The home buying process can seem complicated, but if you take things step-by-step and you know how to choose the right home loan, you will soon be holding the keys to your own home!
Ten steps to buying a home
Step 1:
Figure out how much you can afford. What you can afford depends on your income, credit rating, current monthly expenses, down payment and the interest rate. A housing counselor can help you figure out how to manage and pay off your debt, and start saving for that down payment!
Step 2:
Know your rights
Step 3:
Shop for a loan. Save money by doing your homework. Talk to several lenders, compare costs and interest rates, and negotiate to get a better deal. Consider getting pre-approved for a loan.
Step 4: Learn about home buying programs
Step 5:
Shop for a home. Choose a real estate agent, Wish list - what features do you want, Home-shopping checklist - take this list with you when comparing homes.
Step 6:
Make an offer. Discuss the process with your real estate agent. If the seller counters your offer, you may need to negotiate until you both agree to the terms of the sale.
Step 7:
Get a home inspection. Make your offer contingent on a home inspection. An inspection will tell you about the condition of the home, and can help you avoid buying a home that needs major repairs.
Step 8:
Shop for homeowners insurance Lenders require that you have homeowners insurance.
Step 9:
Sign papers. Have Puja or hawan.
Terms used in Housing Finance
EMI:
Equated Monthly Installment till the loan is paid back. It consists of a portion of interest and the principal
Floating Rate of interest:
Rate of interest which varies with the market lending rate. Monthly Reducing balance: In this system interest reduces monthly with repayment of Principal amount
Annual Reducing Balance:
In this system principal is reduced annually at the end of the year so you end up paying interest even for the portion of principal you have actually paid back
Fixed rate of interest:
Rate of interest remains unchanged throughout the period of the loan
Processing charge:
It's a fee payable to the lender on applying for the loan
Prepayment Penalties:
When loan is paid back before the agreed term of the loan, then banks/ institutions charge penalty for the prepayment
Commitment Fee:
Some institution charge commitment fee in case the loan is not availed within a stipulated period, after it is processed and sanctioned
Miscellaneous Cost:
It is quite possible that some lenders may charge documentation or consultant charges .
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