Buying a home can be a daunting decision. More so, in this cash-crunched real estate market of 2023. This article unpacks the different things you need to consider before signing above the dotted line and calling yourself a homeowner. 

First things first, you need to be sure you even want to buy a home instead of just renting the same place. Renting allows you the flexibility to go with the tide and not tie yourself down to a property. You can invest that money in the stock market instead and make better gains. That said, there are cases where buying a home may be a better idea than renting one. 

You can use this ‘Rent vs buy’ calculator to help you decide if you should buy or rent. 

With that out of the way, here are some things to bear in mind if you’ve decided to buy a house.

Choose the property before you apply for a loan

Financing a house can be expensive, so you will likely be applying for a home loan. Before you do that, however, ensure that you scout for the right house property and visit it in person. Consult a real estate agent if you need to, get to know the locality, and shop around before you decide on a house property. It is also important to be clear about the type of house you want, since that makes it easier to find the right property for yourself and your family.

Verify the property’s documentation and paperwork

Before you buy a property, you need to verify if the paperwork is in order and if the title is free from any dispute. Check the RERA registration documents, ensure there is no encumbrance (aka existing unpaid loans) on the property, and verify if the seller is the rightful owner of the home. This will make it much easier for you to avail a home loan, and it will also save you a lot of trouble down the line. 

Borrow only as much as you need

Over-borrowing is another easy mistake to make. And one of the best home financing tips for borrowers and first-time home buyers today is to steer clear of this pitfall. Have a clear plan in place and know exactly how much you will require to fund the purchase of your first home. Then, ensure that you only borrow the said amount. This will prevent you from falling prey to a debt trap, where you will have to take on more loans to repay existing liabilities. 

Compare home loan offers before you apply

A common mistake among first time home buyers and home loan borrowers is not comparing their options. If you’re tempted to go with the first offer you receive, you may be guilty of this mistake too. Instead, take some time to shop around for home loans, compare the interest rates and see if you can negotiate a good deal. If you have a good existing banking relationship with the lender, you may even get the benefit of a nominal home loan interest rate reduction.

Make a large down payment if possible

If you have a pre-approved offer or if you are applying for a home loan with a predetermined rate of interest, home loan interest rate reduction and negotiation may not be possible. That said, you can still reduce the overall burden of interest by making a larger down payment if you can afford to. This means you will have to borrow less, thereby reducing the overall impact of the interest in the long run. It will also help you settle your debts sooner. 

Prepare to pay the EMIs

A home loan is a long term commitment. While there are tax advantages to taking a home loan, you also need to ensure you have the money to make the monthly EMI payments. You can use this EMI calculator to work out your EMI payment readiness. 

Conclusion

The pointers and home loan tips outlined above can be very useful when you are looking for home financing for your first home purchase. So, if you are close to fulfilling this major milestone in life, keep these suggestions in mind to make the process easier and hassle-free. 

Frequently Asked Questions (FAQs)

1. What is the first thing to do before buying a house?

One of the most important things to do before buying a house is to check if you have the funds necessary for the big purchase. If you do not, you need to have the plan to borrow a housing loan to finance the purchase. Home financing tips can help you in this regard, so you can find the best loan offer for you in the market. 

2. What are some tips for buying a house?

Some important home loan tips and things to keep in mind before buying a home are listed below. 

• Verify the property’s registration documents
• Check if there are any loans pending on the property 
• Ensure the title deed on the property is authentic
• Get to know the locality and the amenities in the area
• Visit the property in person before you make the purchase 
• Compare home loan offers before buying the house
• Use a home loan EMI calculator to get a better idea of your liabilities 

3. What mistakes do first time home buyers make?

There are many common mistakes that first-time home buyers tend to make before they purchase a house. Knowing what these mistakes are can help you avoid them. Check out the most common mistakes below.

• Not doing enough research on home loan options
• Borrowing more funds than required
• Applying for a home loan without checking their eligibility
• Not checking the property title and registration documents

4. How do first time home buyers get the best rate?

Your credit score will determine whether you qualify for a home loan and will affect the interest rate offered by lenders. A higher score will generally get you a lower interest rate, so it is crucial to take the right steps to polish your credit score.

5. What are the benefits of first time home buyers in India?

First-time home buyers are eligible for several benefits on their home loan, including:

1. Interest rate deductions: First-time home buyers can enjoy interest rate deductions under Section 80C and Section 24. You can claim up to ₹1.5 lacs for repaying the principal amount and up to ₹2 lacs for repaying the interest amount on the home loan. Additionally, you can claim a tax benefit of ₹50,000 for repaying the interest amount on the loan.
2. Relief on GST: If you have purchased your home using the CLSS under PMAY, then you are required to pay a GST of 8% instead of 12%. You can also claim an additional tax benefit of up to ₹2.7 lacs if your family income does not exceed ₹18 lacs p.a.
3. Subsidized loan interest rates: Home loan tenures between 15 and 20 years are eligible for interest subsidies. If your income is ₹12 lacs and the principal is ₹9 lacs, you will receive a 4% subsidy; if your income is ₹18 lacs and the principal is ₹12 lacs, you will receive a 3% subsidy.