Buying a home can be a tedious process. It also comes with a lot of questions. Simple yet stress-inducing questions like “how many house tours are too many house tours?” or more technical questions like “how do I get a home loan?” have plagued house buyers since forever.
If you’re facing difficulties navigating the tricky domain of buying a house, we have good news. We have made a list of 10 of the most frequently asked questions by a house buyer and give you the answers to them all.
No matter how far you are in your house buying journey, this list surely has an answer to your questions. From how long it will take you to find your dream home to the list of documents you would require to register your property, we have all the answers so read on.
1. How can I buy property on Clicbrics?
Buying property on Clicbrics is one of the easiest and most social distancing friendly ways to buy property in 2022. With Clicbrics’ technology and real estate expertise, you can now find your dream home, visit it, and then complete all your legal formalities to claim ownership from the comfort of your own home.
2. What is the first step in buying a home?
As cliche as it might sound, there is no set “First Step” to buy a home. Instead, there are a few things that a prospective home buyer needs to figure out like their budget.
That being said, you might have already picked a city you like. Most people tend to pick a place and then look at what their budget permits. There is not much harm in doing that. Just remember to be flexible during the home buying process as there are numerous variables that affect the real estate industry.
However, setting a budget might be the very first thing you need to do when buying a home. People overestimate the amount of money they can spend on their home loan EMIs. Ideally your loan payments should be upto 30% of your disposable income after taxes. Depending on any other loans you might have, you could have only some percentage of this 30% income available to pay towards your home loan EMI.
In addition, you will also require a downpayment on your house. Take a thorough look at your savings and your income to figure out the down payment you can make and the loan you can take to figure out a budget for your home.
3. How long will it take for me to buy a home?
The home buying timeline depends on each individual buyer. Going through the various steps of buying a home may take different amounts of time for different individuals. On average, it can take a person anywhere between 4-5 months to buy a house.
This, however, is a loose timeline that might not work in your case. Buying a house quicker or later than 4-5 months shouldn’t really be a goal. Here are the things that take the most time when buying a house:
1. Financing your purchase:
A cash offer will automatically make your home buying timeline much shorter than having to get pre-approved for a home loan from a bank or a lending institution.
2. Finding your dream home:
Some find their dream home within days and others take months. But don’t feel rushed to settle on a home. When purchasing an asset that requires a huge investment, taking your time is essential.
3. Negotiating a price:
This is another time-consuming aspect of buying a home that can cut your journey short or elongate it.
4. How many houses should I look at before putting in an offer on one?
As discussed in the previous question, no number of houses is too many or too little when it comes to finding your dream home. On average home buyers have been known to look at 10 houses before making a decision on which one to buy.
As a good rule of thumb, take house tours to one-third of the houses available to you before deciding on one.
This is where Clicbrics truly trumps the traditional home buying experience. With Clicbrics, you can take virtual tours to every single house listing that you like. You won’t have to prioritize one listing over the other and can be sure you’re not missing out on a great house simply because your agent couldn’t share its appeal with you.
5. What documents do I need to apply for a home loan?
Along with your home loan application form filled completely and carefully, the bank requires two types of documents; personal documents of the borrower and property documents.
Here is a list of the personal documents that you will need to furnish while requesting a home loan:
1. Passport size photographs
2. Proof of Identification
3. Proof of Age
4. Proof of Residence
5. Income Documents For Salaried Individuals:
Certified letter from Employer
Payslip of last 2 months
Increment or Promotion letter
IT returns of past 3 years
Income Documents For Self Employed:
Income Tax Returns (ITR) for the last 3 years
Balance Sheet and Profit & Loss Account Statement of the Company/Firm (duly attested by a C.A.)
Business License Details/The license of Professional Practice/Registration Certificate of Establishment
Proof of Business Address
The following is a List of Property documents required for home loans in India:
1. The Deed of Sale or Sale Agreement
2. Receipts issued by the revenue authorities for the taxes paid on the building and land, the certificate of possession, and a certified sketch of the location of the property
3. Allotment Letter from the society, or builder.
4. Original documents of the Receipts of advance payments made for the purchase of flat.
5. Original Receipts of land tax payment and certificate of possession by revenue authorities.
6. A Permission letter from Appropriate Authority.
7. An Approved building plan
8. An Original No Objection Certificate (issued under ULC Act, 1976)
9. A Copy of relative order if agricultural land is converted
10. A No Objection Certificate (NOC) from the Builder or Society
11. A detailed estimate of the cost of construction
6. What amount should I pay for the down payment?
According to Reserve Bank Of India (RBI) guidelines, banks and lending institutions are only allowed to lend up to 80% of the cost of a home. This means that 20% of the cost of any home you’re looking to buy will need to be financed solely through a downpayment.
