How To Buy A House – Step By Step Guide

When it comes to asking a question of what is your goal. One of the most common answers is that I want to buy a house or how to buy a house at an early age or I want to buy a house but how to save money to buy a house all these questions. I do respect your emotions and thinking but you should know the answers to the question given below and you should know some kinds of stuff before buying your first dream house.

Why do you need to buy a house?

I know I am asking the question which is personal to you. But when it comes to finance you need to keep your personal and emotions a little bit aside so that you can get a clear idea about everything you are looking to spend. In the end, you are dealing with money and when it comes to dealing with money you need to be mentally strong otherwise you will lose your control over money.

There are three probabilities of answers to this question which I asked now

• You don’t have your personal home till date in your family
• Social Status
• Your dream house or you want to say proudly “Apna Ghar “

Knowing the goal is very important you should know the why. Knowing the why makes the journey very easy and keeps you in the hunt no matter what problems you face when you walk on the journey of achieving your goals.

Are you ready to buy a house financially?

When it comes to buying a house people get attached emotionally very much to the house. I understand and respect your emotions but you should also know yourself are you capable of buying a house financially or not? You should know some stuff before buying a house.

Cost you need to pay other than house cost

Yes, when it comes to buying a house. One not only has to pay the cost of a house but there are many expenses to which people are not aware. Some of them are listed below:-

Note:- Charges/fees can vary from different location and property value

1. Stamp duty charge:- Well stamp duty is around 5-7% according to the property’s market value.
2. Registration fees:- 1% of the property’s market value
3. Brokerage fees:- 2% is usually the brokerage fees
4. Parking fees:- depends
5. Maintenance charge:- depends
6. Home loan paying processing fees:-0.5 – 1%

Now once you know these you will get prepared yourself financially also.

Buying a house rule

5 – 20 – 30 Rule or 5 – 20 – 40 Rule. These rules will help you to know whether you are capable of purchasing your house or this rule will help you know how much potential you have to get a house.

5 – 20 – 30 Rules says that

1. You can look for a house which is 5 times your annual family income
2. You cannot exceed more than 20 years of home loan
3. Lastly, you cannot exceed more than 30% of the monthly income in EMI

5 – 20 – 40 Rule says that

1. You can look for a house which is 5 times your annual family income
2. You cannot exceed more than 20 years of home loan
3. Lastly, you cannot exceed more than 40% of the monthly income in EMI

Well, it’s up to you. You can choose any one of them. Both are made so that you can easily buy a house. I know many people near me who have taken loans but they are stressed and worried because they don’t know how much is there capacity to take a loan is according to their current income and also.

Explaining the above points with a story

Joseph is a 29-year-old young man who is looking to buy a house. His annual income is 6 lakh rupees. And he is the only person earning in his family. So when he applies this formula according to these rules he can look to get a house of 30 lakh. He will take a home loan of around 20 years. Also, he should take care that his monthly EMI of the house should not exceed more than 30 or 40% of his monthly income.

Well, these rules are not fixed rules that everyone needs to follow them. But yeah following these rules will help you to make your life easier and complete the home loan without headache like others. The tabular form is given below for better understanding.

Why not more than 30 or 40 % of monthly income should not go to EMI?

The answer is simple let’s say you earn 50,000 Rs every month and according to the above table, you have still 30,666 Rs for your livelihood after paying the EMI of 19,334 Rs. But if you spend 50 – 60 or 70% monthly income giving EMI what you and your family will eat if you aren’t left with money after paying the EMI? You too know that you always feel 50,000 less when you start spending so think what will happen when you spend 60-70% on EMI. I hope you got the point.

Questions you need to answer before buying a house?

There are 2 important questions that one should ask themselves without fail:-

How many years are you looking to stay?

If your answer is more than 10 years you are going to stay there then fine. But if the number comes less than 10 years then it is not recommended from my side and any good financial advisor.

Location is ok?

What I mean with this. When you look to buy a house then you should see to it how far is your office, school, college, hospital, and markets from the house which you are going to buy.

How to buy a house?

Well, you have two options. One you can get the house entire on cash at one time payment. I know this is not possible for 99.9% of people. The second option is taking a loan.

How to save money to buy a house?

Saving and Investing are the only options when it comes to buying a house or how to buy a house with a low income. What you can do is follow some practical tips on how to save money to buy a house which are as follows:-

1. Cut unwanted expenses

Cut unwanted expenses if you seriously want to make your dream house achievable for you. Because buying a house is not so easy seriously speaking. People work throughout their life to buy a house but still, they can’t do it. You need to stop those unwanted expenses if you seriously looking to buy a dream house for yourself or for your family or your close ones.

2. Save more money

Yeah if you want to purchase a good house that demands lots of capital you need to save as much money you can. But only saving will not go. Have a look next point.

3. Invest that saved money in the right place

Once you save more and more money you need to invest that amount of money in a right place. There are lots of ways but if you ask me I will go with an index fund which works for anyone. Inde fund can give you around 15% return annually. It is not bad. But do proper research before putting money anywhere you can’t blindly put your money anywhere.

4. Side hustle

Side hustle becomes very important if you buy a house at an early age. Listen you need to accept and understand this thing that your only job can’t do anything for you if you get a low paycheck. I know it’s harsh but reality is always harsh. Not everyone can digest the truth but those who can digest the truth and work on that can achieve anything in the world seriously.

5. Reinvest

Once you get money from your side hustle and job now you will get two income sources to reinvest that amount of money upgrading your skills so that you can get a high-paying job. Or you can invest that amount of money in any investment instrument that will help you grow your money and take you closer to your goal of buying a house.

Buying house quick tips

1. You should have at least 12 months of home loan EMI already without any fail to live a healthy life if you seriously don’t want to take the pressure of the home loan which most people have.
2. Never try to show off by taking the house which is not suitable for you according to your current scenario. (Show off is one of the fastest ways to become rich)
3. Try to get as much as low you can get a home loan (0.2% interest can save you lakh rupees if you won’t believe me you can go and search)
4. Take term insurance I know this might be debatable but for your better I said.
5. Pay one extra EMI every year to clear the home loan of 20 years in 10.5 years ( shocked but its true power of compounding works everywhere )

What to do if you are looking to buy a luxurious house?

If you are looking to buy a luxurious house I know that according to the above rule what I discussed above was the 5-20-30 rule or the 5-20-40 rule. That one point which was 5 times the annual income will be the house you should look for. But let’s say Mr. A whose an annual income is 3 LPA and he is looking to buy a house whose price is coming around 1 Cr. What they should do they should not take a house according to the rules. Yes, it’s true.

But here in this case Mr. A can delay the purchase of the house and increase their income so that they can be actually capable of taking the home loan. Listen, Mr. A, if don’t follow this rule and still have the stupidity of taking a loan for a 1 Cr house despite knowing that he earns a 3LPA he might get a home loan but he will get in a depression I know. Because I had seen people dying just because of the pressure created by that home loan or any loan. So it’s better to play smart not fool by seeing others.

In the end, the choice is yours.

Are you buying a house at an early age right decision?

Well, it might be a bad decision well again contrast answers but not no for some but for most of you. Why because when you are in your early 20’s and you seriously don’t know how life will take a curve. You never know which job will you get, whether you will continue that job for a long period, etc all these questions. Once you know everything then might be the right decision to take a house otherwise might it be the wrong decision. So take care of it buying a house requires lots of huge capital so you don’t want to make a wrong decision that will regret you throughout your life. Another thing is that the early 20s is the age when you want to explore things that are working for you or not. That’s why again it’s a personal choice.

FAQ’s