Buying a home is a big deal, especially if it’s your first time. It’s important to do your homework and understand everything about the home buying process. This article is here to help home buyers find the best real estate deals that fit their budget. Sometimes, emotions can cloud your judgment, causing you to overlook important things like interest rates, tax benefits, and loan approvals. This article covers all the essential information you need to make a smart decision when buying a home. Let’s learn the basics of home buying and financing to avoid making costly mistakes.
Here are 16 mistakes one should avoid by the home buyers:
Not sure about the intention of buying
Many first-time home buyers make a common mistake: they don’t know if they’re buying a home as an investment or for emotional reasons. If it’s an investment, think carefully before taking a loan. Real estate experts say it’s wise to invest only if you have a stable income. Otherwise, most of your money will go into loan repayments for many years. If you’re buying a home to live in, you can use the money you would spend on rent to pay monthly mortgage installments instead.
Not learning how to handle the loan
The first-time home buyers don’t realize something important: you can pay extra money towards your home loan every month without any extra charges. This means you can reduce the total interest you pay over the loan period. For example, if a bank charges 9% interest on a 40 lakh loan for 30 years, you might end up paying around Rs 75 lakh in interest. But if you add just 5000 rupees extra to your monthly principal repayment, you could save up to Rs 30 lakh in interest over the same 30 years of time. Banks usually don’t mention this, so you might need help from a knowledgeable friend or professional to understand this trick.
Ignorance about tax benefits
If you’re buying a home for the first time, it’s important to know about tax benefits. This knowledge can significantly reduce the amount of taxes you have to pay. According to the law, you can get tax benefits on the amount you repay for your home loan. You can also get deductions on the stamp duty, registration fees, and the interest you pay on the loan. However, there are specific rules you must meet to qualify for these benefits. It’s also crucial to pay your property taxes properly to avoid legal problems and financial losses later on.
Losing the NDC certificate quickly
When you finish paying off your loan, the bank gives you a document called the No Dues Certificate (NDC). This paper proves you’ve paid everything. Sometimes, banks ask for this proof. If you can’t show your NDC, it can cause serious legal and financial problems.
Not knowing the price break up of houses/flats
Many first time home buyers make a common mistake! They just look at the big price on the sign without understanding all the costs involved in buying a home. There’s a detailed list of these costs in a document called the cost breakup sheet or allotment letter. This document shows you all the different expenses related to owning a home. It helps you figure out if the property fits your budget or if it’s too expensive for you.
Not knowing how to improve credit score
If you’re having trouble getting a home loan as a first-time buyer, here’s a tip: use a credit card wisely. If you make purchases and pay them back on time using your credit card, it boosts your credit score. A higher score makes it easier for you to qualify for loans.
Applying for a loan without being qualified
When it comes to getting a home loan, many first-time buyers don’t realize that their monthly income plays a crucial role. Banks decide how much they can lend you based on your income and some other factors like your credit history. Typically, they might approve a loan of up to 80% of the property’s cost. However, if you’re retired, banks might offer you a smaller loan amount, often less than 80%.
Not having proper budgeting and planning
Many first-time home buyers often forget to plan properly. Without a clear plan, you won’t know how much you can afford. This can lead to either spending too much or too little on your house. It’s important to plan ahead to avoid these mistakes.
One big mistake many first-time home buyers make is not thinking about all the costs involved in buying a home. They sometimes borrow money from friends or family to pay for things like stamp duty, legal fees, home insurance, renovations, agent fees, and moving expenses. If you don’t consider these expenses from the start, you might end up in a tough spot trying to pay for them later.
Here’s another mistake many first-time home buyers make: spending too much on the house and then struggling to pay for other things. It’s important to plan your budget carefully. Think about all the costs, not just the house price. Figure out how much you can afford without hurting your other expenses. That way, you won’t face financial problems later on.
