Finding a place called home before you turn 30

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While buying a house in your twenties may seem like a daunting idea to some, it is not an impossible task. Getting a home loan in India is easier than ever today and tax exemptions act as cherries on the top. In fact, the Aspiration Index of 2019 reveals that ‘Buying a Home’ is the leading aspiration for both men and women in the age bracket of 22-45 years. Hence, buying a house in your 20s is not as uncommon as you might perceive.

But, before we get into the mix and lay down the path for you, there are some precursors that you should be leery of:

  • The city that you want to live in.
  • The career path that you want to undertake.
  • Future family plans and dreams.
  • The expected amount of disposable income.

Being clear about your goals and priorities will only smoothen your investment journey.

Here are some smart practices to bag the home of your dreams:

1. Finding the Ideal Agent

Let’s face it. It is improbable to know about the nuances of the real-estate trade for anyone who’s in his/her twenties. The cost of making a wrong investment can potentially be miles ahead than the commission of a real estate agent. So, the first step is to find a reliable real estate agent who understands your needs, wants, and expectations.

2. Getting the Basics Right

How well have you churned the numbers? Here are some viable metrics to consider:

  • You should be able to pay about 30%-40% of the cost of the house as the downpayment.
  • Your EMI should ideally not be more than 40% of your in-hand salary or income.
  • Income tax savings on the entirety of home loans stands at:
    • INR 1,50,000 on the interest paid.
    • INR 1,00,000 on the principal repayment.
    • INR 3,00,000 on interest paid and INR 2,00,000 principal repayment for married couples.

3. Conducting Extensive Research

The only feedback system to your decision-making regime should be impeccable research. Anything apart from this would only breed investment pitfalls. Leading research characteristics that you need to consider include:

  • Knowing everything about the society, area, town, and city in which the property is located.
  • Conducting extensive on-ground research about the surrounding community and businesses.
  • Running a sales comparison of the past and similar properties that have been sold in the area.
  • Learning about the rent potential of the property by sizing up similar ones and talking to existing tenants.
  • Determining the reputation of the builder or the investment group that is responsible for the property’s or society’s maintenance.

4. Evaluating the Home Loan Options

Availing a home loan would be imperative for a real estate investor in his/her early twenties. Chances are that you do not have a substantial credit score yet and this can potentially create friction in your investment plans. The primary evaluation of banks for home loan applications include:

  • Documentation that details the house you want to buy.
  • Proof of income and salary slips of the past few months.
  • Declaration of existing EMIs to determine the Income-to-debt Ratio.
  • Detailed Credit Report and Score of all home loan applicants (including co-borrowers).

The quickest and safest way to meet most of these criteria is to bring in a co-borrower or partner that has a proven track record. It can either be a family member such as your parents or spouse, or even a trusted friend. Critical prerequisites to ensure here include a good credit score, decent income, and a steady job.

The Verdict

Whatever you do, be realistic about the returns of your investment and ensure that you are able to pay off the house within a time frame of 7-10 years (ideally). Appreciation of the property’s price depends on various factors such as its location, quality of the construction, connectivity with the city, and upcoming infrastructure projects in the locality.

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