6 things all first time home buyers should know about homeownershipJune 17, 2020 . Fundamentals of home buying . 10 min read
First time home buyers may feel like it’s a long road to homeownership. But with some smart research, wise planning, and sound savings habits you can get there in time. The emphasis is on making sure you continue on your chosen path. We’ve got some tips on how you can stay on this road of homeownership:
1. Set the rewind button and start saving in advance
Planning ahead is key. While saving is important, what you are saving for is also very significant. For example, saving enough for a home down payment is wiser than paying a smaller down payment. This is because with a smaller down payment you will eventually end up paying more interest. This is because your home loan amount would increase, resulting in larger EMIs. So, try and make sure you have all your bases covered and are investing wisely in your future.
2. Find the right lender
Since there are so many options out there, finding the right lender can be a crucial step in your journey to homeownership. Choosing the right lender mainly depends on the rate of interest, the responsiveness of the lender to changes in the benchmark rates, eligibility criteria, and the amount of processing fee chargeable on the loan amount. Thus, making sure you have a suitable lender for your goals is important. It’s a working relationship that will affect how quickly you can make your dream of homeownership come true.
3. Your credit score matters
A credit score will give lenders an idea of your creditworthiness. It is calculated by the credit bureaus after taking into consideration factors like the number and types of accounts you have, your used credit versus your available credit, length of your credit history and your credit repayment history. It helps lenders understand how good you have been at paying back your debts. So keeping a good credit score is imperative. It is what lenders will base their decision to lend on. Make sure you do not default on loans and keep your debts low. Better credit scores also lead to lower interests for loans.
4. You don’t need to save 20% for a home down payment
While it is always better to save the most towards your home down payment, you don’t have to save 20%. Most first time home buyers think that they should save 20% of the home value for the down payment towards their house. However, depending on who your lender is, you can get a home loan for as low as 10% down payment. While it is wiser to pay more home down payment in one go, don’t lose sleep if 20% doesn’t seem like a figure you can commit to. It could also work in your favor to use a low home down payment to be able to get your home quicker. In this case, the rising rents could be something you won’t have to worry about. So there is an upside to everything.
5. Down payment programs exist in India
One prevailing myth that many prospective first time home buyers labour under is that there aren’t home down payment programs in India. HomeCapital’s home down payment program can help you buy your first home right away. The HomeCapital Program contributes up to 50% of the home down payment amount interest-free. It reduces the waiting time for home buyers towards owning their first home by offering them interest-free credit, helping them to reduce the cost of capital. So, applying for the down payment assistance program will aid you in finding the tools that can help you be a homeowner faster.
6. Budget for closing costs
It is essential to consider closing costs before you can gain ownership of your home. Closing costs can vary from five to ten percent of the purchase price of the home. Some of the closing costs can be property taxes, insurance, and other assorted fees. Typically, a large percentage of home buyers overlook this element when they are budgeting their savings. Make sure that you take these costs into account so you don’t receive a shock when you’re on the brink of achieving your homeownership dream.
So you see when you make sure you’re following the guidelines and keep at it. Even if you’re going slowly and steadily, what matters is that you have done the research and drawn up a good plan. Sticking to it will mean you can become the owner of your dream home and live a more secure life.