In addition to this, your credit score could also increase your downpayment and affect your home loan. In case you have an average credit score, 650-710 would make banks charge a higher rate of interest from you. This might push you to take out a smaller loan and make a larger down payment. If you have a credit score lower than 650, you might not even get approved for a loan. In case you do get approved, the bank or lending institution would offer you a lesser loan amount than you asked for at a higher interest rate.
This means that while a good credit score allows you to make a minimum downpayment of 20%, a bad credit score might automatically increase your down payment amount.
We do urge you to consider any other fees or charges along with the down payment. When you take out a home loan. Most banks charge a 1% processing fee for the loan they are giving you, thus making your minimum down payment as follows:
20% Cost of property+ 80% Cost of Property*0.01
7. What is a mortgage and how does it work?
Mortgages are also known as liens against the property. This allows individuals to borrow a large sum of money which can then be paid over a long period of time. In case the individual fails to pay the mortgage amount, the lender can then foreclose, or take possession of the property.
After running a complete credit check and financial assessment of the borrower’s paying capabilities, much like a home loan, the lending institution approves or denies the mortgage request. Post receiving the loan, while the ownership of the home remains with the borrower, the papers are submitted to the lender as mortgages are secured loans with the property as collateral.
Mortgage tenures can vary from 5 years to 40 years. While a mortgage of 40 years helps reduce the monthly financial burden as the monthly mortgage is much lower, it results in a high amount of interest paid by the borrower.
8. What is Stamp Duty and who pays it?
Stamp Duty is a form of tax payable under Section 3 of the Indian Stamp Act, 1899. When you buy property, receiving possession is a major aspect of the transaction. However, to also be a legally recognized transfer of ownership, the property then needs to be registered.
During this registration, your property registration documents are stamped by the regulatory authority. This Stamp makes the document admissible in court as evidence for any future use. Any document not stamped and fully paid (stamp duty) for does not have evidentiary value.
Stamp duty is normally borne by the buyer of the property. It is also to be paid in full when due. The penalty for late stamp duty is 2% per month after the due date and can go up to a maximum penalty of 200%.
9. Should I sell my current property before investing in a new one?
Yes, you can sell your current property before investing in a new one. It also might seem fiscally smart as liquifying an existing property can help you raise the necessary funds to purchase the next one. However, there are some advantages and disadvantages to this scenario.
Advantages of selling your current property before investing in a new one:
1. Liquifying an existing property can give you an accurate idea of your budget and help you make larger down payments which will then lead to a smaller loan.
2. Getting a mortgage on the new house would be easier as you would not have a second mortgage cutting down your credit limit.
Disadvantages of selling your current property before investing in a new one:
1. If the current property you’re selling is one you reside in, you will have a short window of time to find another property to buy and move into. Meanwhile, you will have to find a rental unit.
2. If you’re in a financial crunch at any point after buying a new property without selling an existing one, you might have to then make a sale at lower prices to improve your financial situation.
10. How can I verify the seller’s documents when I buy a house?
Verifying the seller’s document, or a Title Search is done before signing any property related documents to ensure that the seller has the right to sell said property.
There are two types of title verification:
Full Search: This type of title search is done in cases of long-term leasing, sale, or resale of a property.
Limited Search: This is done when the leasing period for a property is less than 13 years.
Here’s how you can do a proper Title Search:
Check the Title: The Title Deed of the property you wish to buy must name the seller as the owner of the property without dispute.
Verify the Mother Document: The mother document is the document that mentions the true owner, or the original owner of the property from whom the chain of ownership began.
Ask for the Encumbrance Certificate: The Encumbrance Certificate indicates that the property you’re buying is no longer mortgaged by the previous owner and any dues on the property have been paid in full.
Compare the Approved Plan with your Unit: Cross-verify the plan approved by the local authorities for your property with the exact and actual plan of your property. If it differs, the property may be illegally encroaching land and is at risk for legal actions in the future.
For someone who wants to invest in property, these questions answer generic queries one might have. However, with every individual and property, the questions tend to get more specific. You might have queries about the particular locality you’re looking at a house in. These will factor into your final decision of buying a house.
A piece of advice: whenever you decide on a house, make sure you do a survey of the neighbourhood as well. After all, this is the place you will be spending a lot of time in. Even if you’re buying a house simply to invest in, selling it in the future will highly depend on whether people want to reside in the locality it is situated in.
If you still have any more questions, Clicbrics will keep coming out with more informative articles and blogs to guide you on your home buying journey.