ULTIMATE GUIDE TO BUY A HOME IN 2016
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The average home buyer in 2015 searched listings for 18 weeks and ultimately visited 12 listings. Despite all of the technology available to buyers these days, search for their dream home still takes time and careful research — regardless of whether they’re a first-time home buyer or a veteran who’s purchased multiple residences over the years.
Use this guide to help navigate your home search, become even more knowledgeable about what to look for in your ideal home, and, in the end, find the right property to purchase in 2016.
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List Of Contents 1. 2016: Right Time to Buy 2. Preparing Your Finances • Building up saving • Improve your credit score • Get loan preapproval 3. Working With Loan Coordinator 4. Begin The Home Search 5. Working With Real Estate Agent 6. Home Search Factors • Price • Location • Size and type • Condition
7. Offer and Negotiation 8. It’s Closing Time 9. When it is OK to Be Tenant? 10. If You Are Buying to Invest 11. Start Ups: An alternative to Real Estate Investment 12.About Author 13.Share Your Love
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IN THE LONG RUN, RENTING IS COSTLIER THAN BUYING A HOUSE
2016: Right Time to Buy Buying a home involves huge money, yet, it is not pure financial decision. It is both about your need and wants. It is about when you need, what you want and where you want.
After waiting long enough for price cut, 2016 seems perfect opportunity for you to owning your own home. Owning a home is better than renting. If you rent for long, your payment on rental would be comparable to the home loan. In the long run, renting is costlier than buying a house. 4
Why Buying a Home In 2016 Can Be A Great Decision
Price Are Down
No More Price Fall In Sight
Home Loan Interest are Down
Corporates Has Started Purchase 5
Price Are Down
Since start of correction in 4th quarter of 2013, property rates are 15% - 40% down depending on location. In group housing societies, real estate developers are struggling to progress their
projects despite low sales. Some offer to pay the pre-EMI on home loan till certain period, saving you lakhs of rupees in already low price.
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No More Price Fall In Sight
As you know builders in Delhi / NCR has big stock of unsold flats. Here arise assumption: “Rates will crash”. No!!
Since 3rd quarter of the 2013, home prices have not appreciated much. Price correction in the real estate market has already happened. Buying property at same cost of 2011 is also cheap because inflation reduces value of money with time 7
Home Loan Interest are down
More than 87% of retail home buyer takes home loan. Home loan rate of interest are at lowest level since 2011. If you take home loan now, you will pay 20% less time for same loan than 2011.
Look below comparison for per lakh (1 Lakh) loan When rate of interest is low, you will pay principal faster, resulting in ending your loan early.
ROI
EMI
Tenure (Months)
Extra Period
Current Rate
9.50
998
200
0
2011 Rate
10.5
998
240
20%
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Corporates Has Started Purchase
Best time to buy is, when it is priced less. To judge if prices are down enough, you should look at sophisticated investor. Recently private equity firms have been buying apartments at huge discounts.
It means they are expecting it to rise in mid-term, say 3-5 years.
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Preparing Your Finances Focus on building wealth before even considering your home purchase.
Building Up Saving
Prior to hitting the market and checking out listings, you need to take care of some necessary tasks, including saving up plenty of money for a new Home, enhancing your credit score, and getting pre-approved for a home loan. It will not happen in a day. It will take good planning and consistent control on spending
Improve Credit Score
Get Loan Preapproval 10
Building Up Saving
Focus on building wealth before even considering your home purchase. It convince lenders you’re ready to become a home owner and handle the subsequent mortgage payments.
You must build 20% - 35% saving of property cost. For Affordable homes minimum down payment is 10% of property cost. For high value property banks asks for minimum 25% down payment. It is good to keep 10% extra saving for incidental expenses
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Improve Your Credit Score
Another factor lenders strongly take into consideration is your credit score. The math here is simple: The higher your score, the better you look in the eyes of lenders.
outstanding debts, and avoid taking new loans can boast your credit score.
Doing things like paying all of your bills on time and in full, eliminating
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Get Loan Preapproval
You should take pre-approval for your maximum loan eligibility, you will only pay for loan availed. Internationally home buyers takes pre-approval before buying home. In India your financial institution will depend on your profile and property type.
