Home Buying Guide – Part 01: An Overview
For many people, buying a home can be the most daunting and the biggest financial transaction, especially for the first time home buyers.
Home-ownership has always been one of the core issues of an individual’s life. Most people dream of owning a house and are ready to make that dream a reality. In India, home buying is the biggest financial and emotional decisions for an individual.
A majority of the middle-class home buyers in India get their property financed. The easy availability of finance and the high disposable income of the middle class has made it easier. In fact, investing money in the real estate sector has always been rewarding.
For many people, buying a home can be the most daunting and the biggest financial transaction, especially for the beginner. They need extra caution and due diligence before finalizing one of the most important decision of their life because it can save you or cost you a big amount of money. Therefore, doing the home buying process right is so important. However, it is also the most complicated financial process, even for those who are repeated home buyers as it requires a lot of time and effort.
Home Buyer’s guide Part – 1: An Overview will help you in understanding the necessary steps to the home buying process to realize your dream of having a good living space in the city. It will also help you steer through the process seamlessly and also helps in making the biggest investment decision of your life.
Here’s our step by step guide to making the home buying process easy and manageable : 1. Assess Your Future Needs And Goals
Do ask a question to you before investing in a property whether this decision is right for me or not. The answer could be yes or no depending on your circumstances. You should have a clear picture of your present and future needs and goals, like looking for a home for your family or a long-term investment for capital appreciation or wanting to move closer to your workplace etc. Figure out all possible expenditures and costs that come along with owning a home. Therefore, discuss and take into account all advise and suggestions to be clear about your needs and goals before arriving at a decision to go ahead with the process to buy a home.
2. Fix Your Budget And Finance
Ensure a proper financial planning before you make the decision to invest in a property. So, before starting the process of home search for buying your dream home you need to know how much you can afford. Decide the budget for buying your home by reviewing your own financial obligations including the household budget and the size of your down payment you can afford. You can do this calculation by starting online also.
You need to have enough money for the down payment, cover fees, and closing costs. Therefore, money is very crucial to the entire process. Estimate how much charges you can expect to pay in as an added expenses in buying a house. They may include the stamp duty, registration fees, legal fees, brokerage fees, car parking, clubhouse and other sundry charges. Therefore, besides the home loan amount you should have healthy savings that can meet these added expenses. These various charges normally run between 10-15 % extra on the cost of your home.
The best way to calculate how much you can afford is to get pre-qualified or pre-approved home loan. Pre-qualified loan will give an idea of the price range of the homes you should be looking at.
However, for a more exact figure, a pre-approved home loan is yet another option that is available. This results in an estimated pre-approved amount which gives you a clear idea of the budget within which you can buy a house. Besides, you will also have clarity on EMIs that you need to pay.
3. Arrange For The Right Mortgage
In case you wish to opt for a home loan after finalizing the budget, ask at the bank about the amount of loan you are eligible for. Look for a bank that offers an attractive rate of interest on home loan. There are many different types of mortgage programs in the market, but generally, people go with the floating rate or a fixed rate of interest for the purchase of their home. You must have the cash for a down payment for the purchase of a home. In most cases, lenders require 20-25% down payment as they finance 75-80% of the home value.
You can’t get a home loan before you buy but you can get a pre-approved loan. The lending bank will check your income, debt and credit history to decide the amount of loan in case of a pre-approved home loan. However, you must be aware that pre-approved loan can be canceled if you do not finalize the property within the given limited time period.
4. Decide A Suitable Location
Location is a key reason to consider before making an investment as it plays a very significant role in your day to day life. But, the place should be in accordance with your personal requirements and budget. Once you have fixed the budget for buying a house, it is time to look at the details of where to live. You should first figure out what city or location you would prefer to live in.
Most of the people generally have the idea of where to own their home. However, you should consider all of the options, including urban versus suburban locations or small towns versus rural areas. Before choosing your home, look at prices, home design, proximity to the school, workplace, Hospitals and shopping malls, and other amenities. Take into account these as well as some other factors in deciding the right place of your prospective apartment intelligently.