Taking an emotional decision
A home is where we find happiness and create lasting memories with our families. It’s a place filled with emotions. However, these emotions can sometimes cloud our judgment. We might focus so much on how we feel about a home that we forget to consider if it’s practical and functional. Buying a home is a big investment, so it’s essential to balance your emotions with practicality to make sure it’s a good investment for your future.
If you’re buying your first home, don’t forget about your budget and future plans. Sometimes, people get so caught up in the excitement that they overspend and it can mess up their finances. Also, don’t just focus on the house itself. Think about the neighborhood, facilities, and what the builders are offering. Stick to your budget, experts say, because getting carried away emotionally might make you pay more than you can afford
Resorting to only one lender
When you’re buying a home for the first time, don’t just rely on one bank or lender for a loan. It’s a mistake to talk to only one. Look around and check with different lenders. This way, you can compare their offers and find the best deal with the lowest interest rates. If you skip this step, you might end up spending more money that you could have saved with a bit of effort.
When you’re looking for a loan, talk to at least 3 lenders and consider involving a mortgage broker. Compare the interest rates, fees, and loan terms they offer on the same day. Also, think about their customer service and how responsive they are. These factors will help you make a good decision and have a smooth experience.
Not preparing for a home loan in advance
A common mistake among first-time home buyers is starting the loan approval process after choosing a property. This is not a good idea. Applying for a loan is a long process. It’s better to get something called a “preapproval” first, which means the bank agrees to lend you a certain amount. This way, you know your budget beforehand. It helps you stay within your budget and not spend too much. Also, getting preapproved gives you time to gather all the necessary documents and financial information. It’s like getting your paperwork ready before you start shopping for a house.
Buying beyond your budget
Economists believe people often make emotional decisions when buying things. When it comes to homes, fancy designs and the idea of it being a ‘unique investment’ can make us overspend. But spending more than we can afford is risky. If prices are going up, it’s even more crucial to stick to our budget. Stretching our finances too thin might lead to financial trouble, especially if we face tough times later on. So, it’s wise to be careful and stay within our means.
Think about how much you can pay every month for your home loan. If possible, try to pay more than the minimum amount. This way, you’ll reduce the total interest you pay over the loan period.
Using up all your savings
Buying a home that’s too expensive because you love it might cause financial problems later. If you exceed your budget and take a big mortgage, you’ll spend more on interest and repayments. This can strain your savings and limit your spending ability for a long time.
Take your time before buying a house. Look at different options within your budget. Consider all the costs like registration fees, not just the down payment and price. This way, you’ll have a better understanding of the total expenses involved.
Not researching enough
A big mistake for first-time home buyers is not doing enough research before picking a house. Check out the area and nearby places. Make sure the neighborhood has all the things you need daily, like hospitals and police stations. Research helps you find a home in the right place for your everyday and emergency needs.
Lots of first-time home buyers might not know about good builders in town and might end up buying from bad ones. It’s essential to research different builders and their work quality. Also, check the prices and how they’ve changed over the years. This research helps you avoid bad investments, like buying a house in a poorly-built area or a high-crime neighborhood. Doing your homework keeps you away from these risks.
Doing some research on how to set up your home and following Vastu guidelines can help you create a home that’s practical, beautiful, and peaceful. This way, you make the most of your investment.
Not comparing the loan products
Even if most banks offer similar home loan products, it’s smart to compare offerings from at least 5-6 banks. Different banks might have special deals for your area or group. Check for variations in fees, customer service, and other factors before choosing a bank for your home loan. This way, you’ll find the best option for you.
Ignoring crucial aspects of home inspection
Lots of first-time home buyers just look at the surface of a house and make a quick decision. But it’s important to dig deeper and find out if there are any hidden problems. When you buy a home, you should really understand what’s going on with it. A certified home inspector can help. They’ll check everything, like the structure, plumbing, electricity, and more. The goal is to find any problems that could affect the home’s safety, how it works, or its value.