5 Points To Consider Before Buying A Home

Before you plan to take a home loan for the property you want to invest in, a due diligence is a must.

Let's look at top five points that you should consider before buying your dream house.

Your home budget

This is one of the most crucial decisions. Know the quantity of loan you can afford. The banks may sanction loan based on your income but you should look at your monthly expenditure and see if you can afford the maximum that banks offer.

As a general rule, the Equated Monthly Instalment (EMI) for all the loans you have taken and going to take should not exceed 40 per cent of your income. This is when you have saved atleast three months' gross income for any emergency purposes. Hence, if your income is Rs 1 lakh per month, your combined EMI for all the loans you have taken should not exceed Rs 40,000 per month. 

Bank Loan

The interest rate varies from bank to bank and now after Non-Banking Financial Companies (NBFCs) started competitive rates, you have more choices. In this context, you should also check other fees such as processing fee, documentation fee, and any prepayment penalty associated with the home loan. At the same time research on the best option that banks have to offer. Home loan is a huge amount and hence, even a difference of 0.5 per cent can make big difference in pay-outs.

You should also get the maximum tax benefit from your home loan. See if you can make your spouse co-applicant and avail the tax benefits. You will simply double the tax benefits if there are two co-applicants.

Builder's track record

Research about the builder and the projects it has delivered in the past. Check internet discussion groups and forums for views on the builder. Talk to people who are living in homes built by the same builder. 

You have to have long term view of the investment. The property should be stable enough to last 50-60 years so that if you want to sell it and buy a bigger home, you should be able to do it without much hassle. This is where buying from a reputed builder becomes more important.

At the same time, see if you can link your loan disbursal based on construction instead of time. This will put pressure in builders to build the home faster.

Legal and Documentation

You need to get a lawyer who can search the title and associated documents before you buy the home. You should get everything in writing from the builder. The sale deed should be duly signed by both the buyer and the seller.

You should also ensure that lay out plan, building plan, number of floors, and ownership documents are in order. You should take legal help from a lawyer if you do not understand any document. Apart from these documents, make sure to get the encumbrance certificates from the sub-registrar. The encumbrance certificate tells you the record of last 30 years.

All taxes should have been paid on the property. You should get this from municipality and from the owner too as he or she will have the receipt of the taxes paid.

Last but not the least, the NOC certificate from water and electricity boards has to be obtained.

Location

The most important parameter to adjudge when buying a property is location. The most important aspect of the right location is future prospect of big construction such as mall, IT Park, company, special economic zone (SEZ), airport, railway lines, or any other commercial space. Apart from this, here are the points to consider when zeroing on a locality:

• Availability of civic amenities such as power, water, roads
• General environment
• Closeness to main road, markets
• Possibility of renting out your home

There are times when borrowers buy property to sell it once it is complete and pocket the profit. If you plan to buy a property for investment purpose, location becomes even more important.