First Time Homebuyers? Here’s Everything You Need to Know

Posted on: Feb 25, 2022 | | Written by:

First Time Homebuyers? Here’s Everything You Need to Know

Published on March 8, 2022. EST READ TIME: 3 minutes

While owning a home is a dream for many, it is only a few lucky ones that can translate this dream into a reality. Building your first home is a big thing and requires diligence, hard work and strong financial obligation. If you are a first-time homebuyer, there may be a lot of pressure on you, but keep in mind that understanding the variables involved in home buying can be a great stimulant in taking you a step closer to the dream of owning your dream house.

Diligence and hard work are elements you can easily put in, however, being financially strong and stable is crucial when you need to budget for a house. You may have to depend on your savings for the down payment, but to pay the regular instalments of your home loan, you need to strategize your monthly expenses. A strong financial foundation will help you in managing your money. Controlling the expenses, saving more money and staying out of debt are some basics that must be followed.

Understanding Homeownership Expenses Other Than the Mortgage

Though purchasing a home can be a life event, there comes a lot of expenses apart from the home loan. Some are inescapable expenses while some expenses depend upon your preferences. Let's explore them:

1. Registry and stamp duty:

One of the obvious and mandatory steps after purchasing a home is getting it registered along with the stamp duty. The fees for stamp duty and the registration fee which is paid to the government to get the property registered can be quite hefty.

For instance, if a house ranges around INR 3 crores, the registry and stamp duty fee will cost somewhere around INR 18-20 lakhs.

2. Goods and Services Tax (GST):

GST is the tax that the government imposes on several goods and services availed in the country. If the property is under construction, the GST for the property is 5%. So, if you want to skip this cost, you may want to look for a ready to move house.

3. Maintenance Charges

When you book a house or a flat, the builder may charge you a maintenance deposit. This cost is not included in the base cost of your house. If there are features like a clubhouse, gym, swimming pool, park, then the cost can be double or triple compared to a house with only parking and lighting.

4. Parking Lot Charges

In India, the parking lot cost is not included in the base cost of the house. It is charged separately. Depending upon the type of society and the parking facilities, the charges may go high.

5. Brokerage Fees

Most people prefer to hire a broker who can find them a home that matches their preference. A broker charges their fee depending on the cost of the house purchased by the client.

6. Interior of your house

The basic interior of a house is completed by the builder. However, you may or may not prefer to continue living in the base interior. From wooden works to kitchen modular and ceiling and floor works, everything demands a good amount of money.

Quick Tips for First-Time Homebuyers

First-time buyers have a lot of excitement coupled with some confusion regarding the type of house they want and the amount of income they should invest in it. Let's have some quick tips to help you out:

1. Tip #1: Pen down your requirements

The basics are, to begin with realizing your requirements. You must discuss with your family your plans for the house. It is essential to know if you currently have the threshold to purchase a home or if it can be delayed.

2. Tip #2: Decide on the type of home:

Houses can be either apartment flats or individual houses. Both have their own pros and cons and you need to decide, keeping in mind all the pros and cons, which one suits you the best.

3. Tip #3: Choose your amenities carefully

The cost of purchasing the house may hike depending upon the number of amenities offered. So, before you finalise, make sure the amenities offered by the builder are of use as well. Opting for facilities which you might never use could be expensive on your pocket.

4. Tip #4: Proximity to your regular travel destination

When planning to purchase a house, it is ideal if you buy one which is near to your office or the school of your children. This way, you can save travelling costs as well.

5. Tip #5: Choose the surrounding neighbourhood

The location of the house is a major factor. Not only the environment of the location is essential to consider, but the location of your house also has a lot to do with house insurance as well. If you have a home in an area that is prone to natural disasters or some threat, buying house insurance becomes vital.

6. Tip #6: Builder's reputation can assure you safety

It is very essential to review the builder's reputation before finalizing the deal. Make sure it is a reputed builder. They may cost a little high but you can have the assurance of acquiring your home.

7. Tip #7: Funding your home

The last yet most important one is to realize your bandwidth. Getting a loan can be a better idea as it saves you from emptying your pocket. You can make the down payment depending on your budget and for the rest of the amount, you may avail of a home loan.

8. Tip #8: The Rule of 28%

The rule of 28% refers to 28% of an individual’s gross monthly income. It is a common parameter to assess the amount of monthly income an individual should spend on housing expenses. Loan and money lending bodies use several parameters to approve the loan applied by an individual. It includes credit score, income, etc.

One such essential factor is the 28/36% rule. It implies that not more than 36% of the gross monthly income shall be spent on debt services. If it exceeds, a lender may not approve the loan considering it may turn into NPA (Non-Profitable Asset).

Conclusion

First time home buyers need to be very careful before they make the deal. Knowing everything about the cost of a house is equally important as selecting your dream house. Once you acquire the house, make sure you invest in a good house insurance policy. House insurance will give you the peace of mind that even in case of an unfortunate event, the home that you built with so much hard work and love will be covered for damages.

Disclaimer: The above information is for illustrative purpose only. For more details, please refer to policy wordings and prospectus before concluding the sales.

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