Buying your first home is a special experience that can hardly be compared to any
other. But it is a difficult task with huge real estate prices, particularly for first time
home buyers. Even with aggressive saving and careful planning, even for the initial
down payment on a new home, we get nowhere close to gathering enough. Even if
you’re qualifying for a home loan, if you can’t come up with the initial down payment,
it’s pointless. And the expenses don’t end here.
Stamp duty and registration fees for a new home are very high, but these are rarely
taken into consideration by first time home buyers. Then there are the documents that
need to be presented to the bank for a home loan, on time, and with valid signatures
wherever necessary; all the while ensuring that the down payment is done on time.
And still, the greatest challenge remains the down payment. How do you get a decent
down payment to fund your new home?
Let us take a deeper look at the possible challenges that affect first-time home buyers
and how they can be possibly avoided.
Issue 1: Not saving enough
The real estate market prices increase steadily over time. This also inflates the stamp
duty and registration charges. Most first-time homebuyers do not have the foresight to
prepare for this. Add to this the possibility of home buyers’ changing preference, and
the savings will fall short. Always do your research and factor in diverse scenarios
before you start saving for your home.
Issue 2: Unhealthy CIBIL score
Most people are not even aware that there is something like a CIBIL score exists. It
scores your creditworthiness and before granting you any loan, is the first thing banks
and financial institutions review. You end up degrading your CIBIL score if you take out
a loan or use a credit card and do not pay them back on time. If your score gets really
bad, you will not be able to take a new loan, which includes a home loan. To maintain a
good CIBIL score, always pay back your loan and credit card EMIs on time.
Issue 3: Not doing enough research on Builder
For a first-time homebuyer. The first thing to review is the builder’s reputation and its track record of finishing projects on time. If your builder assured you the delivery and
possession on a certain date, keep them to it. Many times, it so happens that you’re
home loan repayments start and the project gets stalled. For any home buyer, this is
one of the worst-case situations. The second thing you need to check is the reputation
of your builder.
Issue 4: Not choosing real estate brokers carefully
This is another issue faced by first-time home buyers. In their urgency to close the
deal as quickly as possible, most people simply do not do enough research. Make sure
that you check with as many real estate agents and different builders for reasonable
prices. A good real estate broker will scour the market for homes that suit your
requirements and guide you through the process of negotiation and closing. Get
recommendations from other recent home buyers. Interview a few agents at least, and
seek references. Ask about their experience of helping first-time homebuyers in your
market while interacting with prospective agents and how they intend to help you find
Issue 5: Making a small down payment
Most people want to pay the least amount of down payment as far as possible because
it seems like a major cost. This makes sense in a certain way, but it is far from
optimal. In fact, the bigger the down payment you make, the smaller is your long-term
financial burden. Try to limit the amount of loan as much as you can and it will help
you in paying interest rates for a long turn.
A builder may offer to loan you more than what is affordable, or you may feel pressure
to spend outside your comfort zone. Set a price range based on your budget to avoid
financial stress, and then stick to it.