"Go step by step"

Mumbai: There are some people who manage to find a home within a few months and get the home loan disbursed almost immediately while others spend fruitless years endeavouring to do so. What sets the two categories apart is preparation. While it may sound like a cliché, when it comes to finding and funding real estate, it really helps to do your home work first.

Take a more informed approach towards purchasing and financing a new home. Begin with the venue. Decide on the location or area where you would like to buy a house. Consider whether your family would like to shift and stay there or if it is being looked at from the investment perspective.

If it is for personal consumption, then check in for the locality, the culture and your comfort level to gel with the surroundings and infrastructure requirements. If it is for investment purpose then be sure about the expected capital appreciation you are anticipating and what kind of cash flow it will generate in the form of rent.

The next step is arranging margin money: Most banks finance up to 85% of the transaction price. If an apartment costs up to Rs. 30 lakh including all the paper work, then a minimum of six to seven lakh by way of down payment has to planned for, so before deciding on the purchase start making provisions for margin money.

The most volatile issue for an investor is whether to go in for the fixed or floating rate option. Experts have always suggested that it is better to go in for floating interest rates as they are comparatively cheaper than the fixed loan component over the long term. There will always be an interest rate difference of 1 to 2% between prevailing fixed and floating rates of interest at any given point of time. It is advisable to weigh all the pros and cons and decide on the future taking into account expert advice.

The actual home loan amount sanctioned by a lending institution is determined after taking into account factors like repayment capacity, age, educational qualifications, stability and continuity of income, number of dependents, co-applicant's income, assets, liabilities, saving habits, etc.

Documentation required to avail of loans is fairly standardized across the industry.Some of the documents revolve around the individuals' proof of income earned, taxes paid, current place of residence and other government certified documents that further lend credence to the individuals' claims such as passport, ration card, voter identity card etc.Keep all your financial documents like form16, bank statement photographs, etc ready to cut down the time of loan sanction and disbursement.

The sensible thing is to get a home loan sanction in advance from a bank or home finance company. Based on your income particulars, that amount also gives you the upper limit of your budget. That way, you will not waste time looking at homes that you cannot afford.

Plus, once you identify the right house, since your loan sanction is already in place, disbursement will be done quite rapidly. So it really makes sense to do the financial groundwork in advance rather than wait till the day you find a suitable house to file your home loan application.

If you are not comfortable discussing financial matters with a stranger, there is a quicker way - just log onto the Internet at home or the office. Several housing finance institutions provide an on-line EMI and eligibility calculator, which will give you some indication of how much you can borrow.

Pawan Swamy, managing director (West India), Jones Lang LaSalle Meghraj, points out that a family earning Rs. 12 lakh a year can afford to buy a house worth 60 lakh factoring in generalized expenditure and saving patterns. Banks also see this as a safe lending norm.

Source: DNA Space dated 07/08/09