Are You Prepared Financially to Build Your Home?
Building your own home is one of the biggest dreams of every individual’s life as well as the most significant financial decision. There are many types of critical decisions that you will need to make while you decide to build your own home.
You need to ascertain the state of your finances and plan before committing to the idea and acting upon it. You do not want to be haphazardly starting the process and then realise in the middle of it that your financial position does not allow you the flexibility of building your home as you like it. That way you will end up cutting corners and not get the longevity you want.
Check Your Credit Score:
You need to have an excellent credit score (600+) to be eligible for a Home Loan as well as a loan for construction/renovation expenses. Before you consider applying for a loan with the bank, it would be a wise decision to check your credit score.
If your credit score is above 600 and you have a steady source of income, then you have nothing to worry about as your application for a Home Loan will be quickly approved at the Current Home Loan Interest Rates. But if your credit score is below 600, then it would better to wait for some period and try to improve your credit score before you apply for a loan.
Get Your Finances in Order:
You need to sit down and assess your financial position before you consider building your own home. Make sure that you have filed your Income Tax returns for the last 3 years and the income shows an upward trend. Check your bank statements and make sure that there is no cheque bouncing or EMI bouncing in the previous one year.
Also, make sure that you maintain a healthy bank balance in your savings and current accounts to show your financial stability. If you are using a Credit Card, make sure its bills are being paid on time and the outstanding is below 30% of the sanctioned limit. The lender is going to scrutinize your finances carefully before even processing your application, so make sure that your financial documents reflect a healthy financial position.
Getting a Home Loan is very important to realise your dream of building your own house. So, before you take the decision, it would be beneficial for you that you get pre-approval from a lender.
It would also be helpful if you shop around and try to find out the best deal being offered. Though it might be time-consuming but even a small concession in the Current Home Loan interest Rates can translate into considerable savings in the long run.
Become Debt Free:
If you have taken multiple Personal Loans that still have some EMIs outstanding, you should first repay the loan amount and then apply for a Home Loan. If you are running multiple loans, chances of your Home Loan application to be approved are significantly Repay all other loans and minimize your Credit Card debts, so that your eligibility is improved and chances of your application being approved are higher.
Arrange for the Down Payment:
You need to start planning at least a couple of years before you consider building your own home. You should identify the location where you want to build your home and start saving for the down payment accordingly. As a rule of thumb, you should at least save 30% of the total loan you intend to take as margin money. As and when you have saved up that much amount, only then should you go ahead with the process.
Some Extra Money for Other Expenses:
When you start building your own house, you only want the best material, accessories, furniture and electrical fittings. These all cost a lot of money. So, you should start saving for these expenses otherwise you might end up cutting corners and might ruin all your excitement of building your own home.
Have a Stable Job:
Building a home using Home Loan requires serious financial discipline for long durations. If you have just started your job, it would be wise decision to first ensure that your job is secured and wait for some time before you start building your own home. You would be paying the EMIs for 15-20 years, so it is necessary to ensure that you have a stable job that will help you honour your EMIs on time.
Building your own home is an exciting process but can not be taken lightly. So it is necessary for you to ensure that you are financially ready for it before committing yourself to the process.
Also Read: The Best Age to Purchase a Home Revealed!
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