For a millennial, the decision to buy a home can be a life-altering one. For young individuals or couples, getting into a long-term debt commitment such as a home loan can be a daunting task. However, as financial advisors would agree, buying your first home in your 20’s or early 30’s can be one of the smartest moves you can make financially, as it gives you a great head start in more ways than one.
Firstly, unlike rent payments, a mortgage payment (though it may seem overwhelming in the first few years), goes a long way in asset building and increases your home equity. Secondly, it restricts you from making unnecessary purchases and keeps from accumulating credit card debt. Thirdly, a secured loan such as a home loan early in life and making timely repayments on the same gives your credit score a boost and paves your way for further access of credit when you require it.
Now that we have established the advantages of a millennial attempting purchase of property, here is a comprehensive guide for first-time home buyers:
1Getting over
the initial fear
Those who have just about completed hefty student loans may develop cold feet at the thought of skimping once again and preparing to take a home loan. At this stage in your lives, it is important to see the bigger picture. In a few years from now, a roof over your head that you can call your own before you reach your middle years will feel like a great achievement.
2 Invest with
a specific goal
If you have firmed up your mind to purchase your first property, the first thing you must do is begin investing with this specific goal in mind. Set a budget and pick an investment option that will help you meet your goal in a specific number of years. While setting a budget, do not be too hard on yourself and try to stretch limits. Your first home need not be your only home and you can always graduate to a bigger place when you can afford one. While saving for your first home, equities may be your best bet as they offer you the best inflation adjusted returns as compared to other instruments despite the risk factor.
If you do not have the expertise or the time to invest in equities yourself, you can choose the systematic investment plan (SIP) route of mutual funds. By investing in equities through the SIP option of mutual funds you also get the advantage of compounding, which means your returns are reinvested over the term you choose to remain invested in the fund, thus helping you achieve your financial goal of saving up enough for the down payment of the property.
3 Home loan
options
Do enough research before you decide on a lender. Many lenders want young and dynamic home owners as customers and have specific loan products that make it easier for you to make repayments in your initial years and increase the quantum with the rise in your career. Checkout such options and read in between the lines to understand each nuance carefully.
4 Begin with clean credit records
One of the most important factors that will decide whether or not you are creditworthy, is your Credit Information Bureau (India) Limited (CIBIL) score. Your CIBIL score is a three digit numeric between 300-900 that is assigned to you by India’s premier credit bureau. This score is based on your credit behaviour or how you have serviced your credit lines you have availed of thus far. In order to maintain a good CIBIL score (750 and above) it is necessary for you to have serviced debt regularly and well before applying for a fresh loan.
One of the best ways to ensure that your CIBIL score remains intact is by making a habit of not building up credit card debt. Spending small amount and ensuring that you make a habit of repaying your credit card bills before the end of each billing cycle is a good way to ensure that you do not get into a debt trap and also maintain a good CIBIL score.
5 The quest for your first home
In this world dominated by the internet, the search for your first home must necessarily begin online. There are a host of websites such as 99acres.com, magicbricks.com, indiaproperty.com, makaan.com that have made it easy to filter searches according to your requirements, budget and location preferences. It is a good idea to go through all of these portals and shortlist properties that you would like to see personally. Besides using such websites, make the best use of the internet and social media to reach out to actual buyers and check the reputation of the builder, the living experiences and the problem areas if any. A thorough virtual search gives you a firm footing before you start visiting the properties personally and finally zero in on a choice that is best suited to your needs and budget.
6 Be aware
of your rights
The real estate market can turn out to be a head spinner when you are out there on a house hunt. It is important to be mindful of what your requirements are and be aware of your rights when seeking out a home.
7 The final
step
Once you have taken possession of your new house, the first thing to do is store all your property documents. Make a few photocopies and keep them in at least three different locations. It is a good idea to get all your property documents digitised and locked in an e-safe. Next, update all your official documents with your new address and finally transfer all property related paperwork such as water and electricity meters, society membership and property tax records in the local municipal body in your name.
The author is AVP-Marketing, Tata Housing
