Misconception on the Home Loan
Home buying could be a humongous task and if not planned properly could be a burden as most of the home loans last for the next 30 years and real estate business is a bit tricky.
I can do without a real estate agent
Going to buy a house without a real estate agent could be a big mistake. We as a person don’t deal with real estate people on day to day basis and are not aware of the loopholes of this business.
Real estate agents are professionals and will also help you strike the best deal possible in your requirement. Just for the sake of saving 2 % commission, going without a real estate agent could cost you a lot more than you have ever thought.
When you sign up a property through a real estate agent, he will not only help in right property search but can also help you get the right kind of home loan for your property.
I just need enough savings to pay the down payment
Believe me, buying a house is a costly affair and just having enough savings to make the down payment is not enough. There are various other costs associated with buying a house, even when you take a home loan.
There is a processing fee which anyway will get rolled into your loan amount and you don’t have to pay it upfront. But while judging your application, a lender would like to see at least a two-month repayment amount in reserve in your savings account in advance, to not reject your application.
Also, your debt to income ratio must be at least 30 % on a monthly basis. One should not go below that. Some lenders prefer it being above 45% to accept and process your home loan application.
This would impact your loan conditions. Having a higher debt to income ratio will call for preferable loan conditions as the lender would like to lend his money to you and would be at lower risk of you being a defaulter.
I can just go to my preferred bank and get a home loan
It’s not wise to just consider your preferred bank while thinking of a home loan. You might have an account in some privileged bank who may have loan products at much higher rates as it has got all high-end customers who won’t mind paying a bit extra.
Consider other loan options as well. Let the lenders access your application and call you with their offer. This will also help you understand various norms and privileges that are available with a home loan product.
Many people think this will impact your credit history and show you as credit hungry however until all queries are within a period of 30 days, they will be considered as a single query and will not affect your credit score that much.
Having various options will also help you to negotiate on the terms of your home loan with your preferred or chosen lender.
Renting is cheaper than buying
There is one aspect of renting that we often overlook while making this decision. The amount that you pay into rent is just your living cost and do not add up into your asset anywhere.
However, the payments that you are making against your home purchase is slowly building up your asset, your home with it. Also, this home is appreciating in its value over time. The land is the only asset that never depreciates, it always increases over time due to the various developments happening around that area as the population starts to grow in your locality.