home is a significant milestone, especially in a diverse and dynamic market like India. The process can be both exhilarating and overwhelming, with numerous financial considerations to keep in mind. To help you navigate this journey, here is a comprehensive guide on personal finance tips tailored for first-time home buyers in India.

Understanding Your Financial Health

Before diving into the home-buying process, it’s crucial to have a clear picture of your financial health. This includes evaluating your income, savings, expenses, and existing debts. Here’s how to get started:

Assess Your Savings: Determine how much you have saved for a down payment. In India, most banks require a minimum of 20% of the property’s value as a down payment. The higher your down payment, the lower your loan amount and, consequently, your EMI (Equated Monthly Installment).

Check Your Credit Score: A good credit score (typically 750 and above) is essential for securing a home loan with favorable terms. Check your credit score and work on improving it if necessary. Pay off any outstanding debts and ensure timely payments on all your credit accounts.

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Evaluate Your Budget: Create a detailed budget that accounts for your monthly income and expenses. This will help you understand how much you can afford to spend on your new home without straining your finances.

Research and Choose the Right Property

The next step is to research and select the right property that fits your budget and meets your requirements. Consider the following factors:

Location: The location of your property is crucial. Look for areas with good connectivity, infrastructure, and amenities. Proximity to your workplace, schools, hospitals, and markets can add significant value to your property.

Type of Property: Decide whether you want to buy a ready-to-move-in property, an under-construction property, or a plot of land. Each option has its pros and cons. For instance, ready-to-move-in properties eliminate the risk of construction delays but may be costlier.

Builder Reputation: If you are buying from a developer, home buyer must research their reputation and track record. Check for previous projects and customer reviews to ensure reliability and quality.

Read more about How To Check The Builder’s Reputation?

Home Loan Essentials

Securing a home loan is a critical aspect of the home-buying process. Here are key points to consider:

Loan Eligibility: Your loan eligibility depends on factors like your income, age, employment stability, credit score, and existing liabilities. Use online loan eligibility calculators to get an estimate.

Interest Rates: Compare interest rates offered by different banks and financial institutions. A lower interest rate can significantly reduce your EMI and overall loan cost. Consider both fixed and floating interest rate options.

Loan Tenure: Choose a loan tenure that balances your EMI and interest cost. While longer tenures reduce the EMI burden, they increase the total interest paid. Shorter tenures have higher EMIs but lower interest outgo.

Processing Fees and Other Charges: Be aware of additional costs like processing fees, legal fees, and administrative charges. These can add up and impact your overall budget.

Read more about mistakes to avoid when taking a home loan

The legal and documentation process is an integral part of buying a home in India. Ensure you have all the necessary documents in place:

Title Deed: Verify the title deed to ensure the seller has a clear and marketable title to the property. Hire a legal expert to conduct a thorough title search.

Sale Agreement: The sale agreement should detail the terms and conditions of the sale, including the sale price, payment schedule, possession date, and any other relevant clauses.

Encumbrance Certificate: This certificate indicates that the property is free from any legal or monetary liabilities. It is essential to obtain this document to ensure there are no encumbrances on the property.

No Objection Certificate (NOC): Obtain NOCs from relevant authorities such as the municipal corporation, electricity board, and water supply department.

Property Tax Receipts: Ensure that the property tax is up to date. Ask for previous tax receipts to verify this.

Planning for Additional Costs

In addition to the property cost and home loan, there are several other expenses to consider:

Registration and Stamp Duty: These are mandatory costs associated with transferring property ownership. The rates vary by state and are a significant part of the overall cost.

Home Insurance: Protect your investment with a comprehensive home insurance policy. It covers risks like fire, theft, and natural disasters.

Maintenance and Renovation: Budget for any immediate maintenance or renovation work required. This could include painting, plumbing, electrical work, or interior design.

Moving Costs: Plan for expenses related to moving, including hiring movers, packing materials, and transportation.

Read more about costs to consider when buying a property

Tax Benefits and Incentives

First-time home buyers in India can avail of several tax benefits and incentives:

Section 80C: You can claim a deduction of up to ₹1.5 lakh on the principal repayment of your home loan under Section 80C of the Income Tax Act.

Section 24(b): You can claim a deduction of up to ₹2 lakh on the interest paid on your home loan under Section 24(b).

Pradhan Mantri Awas Yojana (PMAY): Under the PMAY scheme, eligible first-time home buyers can receive interest subsidies on home loans. Check the eligibility criteria and apply for the benefits.

Final Thoughts

Buying your first home is a significant financial commitment, but with careful planning and informed decisions, it can be a rewarding experience. Assess your financial health, research thoroughly, choose the right home loan, and ensure all legalities are in order. If you are a first time home buyer by following these guidelines, you can make your home-buying journey smooth and successful.

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