Important steps to buying a house!
So you have decided to buy a house! You have thought over it many times, you and your spouse can afford it, and now you are taking the plunge, right?
Let us look at some of the steps that you MUST TAKE towards that Big decision of your life:
1. Improve your credit score: Credit score has become important in India too. So if you have done anything to damage your credit score, go and correct it. It takes almost a year of good behavior before you clean up your credit. Get your score, and see how to improve your credit score. Now go about doing it!!
2. Create your balance sheet and be completely debt free: If you have any debt try to pay it off. In this category would be all the small time debt like personal loans, credit card loans, etc. See how much of your car loan is paid off, and reduce it to the minimum. Being debt free means you can now look at your assets – you will need all of this to make the down payment. Depending on the market conditions start withdrawing from your mutual funds, direct equities, etc. and get your down payment amount ready.
3. Make a down payment – MINIMUM down payment should be about 30% of the COST OF THE HOUSE. You also need to have money for brokerage, processing fees, registration, stamp duty, society entry fee, society membership charges, etc. So get a PROPER estimate of all these expenses and plan the size of your house accordingly.
4. Buy the size you NEED: If you are newly married, you maybe able to live for 3-4 years of your life in a 1 bhk, once you have a kid move into a 2 bhk. If your parents wish to stay with you for a long period, you may need a 3-4 bhk depending on how many kids you have..So do not be in a hurry to buy a big house…You can always upgrade to a bigger house later. Maybe in a better locality?
5. Shop around for a house as well as a mortgage: when you go to a mortgage company, remember they are sales people too! They may (mostly do) have some house son distress sales. Ask them about it. Ask them about builders, locations, ideal size based on your needs AND your ability to buy. Mortgages have to be considered very carefully. Hdfc charges a little more than State bank of India, but gives all services brilliantly. Your documents are preserved better. Almost everything can be done online or through phone. Consider all this before you choose your lender….
start home hunting! all the best…
Mohana Ganesh
Subra :
Very very informative. I will forward this to my son.
Sachin
Subra sir,
Yes HDFC is very good. Only one problem. You cannot easily prepay the loan. Also, as it is not a bank, you cannot make an online payment whenever you wish. Suppose you have Rs. 50,000 extra in you saving a/c and want to prepay the loan partly, it is a bit difficult with HDFC as you have give past three months back a/c statements etc, to prove that you not transferring the loan.
I discovered this last month. Because of these difficulties, I abandoned the partial prepayment plan (that is what HDFC wants probably) and ended up using the amount somewhere else (resisted the urge to buy a new smartphone! Pat my back, Subra sir!)
Otherwise the people who work at HDFC and their culture is very very good.
Abhi
I second Sachin. Just went through a lot of trouble for pre-paying loan.
I think HDFC home loan is very very different from HDFC bank where everything can be done online.
Here, you can’t do following online:
1. Prepay loan
2. Address change
3. Get a statement of how much you paid for last financial year (for income tax purpouse)
4. Get to a lower rate of interest
Funniest part is: If you login to their website, options like online payment and change of address is present, but when you click on it. It just tells you to go to branch and do it manually! Someone derives a lot of sadistic pleasure on this. LOL.
I had to take a full day leave just to pre-pay my loan. That when I am pre-paying by my own funds – no other party involved.
Had to go to office and then wait in queue where some approach wala people were given preferences. The attitude of staff confused me whether it is sarkari bank or private bank.
Their method of operation-
1. first do an entry in register. Only then the peon will talk to you!
2. Then he will call and give you a token.
3. Now wait for your turn. Somehow people coming after you will go before you.
4. If you complain, next number is yours otherwise more wait.
5. Now you get to talk to a person who will handle your case.
6. Even if you have called them beforehand about the docs required and brought them all. He/she will find some docs missing on seemingly flimsy ground – Oh no. Your driving license is written in hand (was issued at time when electronic cards were non-existent). We will not accept it.
7. And I forgot to mention you need TWO address proofs along with id proof.
8. So, you have to go to home and get these. Repeat from no. 1.
9. We only work from 11AM till 3PM with 1.5 hours lunch break in between. So better hurry.
I am not sure that I am spoilt by private banks or does HDFC does this on purpose to discourage people from pre-paying.
I had to visit HDFC office only ONCE when my loan got sectioned to sign some papers and they asked for tea/coffee, came to meet me in waiting area etc.
Anyway, followed all of their rules and pre-paid (at least partially) the loan. Am very happy because of this. 🙂
subra
Hdfc Ltd is technologically challenged and that culture sadly extends to some of their daughter organisations.
However Hdfc bank is far superior – but only compared to Hdfc bank.
Icici is superior in terms of usage of tech…However like what Abhi said culturally you feel confident of dealing with their employees. They may be arrogant at times, but they are knowledgeable and stick to what they say.
Milind
Being a HDFC Shareholders and Being a Renter , I never became their customer !
However FELT BAD reading 70s Approach .Guys in HDFC Please UPGRADE and Make Loan repayment ONLINE EASY JOB for customers . H T PAREKH started HDFC for Benefit of Middle class and I am sure Sir Must have Felt BAD reading these Customers Input …Deepak Parekh SAB …..CAN YOU CHANGE THIS SIR ?
sujatha
prepayment is not a hassle with Bob.
One other point I would like to add is that
It is safer to buy a fully constructed house. Less hassles
Barun
Same experience here with HDFC Ltd. I think they have something to hide and had specific instructions not to accept pre-payment. One of my friend was intentionally denied part payment on 28th March 2012 saying server issues. He had a return flight same day evening. Every time I visit the branch at least 3-4 persons are complaining on there interest rate/remaining year/outstandanding balance etc. SBI Home loan is far better than HDFC Ltd if you overcome initial challanges.
Abhi
Continuing from my last comment on HDFC, I had to visit HDFC again as I wanted to both part pre-pay and reduce my interest rates. I was told that both were not possible in same day.
This time I was better prepared and scheduled some work at the same time. I first went to HDFC, took the token and came straight out of the office. I then finished other chores and went again to HDFC. This way, my wait time decreased and most importantly, I did not feel irritated.
Process of reducing interest rate turned out to be a lot simpler than pre-payment. I just had to give a cheque and sign some documents – that was it. It was over in 10 mins.
One thing I did not understand, and I am hoping someone here will make me understand.
Why did I have to pay to get my interest rate down? I had opted for a full floating rate interest rate while applying for loan. This means that my interest rate went up as RBI (and HDFC) increased it. This was done automatically without any intervention from my part.
But why did it not come DOWN as RBI reduced it? and why do I need to pay a processing fee to make it come down?
HDFC itself is giving less rate of interest to new borrowers and this being a floating rate interest doesn’t cause any loss to HDFC at all.