You should take preapproval from “X” bank / financial institution if • Property you will buy will be technically correct • Under construction project approved from it • If you have bad credit record
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It is not recommended to take preapproval if • Property you will buy may have technical issue like extra coverage / without map etc. • You want to buy house in under construction project, but have not finalized which project
Once you decide to go ahead with pre-approval, you can search in earnest by checking what mortgage option are available to you based on your profile and property you intend to purchase Having said that, it’s in your best interest to find a loan coordinator who knows the mortgage market well and has a proven track record of getting their clients the right loan.
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Working with Loan Coordinator Your loan coordinator can help you save lot of time, energy and money by selecting right lender from their experience and their referral network
Right Lender
ROI and PF
Referral Network
Process Right & How Amount 15
Working with Loan Coordinator Taking help of a “Non-exclusive” home loan coordinator is better than approaching a bank / financial institution yourself. Exclusive loan coordinator works with 1 specific bank / financial institution. While Non-exclusive loan coordinator is more knowledgeable than a single
banker or exclusive coordinator. They are market expert because of experience of working with different lenders.
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Choosing the Right Lender
Many time choice of your home loan lender depends on factors other than lowest ROI and initial charges. It may also depend on your CIBIL, technical issue with property or any special condition you are in right now. Your loan coordinator can help you save lot
of time, energy and money selecting right lender by their experience and their referral network (Banker’s Contact)
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ROI and PF
If you are buying a technically ok property and your income documents support loan you are looking, you can get lower than chart rate of interest. With their expert negotiation skills, loan coordinator can get you better ROI as well as lower processing fee
from different lenders. They can also help you negotiate lower / no insurance, usually cross sold with home loan
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Referral Network
You are looking for higher loan and you can pay high EMI, but your income documents does not support your claim. Your loan coordinator can help you get loan amount your need to buy your dream home. They have vast contacts with different bankers.
Based on verification of your liquid income and personal discussion, they can get you higher loan amount you are looking.
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Process & How
Banks and financial institutions employs verification agencies, credit managers, advocates and technical staff, property vaulters etc. Your loan coordinator coordinates your loan application on all steps from login to
disbursement. You can ask them about what to do and how to do.
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Choosing the Right Amount
Prior to touring a single property, figure out what the maximum EMI you can easily pay off. Based on this amount choose what will be maximum loan amount you can get.
Apply for maximum loan amount you can get, but tour properties which will require less than this loan to buy.
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Begin the Home search You’ve completed foundation work and now it’s your turn to actually begin the home search by checking, what listings are available in the area in which you intend to purchase a home. If you want to go ahead with home search yourself, fine! When you find potential seller, there may be few things not clarified at time of doing a deal. Such unclarified
terms causes frustration at time of transaction. There’s lot, a local real estate agent knows about property transaction procedures. I highly recommend you to find a real estate agent who has track of working transparently and can get you home that fits in your budget and preferences.
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Working With Real Estate Agent
Experienced real estate agents bring to the table for their clients: savvy negotiating skills, understanding of the local housing landscape, legal knowledge, and indepth advice for home buyers on how to approach the entire process.
Here’s exactly what you can (and should) expect when engaging a real estate agent …
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Market Expert
Everything from where home values are rising the most to the best ice cream shops and concert venues: That’s the kind of intricate knowledge real estate agents have about the markets in which they work.
Sure, anyone can Google housing statistics and local community information, but agents are constantly in the know and building their networks so they can provide buyers with every last detail they need to know about their market.
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Negotiation Skills
With an experienced real estate agent comes veteran negotiation techniques. A real estate agent understand it is in mutual benefit for deal to realize. They puts nothing less than best to negotiate lowest price from seller.
Put your trust in an experienced real estate agent who has proven to get great prices and the best terms possible for their past clients.
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Legal Knowledge
Legalese is not something the average home buyer knows a great deal about — but then again, they don’t have to, so long as they employ a real estate agent.
Agents are well-versed in the language of home purchase agreements and other legal documents, meaning you don’t have to study up on real estate law and, in turn, avoid headaches during the home buying process.
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Home Search Factors
Price Narrow down your search by price point first so you only view homes for sale you can actually afford and don’t waste your time.
Location
Size & Style
Condition
Identify specific areas, or even neighborhoods where you would be happy to lay down a foundation
Determining size and style preferences is essential when hitting the market to check out real estate listings.
