"I believe that buying a home is an investment. Why? You can't live in stocks, mutual funds, or even your car!"- Oprah Winfrey

Buying a house is a major accomplishment that holds great significance for many individuals. For some, it represents a lifelong aspiration that they have worked hard to achieve. Buying a house in India can be a complex process, particularly when it comes to managing the financial aspects. There are various factors to consider, such as the cost of the property, down payment requirements, interest rates, and loan terms.

As such, navigating the financial aspects of buying a house in India can be challenging and requires careful consideration and planning. In order to achieve a seamless and prosperous home-buying experience, it is essential to have a comprehensive understanding of the various stages involved in financing your ideal home. The purpose of this guide is to provide a detailed explanation of how to finance building your own home. It will offer valuable insights, real-life examples, and practical tips to assist you in making informed decisions.

Follow these steps to finance your home purchase:

Set a realistic budget

It is crucial to conduct a comprehensive evaluation of your financial status before beginning the process of purchasing a home. To determine the amount of money you can comfortably spend on a house, it is important to calculate your income, existing debts, and monthly expenses. This will give you a clear picture of your financial situation and help you start the process of financial planning to eventually make a home purchase.

By taking into account all of your financial obligations, you can ensure that you are not overextending yourself and that you will be able to comfortably make your mortgage payments each month. Suppose you have a monthly income of INR 80,000 and you currently have expenses that amount to INR 30,000. In this scenario, it may be advisable to allocate INR 40,000 to 50,000 toward your housing budget. This will help ensure that you have enough funds to cover your housing expenses while also allowing you to manage your existing debts and expenses effectively.

Select the right location

This may involve researching different cities and neighborhoods to determine which ones are the best fit for you. By doing so, you can ensure that you select a location that meets your specific criteria and provides you with the lifestyle and amenities that you desire. When choosing a place to live, it's important to take into account various factors such as transportation options, the distance between your home and workplace, and the availability of amenities like grocery stores and healthcare facilities. These factors can greatly impact your daily life and overall well-being, so it's crucial to carefully consider them before making a purchase decision.

Keep your research strong

Conducting comprehensive market research is of utmost importance when it comes to gaining a deep understanding of property prices, recent trends, and market forecasts. This process involves gathering and analyzing data on various factors that impact the real estate market, such as supply and demand, economic indicators, demographic trends, and local regulations. By conducting thorough market research, individuals can make informed decisions about buying or selling property, as well as develop effective strategies for investing in real estate.

One way to gain insights into the potential appreciation of a property is by studying historical data. Additionally, consulting with real estate experts like Dwello can also provide valuable information on the subject. It is advisable to monitor various factors that could potentially affect property values in the future, such as the progress of infrastructure development and any upcoming projects in the area.

List available properties

After analyzing your budget and conducting thorough market research, your next step should be to create a concise list of houses that meet your specific criteria. This list should only include properties that fit within your budget and align with your desired location, size, and other important factors that you have identified as essential.

By narrowing down your options to a shortlist of properties that meet your criteria, you can focus your efforts on evaluating these properties in more detail and ultimately make a more informed decision on which house to purchase.

When evaluating a property, it is important to take into account various factors such as its size, layout, condition, and potential for appreciation. These factors can greatly impact the value of the property and its potential for future growth. The size of the property can affect its market value, as larger properties tend to be more valuable than smaller ones. The layout of the property can also be important, as a well-designed layout can make the property more functional and appealing to potential buyers or renters.

The condition of the property is another crucial factor to consider, as a property in good condition will generally be more valuable than one that is in poor condition. Finally, the potential for appreciation is an important consideration, as properties located in areas with strong growth potential are likely to appreciate in value over time. Suppose you are in search of a three-bedroom flat that is spacious and located in a prime area. In that case, it is essential to ensure that the properties you consider for shortlisting meet these specific requirements.

