Sure, owning a home is every Indian’s dream. Making the switch from renting to owning is exhilarating, but many rookie homebuyers find the process trickier to navigate than they expected. It’s also the largest investment most of us will ever make, so go into it knowing what is required.
Here’s what you’ll need:
- Enough money to make monthly mortgage payments. Duh! If a mortgage payment will bust your budget, you can’t get rid of your landlord yet. Use a mortgage calculator to estimate your monthly payment.
- Enough income to pay property taxes and home insurance. The mortgage isn’t the only cost you’ll have each month. You also have to pay taxes and insurance. If you can’t make those payments, say bye-bye to the house.
- The ability to maintain the property. You must keep a home in good repair or it will lose value and you’ll lose money. You can do the work yourself or hire it out. ‘Either way, you can’t ignore peeling paint and windows that won’t close, like you did when you were a tenant.
- A decent credit record. If you have lots of late payments, have declared bankruptcy or left old debts unpaid, it’s harder to get a mortgage. And if you do get one, your bad credit record will make you pay a much higher interest rate.
Refer to this 12-step checklist to get you through the homebuying process.
1.Do your research :This isn’t an ideal time to put stock in your gut, so the principal thing on your list should be research. In this day and age, there are many factors to consider like the area, proximity to highways, schools, shopping centres, your nearest retail stores and fast food take-outs.
- Everyone is going to give you advice, it’s okay not to listen: When you declare that you’re hoping to purchase property, you can anticipate that loved ones will leave the woodwork with all their well meaning counsel. Unless your companions or family are in the property business, there is a decent shot their recommendation won’t not be sound. To stay away from any mistaken assumptions and struggle, address the professionals and approach them for their expert info.
- Use your nose, knock on walls and turn the taps: When viewing potential homes, check for the smell of garbage/sewage disposal area or animal-related odours. Check the walls: outside boundary walls, inside walls and cupboards etc for any damage. Does the toilet flush properly? Does the heating or air-conditioner work? Is the water pressure okay? These are all important questions to ask.
- Work with experienced professionals: Hire a home inspector to do a report on the potential property you’re looking to buy.Consult with your legal counselor on any issues you may discover. Ensure you utilize a decent property attorney. There are different types of lawyers but just because you know a lawyer, it does not mean they are right for the job. Ensure you ask the experts every one of the inquiries you may have with the goal that you find exhaustive solutions.
- Use your head and not your heart: Don’t be afraid to walk away from a bad deal.There will be other properties, maybe even better ones.Remember that this is a financial transaction so ensure that your terms are met. If something seems off, then walk away, don’t be pushed into a bad deal.
- Negotiate as much as you can: You can use an agent to do the negotiating on your behalf, but you can’t be sure how hard they will push for you.As a buyer, you should feel in control and as though you have nothing to lose through robust negotiation.
- Don’t be pressured into a deal: Real estate agents are expert sales people. They may get you to rush over to the perfect property and urge you to make an offer before someone else snatches it up.If you feel rushed, then back away. Time is on your side.
- Consider what you can really afford: Determine your budget based on what you can afford to repay now, not the maximum you’re allowed to borrow.You need to be able to afford your bond, and considering that interest rates go up, think about just how much buffer you can afford.
- Are you prepared for hard work?: Almost everyone likes the idea of having a big garden. However, if you’re not used to maintaining one, you might want to think about whether you can afford to pay for the servicing of the lawn or whether you want to spend your weekends maintaining it.
- Check the interest rates: When preparing to buy a home, you need to do your research on the interest rates.Working with your bank will be your first call and once they give you an interest rate, start shopping around. Use this to leverage the various banks to offer you a better interest rate.Once you get a green light from one bank, the others will follow so don’t feel pressured to accept
Remember to carefully read through the fine print work with your agent and lawyer to understand what you are getting into.
- Select an agent carefully: Prepare questions in advance before meeting with your new agent. Find out what kind of experience they have, how many buyers they are representing and if they can share any references.Before hiring an agent, ask friends and family who have bought homes whether they can recommend someone. Remember, however, that you should not feel obligated to use the recommended agent.
- The search may take longer than you think: Give yourself six months to a year to find the right property for you and your family.Finding a property is not a simple task – it takes time so don’t rush.You may have to spend your Sundays looking at properties, you may get frustrated and may want to give up, but hang in there, you will find the right property for you, and you will love it once it’s yours.
