1) Check Credibility and Track Record of Builder
For many people, the opportunity to build a house never comes twice in their lifetime and that is why they should not be careless about whom they choose for building their houses. Before making a decision, one must undertake a thorough and detailed analysis of available builders and the housing schemes they offer.
This is important because the realty market is rife with unscrupulous elements that may have secured the land on lease and are attempting to get rid of it pretending the property to be their own. Hence, a person should always ensure that complete check has been conducted on the builder's credibility as also the housing scheme that is offered by the builder.
Check by referrals: A builder's background and the reputation should be checked through referrals, by calling on those who have worked with the builder earlier or by keeping a tab on the projects that the builder has cited as proof of his expertise.
Track record: One should check the track record and efficiency of the builder in completing earlier projects. This can be gauged by looking at the timelines or delay in completing projects, the quality of construction, compliance with the terms of agreements and the quality of amenities provided in the completed projects.
Sample: An investor should always ask for a sample of the flat and the material that would be used for construction. The dimensions of the rooms and the designs must also be checked to ensure they satisfy his requirements.
Price comparison and other requirements: It is always advisable to compare the prices quoted by the various builders and the facilities that will come with them. If a builder has in offer completed flats, one should check whether the required completion certificate and occupancy certificate has been awarded him by concerned authorities. Further, hiring the services of a realty lawyer is a wise decision so that an investor can be satisfied there would not be any legal complications later.
2) Importance of Location While Buying A House
Most people purchase landed property such as houses to dwell in them immediately or sometime in the future. Although some may only buy property with the intention of selling later for a profit, every prospective buyer should strive to ensure they have made the right choice in order to avoid regrets later on. Hence, a prospective buyer should take care of a number of things before he decides to buy a house.
Overall expense and location: Expense is a primary criterion in buying a house. A person must note the overall expense that will have to be met. For instance, if he intends dwelling in it himself, he should bear in mind where the house is located and how easy is the access to facilities such as markets, schools and medical facilities, as well as to daily necessities such as gas and water supplies, among others.
Direction: The direction a house faces is also a very important factor while choosing a house, not so much from the astrological viewpoint whereby people seek consultants to check a house for its ‘vibrations’, than from the comfort it would provide against the climate of the place.
The placement of a house can give an idea of the effects of external temperature on it for the whole year. For instance, people who live in cold areas are usually advised to purchase an east-facing house while those who live in temperate climates are recommended to live in a house facing north as such houses are relatively cooler than those facing other directions.
Parking and other facilities: A garage is one of the most essential facilities a house should have. Even if a house does not have one, there should at least be a car-parking facility in the vicinity. Meanwhile, the actual living quarters should be spacious and properly ventilated while the number of rooms available should be sufficient to accommodate all family members, with some level of privacy available to all.
Besides these things, the other things that should be considered are the locality of the house itself, how well known is it, whether there are anti-social elements known to frequent the area, the daily traffic flow in the area, and the suitability of the area for raising a family.
3) Know Your Affordability
Individuals who intend applying for a home loan should first calculate the amount of mortgage that would have to be paid in order to get an idea about the repayment amount they can afford. This will help them in avoiding any loan-related problem in the future.
Mortgage payment and its components: At the outset, a person must have a clear understanding of the transaction process involved to calculate mortgage payments. Several factors are taken into consideration while calculating mortgage payments. The principal or the total amount which is needed to be borrowed must first be considered. The next factor to consider is the amount of interest that a person will have to pay on the principal amount. This varies with different lenders but can also depend on the person’s credit score and other factors.
Next, one must consider the amount of tax payable on the property. This tax is called the property tax and is included in the monthly payments on mortgage.
Finally, there is the home insurance policy which a person must have bought before the final deal on loan is made.
Eligibility: The eligibility of a home loan sanction also depends upon the level of equated money installments (EMI) the applicant can afford in repaying the loan. Most lenders in India consider all EMI payments a person has made, such as car loan, personal loan and so on. Generally, the maximum combined EMI permissible is about 45-60% of a person’s gross salary.
Once a lender is satisfied with the applicant’s EMI payment capacity, it calculates a figure for the total home loan that can be sanctioned. Lenders also generally expect that the applicant will self-finance at least 15-20% of a home’s cost amount as upfront payment and sanction the remaining 80-85% as the loan amount.
4) Repayment History Defines Your Financial Character
Globalization and fast growing economies have driven individual spending to unprecedented levels in today’s world. Whether he really needs them or not, a person wants to have everything his neighbor has, if not more. The end result is that everyone tends to end up spending more than what is necessary.
In such situations, the volume of money available is a key factor and financial institutions tap on the opportunities available by ramping up their loan segments. However, these institutions are there just for a simple reason: to earn profits. With lending levels growing by the day, banks and other lenders must also keep a check on who they are lending credit, whether the applicant has had a history of defaulting on payments, or whether it is safe to sanction more credit to him because of a good credit history.
CIBIL: In India, the central government, along with the Reserve Bank of India, has come up with the solution in the form of CIBIL (Credit Investigation Bureau of India Limited). This is India’s first and the only fully operational credit information bureau and is a huge repository of information, containing the credit history of commercial and consumer borrowers. CIBIL provides this information to its members in the form of credit information reports.
All credit facilitators, such as banks, state financial corporations, non-banking financial companies and credit card companies are CIBIL members. They can provide information about an individual’s credit history to other members when the latter has to decide on lending credit to that person.
To cite an example, a person who has applied for a loan or a credit card and has deposited all the necessary documents could find his application has got rejected without any reason. In such cases, there could be every possibility that the person’s repayment history is poor and the bank has found it from his Credit Information Report (CIR) that the CIBIL database has.
A CIR is a factual record of a borrower’s credit payment history compiled from information gathered from different credit grantors. It contains all the information about a borrower’s transaction in the past.
Hence, the CIBIL database has made it very easy for creditors to assess an applicant’s repayment history, which also helps establish his financial character, with the outcome being either rejection or sanction.