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Tips for Buying a Home on a Single Income

8th Sep 2017

  • Down Payment: Ensure you save enough money to meet at least 10% of the cost of the apartment. Banks insist on 10% margin money from a buyer where the cost of the apartment does not exceed Rs.30 lacs and 20% margin money from a buyer for apartments costing up to Rs.75 lacs.
  • Cost of apartment:  Ensure the cost of apartment is within your affordable limits.  A good thumb rule is that the cost of the apartment should not exceed four times your annual salary. For example, if your annual salary is Rs.9 lacs and you have saved your down payment margin money, you can probably afford a home that costs up to Rs.36 lacs. If you have significant amount of debts, settle for a home that cost less than three times your annual salary.
  • Credit Score: Your credit score plays an important role you qualifying for a home loan, especially if you are the sole applicant on the home loan. Your credit score should be 700 or above to be considered for a loan. If you have a credit score less than 700 you shall improve it by paying all past due balances on other debts and paying balances on your credit card.
  • Identify the best Bank or lending institution:  Check with bank for the best loan you will qualify based on loan amount and interest rate. Find out your monthly EMI and the repayment tenure. Ensure you can afford those EMI payments on your single income.
  • Zero in  your Location: Buying a home is both a financial and emotional transaction. Families often look for a home either to a place which is in the vicinity of their occupation, children's schools, colleges etc. Identify the factor that has maximum benefit for you and family and zero in on a location that meets this need. Also look for amenities around the project like proximity to hospitals, Restaurants, recreational facilities, transport hubs etc. Amenities available within the project like swimming pool, club house, lawns, play grounds, shopping stores etc. shall also be considered.
  • Select your Home: Once you determine your budget based on your loan amount and monthly EMI payments, shortlist the home with a developer with good track record like No deviation from approved plans in past projects, long term commitment to maintain project, Environment friendly Green Certified projects, CRISIL Rated projects, Obtain completion certificate for its projects, Conveyance of 100% Undivided share of land to buyers. Check whether project registered with Real Estate Regulatory (RERA) Authorities or project completion certificate obtained / application for completion certificate submitted with appropriate authorities.
  • Avail Subsidy & Tax Benefits: Government of India had rolled out interest subsidy (PMAY) amounting to Rs.2.30 lacs to 2.67 lacs for home buyers subject to meeting few criteria. Make sure you avail this subsidy. Also, ensure you avail Income Tax benefits under Section 80 C, Section 24 and Section 80 EE.

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