One Year Step by Step Guide to Buy your first Home
The 12-month timeline will help you sidestep common mistakes, like paying too much interest or getting stuck with the wrong house. (Yep, it happens!)
12 Months Out
Check your credit score.Get a copy of your credit report.Avoid last-minute bombshells by checking your score long before you’re ready to make an offer. And work diligently to correct any mistakes.
Determine how much you can afford. Figure out how much house you can afford and want to afford.
Make a down payment plan.
As you’re planning your savings strategy, keep in mind that banks like you to “season” your money. That is, they like to see that you’ve had stable funds in your account for 60 to 90 days before applying for a loan. Don’t worry: You can still use a financial gift from a family member or bonus received near the time you buy.
9 Months Out
Prioritize what you most want in your new home. What’s most important in your new home? Proximity to work? A big backyard? An open floor plan? Being on a quiet street? You’ll make a much better decision on what home to buy if you focus on your priorities. If it’s a joint decision, now is the time to work out any differences to avoid frustration and wasted time. Perhaps most important: Know what trade-offs you’re willing to make.
Research neighborhoods and start visiting open houses to get an idea of what kind of homes are in your price range and what neighborhoods appeal the most. Seeing potential homes will also keep you motivated to continue reducing your debts and saving for your down payment.
6 Months Out
Collect your loan paperwork. Banks are very particular when it comes to mortgage loans. They demand a lot of paperwork. Here is the list of documents required:
- Absolute sale deed in present seller’s name
- Khata certificate & extract from BBMP
- Latest tax paid receipt
- If any loan outstanding on the property, latest statement from bank
- Encumbrance Certificate from date of purchase till date
- Agreement of sale & construction executed by developer in favour of seller
- Latest electricity bill & receipt for the said flat
- NOC from Apartment Association
- Sanctioned building plan
- Possession/occupancy certificate from builder
- All title documents of land owner
- Joint development agreement, GPA, & Sharing/supplementary Agreement, between land owner and builder
- Whether originals are available for inspection if no loan is taken?
- A Copy of all registered previous agreements (in case of re-sale property)
- RTC (Records of Rights and Tenancy Corps) or 7/12 extract
- Conversion Order issued by the concerned Authority
- Registered development agreement (If in case of Joint Development Property)
- Power of attorney/s if any
- Photocopy of Society share certificate & Society registration certificate.
If you start collecting these documents now, it’ll lessen the stress when it’s time to get your loan. Bonus: Looking closely at your loan documents each month will also help you stay focused on saving for your down payment and keeping your debt-to-income ratio low.
3 Months Out
Get pre-approved for your loan. At this point, if you’ve been following this timeline, your credit score, paperwork, and down payment should be on track. You’ve done your research on lenders and buyers’ agents. Now it’s time to start working with them. First you’ll need to get pre-approved for a mortgage.
Make an appointment with your lender or mortgage broker and bring all your paperwork. He’ll run a credit check on you and tell you how much of a loan you’re approved for. It often makes sense to borrow less than the maximum the lender allows so you can live comfortably. Draft a budget that accounts for mortgage payments, insurance, maintenance, and everything else you have going on in your life.
Start shopping for your new home. One you’re pre-approved, the buyer’s agent you’ve chosen will be able to target homes that meet your priorities in your price range. This way you won’t be wasting time looking at homes you can’t afford.
2 Months Out
Make an offer on a home.It usually takes at least four to six weeks to close on a home. So if you have a firm move-out date, allow enough time to deal with any hiccups that can delay closing.
In the Last Month
Triple-check that all your financial documents are in order and review all lending documents before closing. You’re in the home stretch! If you’ve been keeping your documents up to date, and your down payment is in reserve, these final steps are the easiest. Reviewing the mortgage documents is probably the most difficult.Your agent can help guide you through them. Get insurance for your new home. Don’t forget to secure insurance before closing. You’ll need to bring proof of insurance to closing.
Do a final walk-through of your new home, usually a day or two before closing, to make sure the home is in the shape you and the seller have agreed upon.Make sure you get an exact amount of cash needed for closing. You’ll get that number a few days before closing so you can secure a cashier’s check or arrange to have the money wired.
That’s it. Congratulations! You have made it through and got your dream home.
We are also attaching a handy comparison checklist which you can take with you while going out for property visits.
I guess, we have got you covered for purchasing any property with the facts and checklist. What do you think??
Download our HomeBuyers Checklist here:C2D Home Buyers Checklist