One has to work hard for years to become slightly more financially secure. Being financially stable means that you are not living from one paycheck to the next and that you’ve managed to save a considerable amount over the past few years. You have a small family now, and you feel like having your own home which you can decorate, maintain, paint and remodel as you please, instead of being at the mercy of a landlord every month. If you answer to all the descriptions above, then you are at the right stage of your life to be able to buy a home for yourself.
But the problem with buying a home is that it is not something you can pick up with loose change or a month or two of saving feverishly. A loan will need to be taken, and a home loan poses difficult questions both before and after taking the loan, to answer which you have to be very strong financially, or at least have a sound plan and disciplined habits. Let us see how you can prepare yourself financially to be able to get loans easily for buying your dream house.
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Preapproval Is Possible
You don’t need to wait till you select your house before you can speak to a bank. Many banks provide preapproval, which is a statement from them detailing how much of a loan amount they are willing to give you. There are several documents you will need to provide them, mostly to give them an idea of your financial status, before they grant you preapproval.
Create a War Chest
When you take a home loan, you need to have three things ready – the down payment for the house, the monthly repayments, and an emergency fund for difficult times so that your home loan repayments are not affected. The first and last are lump sum amounts, which you need to put together, and the second is a monthly amount which you should be able to keep aside from your monthly income.
Work Your Credit Rating
As soon as you apply for a home loan, the bank would check your credit rating. That’s why you need to spend the prior few months working on improving your credit rating. You need to keep credit card dues down to zero or at least the bare minimum, and if there are any other loans you have taken, then those should also be regularized. Some people also improve their rating by taking a small loan or credit card just for this purpose, paying the monthly dues on time for a few months, so that their credit rating can look healthier.
Reduce Expenses
Repaying a loan every month can be a big challenge if the borrower doesn’t have fiscal discipline. Once you have decided to take a home loan, you need to also be prepared to reduce or completely stop all unnecessary expenses. If you develop frugal habits, then you would also be able to put aside a bit of money every month to be able to pay off your loan faster.
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