It’s vital to discover which homes for sale are in prime condition and which will require some investment to fix. 27
Price
Now that you have a specific budget for your property purchase, you now have a crystal clear idea about how to conduct your home search. Having said that, there are still other financial considerations to take into account with any listing you plan to bid on.
The silver lining to taking on these payments is, you may be eligible for some tax deductions for mortgage principle and interest, so consider that extra money coming back to you as well.
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Location
Where’s the closest public transportation? What’s the quality of the area’s school? You should ask these question as prospective homeowners during the home search.
Though you may fall in love with a home, you also need to take into account what the community can offer you and your family — not only to ensure you live near great and useful amenities, but also to make certain you’re paying the appropriate price for a house.
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Location Factors Work Commute Make sure you consider whether it’s easy to get to and from work when visiting property. Indian cities don't have infrastructure to support most of people using personal vehicle. You know this from personal experience of getting stuck in traffic on festive eve, when most people who own vehicle try to use it on same time.
You must see a home with proximity from public transport. It is recommended to choose a home with public transport not more than 1 kilometer. It is helpful for you, not only leaving and arriving on time for work and home but also give freedom to your family member in absence of individual vehicle
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Water and Power Steady supply of water and power is important. Check with your friends, relatives or other source. If your find later, it can spell trouble
School System Look for a home near a good school if you have school going kids, or toddlers who will go school soon. For them not only getting admission becomes easy, but going school too. The quality of a school system greatly impacts home values and how a community evolves.
Security and Public Services Discover all you can about nearby hospitals, local police, fire station, and general municipal services to get a feel for the community. Your priority sure depends on age and health of your family 31
Crime The rate and total number of crime committed in an area can have a drastic impact on home values in the long run
Shopping and Attractions Knowing you have plenty to do and enjoy near your new home is just as important as finding a suitable residence. On which Shopping malls or Movie Theater you can hang out with your family and friends. Where are the best clothing stores? Which are money saving grocery stores nearby?
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Size and Type
It doesn’t matter if you’re a growing family in need of an upgrade or a couple looking for a cozy retirement property, it’s imperative to consider what residence size and type is acceptable and desired.
Each house has different size, and style. It’s important to know what you want in your home, what you can live with, and how much space you actually need.
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Condition
Whether you’re interested in property built in the last couple of years or residences constructed 30 years ago, chances are there are some blemishes. And perhaps even some major issues that require attention and action.
Here are the main home problems to look for …..
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Condition Factors Strength of Property Carefully look for structural strength of building as a whole. On visit to property take a closer, deeper look at condition of property. Any cracks, breaks, mold, and pests discovered near a home’s foundation are big red flags that indicate you should head to the next listing on your list.
In Delhi / NCR most of houses are built on plotted development. With people owning plot and constructing without any uniform structural strength guidance, makes it unsafe to live. Threat is further compounded by its seismic zone 4 geographic location (correspond to Richter scale up to 7.5), which makes it vulnerable to high intensity earth quakes.
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If you want to buy a plot and later build a house yourself, keep eye of structural strength. While planning construction, take help of architect, they have enough knowledge about structural strength. Disaster prevention involves engineering intervention to make building strong enough to withstand the evil forces of nature.
Ventilation Without proper ventilation, bacteria and stale carbon will make the indoor air of your home more polluted than outside. Ventilation is necessary to remove dirty air and moisture due to cooking. Good ventilation will keep your home odor free and pleasant
Odors Smell doesn’t lie. If something in or around a real estate listing causes a physical reaction — whether it’s general air quality or a specific problem area with mold — it may not be an ideal choice. 36
Offer and Negotiation
After you’ve completed a comprehensive search across the local market and zeroed in on the home for sale you want, it’s time to get the purchase process in full gear. Of course, bidding on a listing is just one step in the buying a home.
There’s plenty to do once the paperwork gets going.
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BASE YOUR OFFER ON THE HOME VALUE, NOT THE LIST PRICE.
Offer While seller have a specific list price, that doesn’t mean your offer needs to meet their pricing requirement. Rather, work with your real estate agent to develop a price point that you’re comfortable with and leaves room for negotiation with the sellers.
Your bid should be what other homes near the listing have sold for in recent months and years.
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For this you can do some research on internet. Check at what price similar properties were sold in that locality. If they are listed again and again over time, it means they are selling very slowly, then you are in stronger position to put lower offer.
