A Guide to Preparing Yourself Financially to Buying A House

Sujan Afi S

Introduction

Buying your dream house is always a big financial decision and for that you need to yourself financially prepare well. You need to change your spending and saving habits a lot for placed yourself in a house buying financial position.  Buying a house is not always a simple financial matter. There a lot of financial issues which you require to face when you will buy a house as well as the availability of mortgage also largely depends on your financial position and record.

A well financial preparation can make the process of buying a house quite easier to you and in this blog we will discuss about the ways of this preparation.

Ways of preparing yourself to be financially able for buying a house

We will discuss here about a number of ways by following this you can ensure yourself to be financially strong enough to buying a house. The ways are discussed below –

  1. Sufficient Down Payment: In very first step you need to ensure that you have saved enough liquid capital for down payment. The amount of down payment is generally around 20% of the total cost of the house which will not finance by bank and therefore you should prepare yourself for down payment. You should follow a systematic way to save the moneys for down payment, for example if you want to buy a house within three years then you should stick yourself on low risk investments like fixed deposits and fixed maturity plans (FMP) etc.
  2. Budget: Before buying a house you should prepare the budget very well. According to the financial planners the amount of EMI should not exceed 40% of your total salary. If you have already a loan then you need to consider the old EMI amount in your budget i.e. after excluding the old EMI amount from your salary you can consider 40% of remaining salary for your new home loan EMI. In your budget of buying a house you should consider some important thing, such as – uncertainty of job, enough money in hand for daily expenditure throughout the loan tenure, expenditure for education and entertainment, expenditure for emergency purpose like hospital etc. You can create a contingency fund to pay the EMI in unfavourable financial situations.
  3. Habit of Saving Money: You should create a habit of saving money for making smooth financial situation to buy a house. While saving the money for down payment at the same time you can additionally save some money to understand the load of EMI on your salary. This will also help you a lot to create your saving habits.
  4. Affordable Interest Rate: You should search for a loan which offer you affordable interest rate. An affordable interest rate will help you a lot to ensure financial stability and payment of EMI throughout the loan tenure.
  5. Maintaining A Good Credit Score: If you are planning to purchase a house in near future like within few years then you should maintain your credit score very well. A good credit score will help you a lot to obtain a home loan in a easy way and with affordable interest rate.
  6. Prepare Yourself for Closing Costs: For buying a house you should prepare yourself for the payment of closing costs. Beside the payment of property cost you should also essentially required to pay a handsome amount of closing costs. The amount of closing costs is quite high and generally it is around five per cent of the total costs of the house. While saving the money for down payment you should also save money separately for closing costs.
  7. Balance between Income and Expenditure: You should control your expenditure to maintain a balance between your income and expenditure which will promote your savings. For controlling the expenditure you should avoid the unnecessary expenditure or bad habits like impulse buying, high amount of expenditure for fast food etc.
  8. Side hustle and over Duties: To increase the income you may search for side hustle jobs. Along with a full time-job the side hustle jobs will brings extra money for you. You can also do over duties also for extra income. This extra income will be benefited for you financially while you go for buying a house.
  9. Skip the vacation trip: Vacation trip causes a lot of expenditure. Therefore, you should control yourself from a long distance vacation trip while planning for buying a house. Skipping of long distance vacation trip from your schedule will save a handsome amount of money which you can save for buying your house.
  10. Rent out your spare room or parking space: if you have spare room or additional parking space then you can rent out them for extra income. This extra income will financially help you while you go for buying a house.

Conclusion

The buying a house is the biggest financial decision for many people. You need a very well planned to prepare yourself financially enough strong for buying your dream house. So, don’t rush while planning the budget and consider all your financial strong and weak points before taking the final decision of buying a house. 

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