Moreover, location does have a large impact on the resale value of your home. Therefore, do your research thoroughly and wisely before choosing your home.
5. Look For The Right Home
Figure out your expectations from your homes such as amenities, features, and specifications. However, when determining what type of home is the best fit, you should be clear about the features you wish in your living space, such as the number of bedrooms and bathrooms, livable space, flooring, attached garage and anything else that may be important. You should also take into consideration the lifestyle that you live, current needs and future needs of the family to avoid any last-minute rejections.
6. Search For A Specific Home
Start searching websites, newspapers, and magazines where you will find thousands of homes for sale. Prepare a list and note down the details of some prospective homes and choose a home of your choice.
7. Find A Real Estate Agent
If you want your home buying process to be simple and smooth then you should find a good real estate agent to represent you in the search and negotiation process. They are experts in the home buying process and negotiating skills, and their familiarity with the area can be extremely valuable.
8. Hunt For The Property Lawyer
You need to have a property lawyer to handle the legal work to transfer ownership of the property to you once your negotiation with the seller is complete. There are many specialist property lawyers who do all the legal paperwork, registry, local searches, draft the contract and do some other legal works as well. So, choose an experienced legal advisor, who will help you to have a smooth home buying experience!
9. Visit Available Properties
Now, after determining the location and type of home you should view available homes in the area. Your hired real estate agent will set up a date and time to visit potential homes and show you them with the options that best match the established criteria.
10. Make The Right Offer
Once you find the house of your choice, it is time to move quickly to make an offer on the property. Make a reasonable offer and hopefully, the seller would accept that. Tell the seller how much you want to pay and along with other terms and conditions.
Get your finances in place before making an offer as it makes the sale go much quicker. Besides, it will make your offer look more authentic than any other buyers.
11. Negotiate The Deal
Once you reach a mutually acceptable price you need to negotiate any last things such as a completion date. Sometimes builders offer promotional discounts during festive seasons or if their sales are slow. Do enquire about any special pre-launch and launch prices. Negotiate better price, particularly when buying a new property in the first stages of construction.
12. Enter Contract And Finalize The Deal
After closing the deal, when you sign the contract and exchange with the seller you become legally committed to buying the property and they are legally committed to selling it to you. Before exchanging contracts, you need to deposit an amount of 10-20% of the property cost to the seller. After this payment, you can’t back out from the deal without any due reason otherwise your money may be forfeited. Similarly, If the deal falls through from the seller’s side, you get your money back along with the penalty clause.
While exchanging contracts, you need a mutual agreement on a completion date with the seller. The completion date is the date when the seller hands over the house keys to the buyer.
13. Close The Deal
You should be a liaison with the mortgage company to make sure the money will be ready for completion. You need to make sure that your deposit is ready, and you pay that amount to your conveyance before completion.
Your property lawyer will normally pay the stamp duty for you, and make sure that the change of ownership is registered with the land registry.
At closing, you need to sign the transfer deed and all of the paperwork required to complete the purchase. It confirms you’re willing to take the ownership of the property. Your lawyer or bank hand over the money to the seller in exchange for the transfer documents of the property.
Your lawyer will get the new title deeds from the Registrar office and send them to your mortgage lender or to you if the property is mortgage-free.
14. Take Possession Of Your New Home
Once the money is transferred and the deeds of the property are transferred, you take the ownership of it. Therefore, after the completion of the legal process, you become the complete owner of the house.
So, finally your home buying process is over and the keys are yours. Buying a home is one of the most stressful things you can do, but if you are well prepared and know the home buying process well, it can be very smooth as well as hassle-free. Good luck!
Ajay Verma, founder, and writer of The Housing World, a real estate and mortgage news website. He has over fifteen years of rich experience in the above-mentioned industries.