Be Prepared to compromise Your price does not matters, you won’t find a perfect house. You may have to compromise on features and may be even on the big three: price, size or location.
Don’t get fancy on decor. There are a lot of things that can be altered / renovated after purchase, like hardware and glasses. Let the little things go.
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Negotiation FOCUS ON GATHERING INFORMATION ABOUT SELLER. MORE YOU KNOW ABOUT HIM / HER, YOU CAN PUT BETTER STRATEGY. When you enter negotiations prepared to compromise, you’ll be a step ahead. Remember your easy terms can be as important as your offer. Making a bigger down payment or changing the closing
date to accommodate the seller. “The fewer contingencies you have… more likely you are to get better price.
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Principle of negotiation is knowing you won’t get all, but if you don’t ask, you get nothing. To negotiate better, focus on gathering information about seller. More you know about him / her, you can put better strategy.
Invest quality time in research Find out if property is being sold because of bank foreclosure. Check google and determine whether the house has been on the market before and at what price.
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Time Can Be Essence If seller has just purchased other property, they would want quick closing. If there are any business losses / payment to third party is involved, you can negotiate better. But if seller has no specific urgency
/ is ok with longer closing time / ok with renting back property you cannot hard negotiate
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DOUBLE-CHECK EVERY DOCUMENT AND AGREEMENT TO MAKE SURE YOU AND THE SELLER ARE ON THE SAME PAGE.
It’s Closing Time
You’re on the cusp of closing the deal and owning your very own home … but it’s important to pay attention to all of the minor details that need to be handled in order to make the purchase
official. Thankfully, your loan coordinator and real estate agent can help you with these tasks, like facilitating paperwork between your mortgage lender and signing the requisite forms. 43
Of all times during the home search process, this is the one when it’s absolutely vital to double-check every document and agreement to make sure you and the seller are on the same page.
Many deals fall through at the last minute due to miscommunication, so work with your agent diligently to get the deal past the finish line in a timely and efficient manner.
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HOME LOAN IS LONG TERM LIABILITY. FOR A 20 YEAR CONTRACT, YOU MUST HAVE CONFIDENCE IN YOUR INCOME STABILITY FOR NEXT 5 7 YEARS
When It Is Ok To Be Tenant? People prefer buying home than renting. If you have built enough saving to buy home in total cash, then answer is obvious YES. But if want to buy a home on loan, then
answer goes beyond down payment and present income. If you can’t see stability for next few years, for now renting makes more sense to you.
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MARKET MOVEMENT HAS RESTRICTED SHORT TERM INVESTORS FROM MAKING QUICK RETURN. LONG-TERM INVESTORS ARE SPECULATING WHAT GROWTH REAL ESTATE INVESTMENT WILL GIVE “OVER BANK INTEREST”
If You Are Buying To Invest 46
If You Are Buying To Invest
Few real estate investor puts cash down from their wealth. Many invest with bank loan hopping their property price will rise at higher rate than bank ROI.
Market movement has restrained short term investors from making quick return. Long-term investors are speculating what growth real estate investment will give “over bank interest”.
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During the peak, the news about someone making a 100 per cent plus return on property investment in a year usually had a viral effect. That time most of surplus from all investors were driven to real estate. Those who gained fantastic return from short term betting sometimes leveraged almost everything they could afford in real estate. Now those investors are stuck with costly loans and unsaleable property (Or
saleable at heavy losses). I met a friend of my client Arun Jain, in November 2015. He had purchased 4BHK apartment in under construction project at Faridabad at cost of 75 Lakhs in 2012. Arun says - “ I have been trying to sell my apartments for the past two years even at 5 lakhs less than cost. But no success”.
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To make matters worse, Arun is paying interest on the loan and the property is not giving him any returns. As I am writing this at end of 2015, Delhi / NCR has largest unsold residential inventory of more than 1.5 Lakh units. On other hand some developers are launching premium projects at amazing low rates. If you are investor, this is time of caution, but if you want
home to live, you can get highly discounted house now. But my word of caution is don’t always look for lowest price. It is possible some developers are throwing misleading schemes. Always check a builder’s reputation and check genuine-ness of project with all resources available with you. Do detailed research of property before putting your money on it
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About Author Hi!!
I am Ravinder Bhutani, founder of Joy Loan. I hope you found this EBook informative and useful.
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[email protected] Or Click here to submit your details 52
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