While we say there is no crystal ball in the real estate sector but even then, there are some easy-to-understand signals that indicate that you can consider a home purchase. The timing matters a lot especially when it comes to making such a life-changing and enormous purchase. Some of the factors that decide whether it is the right time for you to pull the trigger are:
When you plan to buy a home, the first and foremost thing is to convince the lenders that you have the discipline and ability to save. If you are not able to pay the down payment of at least 10% or 20% of the value of the home, then you are financially not prepared to buy. It is imperative to show the lender a sizeable down payment. The more you pay initially, the lesser will be the amount of the loan and the less you will have to pay as interest.
Then, it is not just about paying the down payment but there are many other additional charges that probably a first-time buyer would not have taken into account. It is very important to inquire about all other additional charges like property taxes, homeowner’s insurance, maintenance & repair costs, etc.
Purchasing a property lets you build equity in the form of a valuable asset but at the same time, it is important to remember that for this you should not compromise on your retirement savings, regular budgeting, or keeping aside an emergency fund.
No Commitment Issues
Besides being financially viable, your house should be your commitment to stability. While buying a property there can be many types of additional costs which could be beyond your calculated amount. So, taking into consideration, the appreciation rate of the property, it will take you say four years or more to break even. In such a case, if you don’t want to bear the loss, it is important to decide whether you want or don’t want to sell the property before reaching the break-even point. For this, you can even plan to rent out your home for a few years in case you have to move and cover the amount of funds.
Qualify for a Good Rate
The lower the ROI on the home loan, the lesser will you have to pay as interest. The lender will no doubt look deeply at the financial picture presented by you but more importantly will pay attention towards your credit score. Your credit score is a special number that the lenders consider while offering you a loan. It determines that how likely will you pay back the amount and what ROI do they need to give you. Your past behavior towards your financial responsibilities will determine your credit score and those having a high score might be qualifying to get a loan or else you will have to postpone your decision for a while.
Apart from your personal situation, there are few external factors that need to be considered before taking a final call. People with good credit scores can get decent rates of interest. Since a home purchase is a major purchase, so even a minor reduction made can help you save thousands of rupees in the long run. Low ROI doesn’t imply that you should buy but is just an influencing factor whether to make a purchase or not.
Another major factor is the current housing market. It is a buyer’s market when there is a wide range of options available and you can negotiate and crack the best possible deal. It is good to be in a buyer’s market but this doesn’t mean that you are ready to buy a home.
Conclusively, it is good to have knowledge of the prevalent interest rates and the housing market in general but the most important thing is to be well-aware of your personal financial situation.