Buying a house is exhilarating. But there are many things you should take care of before buying a house.
You need to manage your finances and pool some savings without totally depending on the lenders. You need to have a stable source of income from which a part would cover your EMI.
Planning every aspect of buying the house is tedious and stressful. Although the banes add up, living in their own house is the dream for everyone.
Do Your Research
So, you need to do your research before starting the procedure for buying the house. Plan your finances on paper first.
Learn about different kinds of mortgages and their interest rates. Many people end up in the cycle of paying the debts forever.
You need to escape the traps of higher interest rates and save yourself from a lifelong debt. Here are a few ways to reduce your interest burden:
- Choose a Shorter Tenure: Longer tenure means you will end up paying higher interest. So choose your home loan properly. Once you verify with the EMI and income, you can analyse a comfortable loan term. Do not extend the loan tenure too much. This can help you reduce your interest rate. Take your time in analysing your financial status and health. Either the EMI which you cannot handle or the EMI which is too less comparatively would not be fruitful.
- Make regular prepayments: There are two parts of the EMI you pay back to the lender — Interest and Principal. If you reduce your principal amount, you will be able to reduce your interest payments accordingly. You can reduce your principal amount by making prepayments before the due date. The recurring prepayments would soon reduce your overall loan burden, thus reducing your total interests paid.
- Get a home loan balance transfer: If your current home loan is at a higher interest rate, you can always refinance it. You can replace the loan with another at a lower interest rate or change the adjustable-rate mortgage to fixed-rate mortgage. These changes can be made with a simple home purchase agreement. This is one of the best ways to reduce your interest burden.
- Check your CIBIL score: Lenders use the credit score to examine the risk profile of the borrower. Credit score ranges from 300 to 850. The higher the credit score, the higher is your credibility and lower your interest rates. Hence, you would be termed as a responsible borrower implying low risk, significantly improving chances that the lenders would loan you at a lower interest rate.
- Good negotiation with the lenders: Good credit history and relationship with the banker allows you to negotiate the interest rates and terms of the mortgage. A regular source of income also helps you to get your mortgage negotiated with the banker. You can talk through the terms of the loan agreement with the lender and negotiate it accordingly.
- Explore your mortgage options: There are many mortgage options out there and you need to explore the suitable one for you. Conventional mortgages are neither insured or guaranteed by the government agencies. These are available through private lenders like banks, credit unions, and mortgage companies. They are fixed in their terms and rates. FHA loans are approved and insured by the Federal Housing Administration and require minimum down payments and credit scores compared to conventional loans.VA loans are the loans availed through a program established by the United States Department of Veterans Affairs. VA loans have generous terms such as no down payments and no prepayment penalties.
- Make way for a generous downpayment: It is not reasonable to buy a house after saving the entire amount in cash. It is better to put down 20% as downpayment before buying the house and financing the rest. This would reduce the interest on your EMI paid to the bank. Many lenders do not demand more than 20% as downpayment while a few go as low as 5-10%.
- Choose Maximum EMI payment: By stretching your EMI to the maximum, you can get relief from your mortgage quickly. You can choose the EMI that is comfortably maximum for you to pay. With the hike in your salary or with the perks added every year by your employer, you need to prioritize paying more by way of EMI to help you pay off your loan sooner. Accommodating for these, even though you can’t guarantee them, is a good because, then, your loan agreement could include provisions that allow you to increase payments when you receive such benefits and reduce your interest burden.
- Research state and local assistance programs: Many governments provide benefits to first time home buyers such as down payment assistance, closing cost assistance, tax credits and discounted interest rates. All of these benefits can help you make paying back your loans easier
Taking a house loan is a burden on your finances. You need to make sure you make the most from your research and help yourself from falling into an unending loop of debt repayment.
Getting yourself a real estate agreement that includes everything you want while getting payment terms can become a headache if you don’t plan everything properly. Apart from the above tips, you can always talk to professional help and get yourself to purchase the house adeptly.
Jessica, is a writer by calling and an academic. She has created scintillating and remarkable content for dozens of websites in the Business Sector. She possesses a fair understanding of the inner workings of several business establishments, making her the foremost expert in this field.