You can make the entire process super easy as Dwello gives you multiple property options in cities like Mumbai, Pune, Bengaluru, and Delhi. For eg- if you are looking for a fully furnished flat in Andheri with good connectivity and a number of useful amenities, you can easily browse through a number of properties from the comforts of your home. Thus, making the homebuying process simple and hassle-free.

The very crucial part: Financing for building your own home

After you have successfully identified the property that you wish to purchase, it is important to start preparing your finances for the purchase. This involves taking a closer look at your financial situation and making sure that you have the necessary funds to complete the purchase. It may also involve seeking out financing options such as a home loan, and ensuring that you have a good credit score to qualify for these options.

Suppose you are considering taking out a loan to finance your home. In that case, it is advisable to conduct a thorough evaluation of the different options available to you to determine which one is the most advantageous. This assessment may involve comparing interest rates, loan terms, repayment schedules, and other relevant factors that could impact your financial situation. By carefully weighing your options, you can make an informed decision that aligns with your long-term goals and financial needs.

One of the most important factors to consider is whether the loan has a fixed or adjustable interest rate. A fixed interest rate means that the interest rate will remain the same throughout the entire loan term, while an adjustable interest rate means that the interest rate can fluctuate over time.

Another important factor to consider is the loan tenure or the length of time over which you will be repaying the loan. This can have a significant impact on your financial goals, as a longer tenure will generally result in lower monthly payments but higher overall interest costs, while a shorter tenure will result in higher monthly payments but lower overall interest costs. It's important to carefully consider your financial situation and goals when choosing a loan tenure that works best for you.

Calculate your EMI

To determine your estimated Equated Monthly Installment (EMI), you can either use online calculators or consult with your lender. These tools will help you calculate the amount you will need to pay each month towards your loan, taking into account factors such as the loan amount, interest rate, and repayment period. By knowing your EMI, you can plan your finances better and ensure that you are able to make timely payments towards your loan. When considering a loan, it is important to take into account three key factors: the loan amount, the interest rate, and the tenure.

The loan amount is the total amount of money that you are borrowing. The interest rate is the percentage of the loan amount that you will be charged as interest over the course of the loan. The tenure is the length of time over which you will be repaying the loan. By carefully considering these three factors, you can make an informed decision about whether a particular loan is right for you and how much you can afford to borrow. It is important to carefully consider the cost of the EMI and ensure that it aligns with your financial situation.

It is recommended to choose an EMI that is affordable and does not cause any financial strain. Suppose you are considering taking a home loan of INR 50,00,000 and the loan is subjected to an interest rate of 8.5% which you plan to repay over a period of 20 years, your Equated Monthly Installment (EMI) would amount to approximately INR 43,391.

Save for the down payment and other additional costs

One of the crucial components of financing your home purchase is the process of saving for the down payment. Suppose you are planning to purchase a property worth INR 1 crore. In that case, you will be required to make a down payment of 20% of the total property value, which amounts to INR 20 Lacs. Therefore, you will need to save INR 20 Lacs as a down payment to proceed with the purchase of the property.

In addition to the main cost of purchasing a property, it is important to also take into account other expenses that may arise during the process. These expenses may include property registration fees, which are fees paid to the government for registering the property in your name.

Stamp duty is another cost that is to be incurred, which is a tax on the transfer of property ownership. Legal charges may also be necessary, such as fees paid to a lawyer for their services in reviewing contracts and other legal documents. Finally, moving expenses should also be considered, such as the cost of hiring a moving company or renting a truck to transport your belongings to your new home.

It is also advisable to have a financial buffer, which refers to a reserve of money set aside specifically for unexpected expenses, to cover any unforeseen costs that may arise. This can help to alleviate financial stress and ensure that you are able to handle any unexpected financial challenges that may come your way.

When it comes to purchasing a home in India, it's important to take the time to plan and consider all the different factors involved in financing your purchase. This can include things like your budget, the type of loan you're looking for, the interest rates available, and any other fees or charges that may be associated with the process.