By Rohit Kothare on May 14, 2019 6:37:00 PM
If you have never owned a home and looking for one,
Apply for a loan, though downpayment weighs like a ton!
Gather some documents and move towards a bank,
Only if it were that easy, it might have deceived none!!
Liked the poem? It’s a decent try from a property expert. However, the reason it stands firm on its point is that home buying is not as simple as it looks.
About 32% of home loan applications are denied yearly due to a low CIBIL score, not enough documents, unsuitable income group, lousy credit history and a hundred more reasons.
So, if you are looking for a home to buy, it would be better to know if you qualify or not.
A home is more than a roof over your head. Apart from the financial security, the emotional satisfaction of being a homeowner is unparalleled. However, it shouldn’t be viewed with fear. If you have never owned a home, you fall in the category of first time home buyer.
Also, first time home buyers can avail several benefits from government and financial institutions. Let’s understand it better.
Avoiding CIBIL Score is no option
Your CIBIL score (credit score) plays a vital role in the home buying process. It’s how banks and other mortgage lenders find your ability to borrow and pay back in future. In India, your credit score is measured by CIBIL.
Having a score of 700 and above would endear a lender to you as you are less likely to be a liability for them. This will also help you get an interest rate which is much lower than what they officially claim. However, even if you don’t have a good score, don’t worry, you can still qualify for a home loan.
Eligibility for Financial aid
There are different criteria set by banks and NBFCs, but a tentative list can be drawn for a prospective home buyer. Banks and NBFCs consider the following three things even before starting your loan process.
Age: Age between 18 and 60 years.
Job: Either salaried or self-employed.
Salary: Earning more than the minimum income quoted by the banks.
Note: Banks don’t accept more than 50% of your income as EMI.
Most banks will give you a home loan of 80% or less and this depends on the property in concern. The remaining 20% of the amount should be mobilised by you. If you are applying for a new home loan, you should make sure to have the down payment ready so that your application doesn’t get rejected.
Plus, other loans can hinder your home loan process so make sure that all other loans are cleared off and well settled.
If your credit history is good and you meet the eligibility mentioned above, then it is likely that your loan application will be processed.
Still, first time home buyers need to know that home buying involves a lot of attention and time. You can know more about which are the top 7 mistakes first home buyers make in our latest blog.
A few more essential benefits first time home buyers can reap are:
According to recent change in tax rates, the government has reportedly cut GST rate from 12% to 8% for houses purchased using the credit-linked subsidy scheme (CLSS) under Pradhan Mantri Awas Yojna.
Fact-of-matter: “The first-time homebuyer with a family income of up to Rs 18 lakh per annum will be eligible for a benefit of up to Rs 2.5 lakh while buying a house or apartment of up to 150 square metres (1,615 sq ft) carpet area under the Credit-Linked Subsidy Scheme.” - Times of India
The first time home buyer can avail benefits like deduction in taxes, deduction on GST, deduction on subsidy slabs, deduction on interest in his home buying process.
Most people often ask ‘how do you qualify as a first time home buyer?’, and the answer usually is, assess your needs.
- A working professional (let's call him Amit), aged between 30-40, with no past loans
- Having a decent sum of 10-20% for deposit + He wants a loan of 20 years on 80% of selected property value.
- It is most likely that Amit will easily get a home loan.
- A working professional (Named Namit), aged between 30-40, with an ongoing car loan
- Having a decent sum of 5% for deposit + He wants a loan of 20 years on 95% of property value.
- Namit will have a hard time getting a loan since he already has an ongoing loan and is looking for another one.
There are many first time home buyer qualifications to be matched. Where few are mandatory, a few can be tailored with some additional work. Whether you fall in the segment of ‘first time home buyer with bad credit’ or ‘accounts for irregular income’, you can still buy your first home. Keep in mind the above-mentioned points!