Assessing your affordability: It’s all about money and how you could invest in buying a house!

Investing in a house is likely one of the major decisions in your life. We often take this decision due to peer pressure or the society pressure as we may call it. However, in India, the urge to be the owner of a house or property rather than a tenant often is the driving force to invest in real estate. Nevertheless, such important financial decisions shouldn't be made in a hurry or under compulsion. To prevent future financial distress, it necessitates a thorough awareness and planning of funds.

There should be a checklist of things that need to be prepared before investing into real estate. This definitely helps in preparing for any financial bumpers. Purchasing a property means taking out a loan, which is not a run of the mill work. Hence, good planning is always recommended. So, knowing how much one can pay is crucial before learning how to finance a property.

Calculate EMI

When it comes to home loans, the Equated Monthly Installment, or most commonly known as EMI is the most essential component. If the EMI is out of your comfortable range, buying your ideal home could turn into a nightmare. Your monthly income, the remaining number of working years, and your current responsibilities all play a pivotal role in determining how affordable your EMI will be.

The most crucial aspect in determining whether to apply for a home loan is likely the net monthly income. You must ensure that the home loan does not put a pressure on your other monthly bills or emergency reserve. Furthermore, even after paying off the EMI, you ought to be able to spend money without difficulty. Never go above and beyond your means in the hope of a future increase in income.

The phase of your career when you apply for the loan is also important. For example, if you plan to take a up home loan early in your career, you may be able to borrow more money than if you wait until later. Thus, the stage of your career at which you decide to take a loan is critical because it affects your savings and retirement plans. Moreover, several banks are hesitant to make loans to people nearing the end of their careers.

Assessing your payback

Banks do not finance the entire cost of the house you wish to purchase. As a result, once you know your EMI affordability, you must determine how much you can afford to pay out of your pocket as a down payment. As banks do not grant 100 percent loans, you should put down at least 20-25 percent of the total cost of the house. As a result, you must be certain of your savings.

You should also check your housing loan qualification, such as whether you are eligible for the amount you require. If there is a difference between the amount you require and the amount you are qualified for, you will need to make a larger initial investment to reduce the overall cost.

Hence, Assessing your affordability is imperative before investing in buying a house.