Budget

How to set a budget for buying a home .

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Buying a dream house includes hard work, savings, applying for loan and so on. Sometimes it also
becomes necessary to act stingy to balance our expenses and to achieve our dreams. There are many
ways and means to get set for buying your dream home.

Buying home
Get started:
Focus on your basic requirements and the investment you can afford. Stepping into expensive ideas is
not good before analyzing the budget. If your family has more than one earning member, then it is well
and good to manage your expenses and investment for your new dream home. But if all those expenses
and savings depend only on one income, then there are points to be considered.

Tips to turn-on savings:
1.Try to set apart a portion of your income to be deposited in different saving schemes as a safe
foundation for purchase/construction of a home. Avoid spending that money on any occasion
other than emergencies.
2.Try not to spend on other accessories for your home unless it becomes mandatory on your
current situation.
3. Concentrate on making budgets for your daily needs and also for buying home.
4. Minimize or bring down your old debts to nil.
Apart from basic preparations for buying a home, we should also consider other factors like applying for
loan, salary calculations, tax payments and so on.


Availing home loan:
Home loan allows the borrower to use the money for construction purposes, buying a new house/used
house, and renovation works. Generally all banks offer home loan and they maintain certain criteria to
apply for the loan.

Profession: This is the important aspect considered while applying for home loan. The borrower must be
working in the current occupation for a minimum of two years and if self employed, borrower must have
completed a minimum of 5 years of earnings.


Credit score: Credit score is an aspect that directly has its effect on the total amount of loan eligibility,
interest rates, and EMI. It is important to maintain the credit score as high as possible and without any
balance in the EMI payments/debts. A good credit score allows the borrower to avail the maximum loan
amount that he can apply for his income.

Age criteria: The age limit for a salaried person is from 21 years to 60 years and for self-employed
person, it is from 24 years to 65 years.
Financial stability: Here the lender analyzes the overall financial stability of the borrower and also his
current financial status. The overall financial stability will also have its effect on total amount availing
options.

Income: In general it is preferable to have a minimum annual income of at least 2 lakhs. It totally
depends upon the lender and their terms and conditions.
Address: The borrower must be living in the address specified in the application form for a minimum of
1 year. Any period of living in the specified address lesser than the specified period (1 year) will not be
accepted by the lender.

Other than the above specified criteria, other terms like the type of current residence, type of residence
to be purchased and sometimes the reputation of the employer in which the borrower is employed are
also followed by some lenders.
Make proper arrangements to satisfy such criteria before applying for the loan. Your savings can save
you at this time where you can escape from a very huge amount of loan. It will become a difficult task to
repay the loan availed from the lender, if you go for loan for your entire investment. Make sure that
your savings can save you at least 10% – 20% of the investment required.


How to calculate total loan amount that you can avail from your salary?
The salary or income is the base for total amount that one can avail from the lender. The lenders will
announce that you can avail say 30 times, 40 times even 60 times of your net salary. This totally depends
upon the lender. But this cannot be 100% true because during approval process, the lender will go
through all the eligibility criteria. Finally when the loan amount reaches you, there will be a wide
variation than that of your calculated amount. Let us see why this happens.

Generally, the net salary will be a combination of basic pay, HRA, LTA, medical allowances, travel
allowances and other benefits that are offered by the employer. Medical allowances and LTA are not
calculated for loan approval. So,
Total net pay taken into account by the lender = Net salary – (Medical allowances and LTA)
After considering your eligibility criteria and your net pay, the lender will calculate your interest rate and
EMI.

Note: You will be charged for stamp duty and registration.

Points to remember:
> Complete knowledge about the entire process is important before entering into the process.
> Collect all the terms from the lender about the loan application process and analyze with your
income.
> Add your earning family member a co-applicant. This will enhance your chances for availing
more total amount.


> Try to minimize the errors that affect our credit score.
> If you have valuable and reliable properties, then try to go for mortgage loan also.

> Never ever come to a conclusion that the lender will provide you the exact loan amount as they
announce. There are chances for increasing your rate of interest and EMIs.
> Choose a tenure period in which you will be comfortable on repaying the loan amount and also
in a way that does not affect your routine.

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