Your To-Do List Before Homebuying

There is a huge time period in between the decision of buying a home and then actually buying it. During this phase, you have got enough time to plan out the entire process of homebuying. You must start acquiring your finances, well in advance for your preferred home.

Know Your Credit Score: Every working person looking to buy a house will definitely choose either or both of the following options for the home buying finance: borrowing from friends and relatives and/or taking a home loan. When applying for the home loan, the lenders (Banks/NBFCs) consider your credit score first and foremost. This is why it is mandatory to keep your credit history clean. The finance lenders acquire your credit report from independent credit reporting agencies such as CIBIL, Equifax, Experian, etc. They have all the required historical data regarding past loans, credit cards, etc., which is acquired from multiple data sources from different financial firms.

Now it is up to the lender to decide whether to approve your home loan application or not, based on your credit report. Any defaults on the report could lead to rejection of your application. It is always suggested to check your credit report well in advance. There could be chances of someone else’s defaults appearing on your report. In such a case you need to visit the credit information bureau and the bank to resolve the error. The credit score is available for free which can be checked on financial websites such as PolicyBazaar.com. Understand the data and take necessary actions to improve your credit score.

Applying for too many loans or credit cards can possibly affect your credit score. So if you are planning to buy a house, refrain from taking too many loans and/or credit cards. If you have any other outstanding installments related to any other loan, then try to wrap it up as soon as possible. Assess your financial situation before taking any step further.

Home Loan Approval: It is often said that you cannot apply for a home loan without finalizing the property, which, isn’t true. If you know that your credit report is good, then you can apply for the home loan before you finalize the property. The advantage here is that you will get an idea of whether or not you are eligible for the home loan and the amount based on your income.

You can easily arrive at the budget for the property based on your home loan and the funds you have already accumulated. It will also reduce the time needed for the home loan disbursement after submitting the property documents.

Generate Funds For Home Buying: Now that almost everything is settled, you must now arrange for the funds required for buying the property. As per the RBI mandates, banks are allowed to provide only up to 80% amount of the property price as a home loan. The rest 20% of the amount should be paid from the buyer’s pocket which is the home down payment. This amount is derived excluding the other expenses such as stamp duty and registration charges. Money lending is a risky business, hence the lenders would share this risk with the buyer with this 80-20 rule. There are other non-banking finance companies, that do not work based on RBI policies, can provide you with more than 80% and also overlook your credit score. However, the catch is that their rate of interest is much higher.

In case you have investments and other income sources, then it is a good time to liquidate your assets and transfer the required amount into a savings account for the down payment of your home. You must also keep the future expenses after buying a home in mind so that you don’t break your bank.