What Are Some Tips to Buy Your Dream Home With a Single Income?
“The ache for home lives in all of us. The safe place where we can go as we are and not be questioned” - Maya Angelou
Owning a home has been a dream passed on from generation to generation. It is one of the common ideologies shared by Generation X and Millennials. Millennials, in particular, are showing increased curiosity in learning the tips to buy dream home with a single income.
Previously, buying a home has been considered as a venture by the whole family. Married couples were more interested and invested in calling a place their home. But it all changed when Millennials entered the equation.
Millennials belong to a generation that witnessed and continues to witness drastic changes in all sectors - from technology to real estate. They went from using keypad phones to touch screen phones within a very short time.
However, it is not only Millennials that are looking for tips to buy dream homes with a single income. Single income households are also looking for such tips. For at the end of the day, having a place to call home is the biggest dream for many of us.
Is It Possible To Buy a Home With a Single Income?
Yes, it is possible to afford a house on a single income. If you are looking to purchase a home on a single income, you are either-
From a single income household or
Someone who wants to own a house independently.
Either way, following some tips and suggestions and researching, you can become a homeowner with one income.
Besides, there are several top real estate companies in Vizag and Hyderabad that support you throughout the process of buying a home. Some of them also provide end to end support to their clients. That is, they guide the clients from searching for a house to registering one.
Let us explore some common tips to buy your dream home with a single income-
The first tip would be to assess and finalise an estimation of the budget. Research the market value for your desired property. That is, if you are looking for a 2BHK research the prices of such projects. Also look into an estimation of additional costs like interiors and maintenance fees. This would give you an approximate calculation of the budget that you would need.
Another popular tip to buy your dream home with a single income is to maintain a decent credit profile. To secure a good home loan, you will need a strong credit profile history. The following are some tips to maintain a good credit history-
Before applying for a loan, make sure that you do not make expensive purchases. Ideally, the purchases before a loan application should not exceed Rs. 65,000.
Do not cancel your credit cards before applying for a loan. This can reduce your credit life period.
Maintain a good credit score. This can be done by paying off your credit bills on time.
Pay off any previous loans before applying for a home loan.
Maintain a debt to income ratio. It is the income earned by an individual that is used to pay off debts.
Home Loans and Down Payments
Before applying for a home loan, it is best to research the different home loans available in the market. Some institutions do not charge a processing fee. Some have easy documentation processes. Some allow you to choose between fixed and floating interest rates.
The next step is to check if you meet the eligibility criteria for home loans.
According to the Reserve Bank of India (RBI) guidelines, the lenders can only approve a loan up to 80% of the property’s value. That is, a bank can provide you with a loan that is equal to 80% of the property’s price. The remaining 20% should be paid by you - the buyer.
Here are some features of a home loan down payment -
Lenders ask for 20% of the property value as a down payment. Down payments below 20% are not allowed.
There is no maximum limit for a home loan down payment.
The higher the down payment is, the lower the loan amount would be. This further results in a reduction in the loan’s EMI.
Before finalizing on a home loan, it is always beneficial to go through the terms and conditions of the loan thoroughly.
Guarantor for Loan
Home loan on single income is possible. There will be an option to add a third party to home loans. They are referred to as the guarantor for the loan.
Having a guarantor is not mandatory. However, having one will help speed up the loan process. There are a few things to be understood by both you and the guarantor before closing the deal. They are briefly mentioned as below-
Once the guarantor signs the loan documents, he becomes partly liable to pay the loan.
If and when you fail to make payments in regards to the loan, the guarantor will be responsible to make the payment.
The guarantor’s eligibility for a loan would be reduced. That is, there are fewer chances for him to avail a loan on his name.
It seems easy to suggest someone to save money to make a down payment. However, it may not be easy to make such savings for some, especially for single income households. Below are some options one can consider to use towards the down payment-
A loan from the individual’s employer
A gold loan
EMI (Equated Monthly Instalment)
One of the most important tips to buy your dream home with a single income is to understand the EMI of the home loan.
For a home loan on a single income, selecting an EMI plan is important. It is generally suggested that the EMI can equal up to 40% of your income. This would allow you to make space for household and day to day expenses.
For a home loan, the ideal loan repayment period is between fifteen and twenty years.
Be alert and keep tabs on any revisions in the policies or government exemptions. It would help in keeping you in the loop with the banking market.
Insurance Protection Plans
It is always safe to have insurance protection to fall back on. Insurance provides a safety net if and when an emergency rises. It will benefit your nominees to either pay off your home loan or be used as an emergency fund.
It is both wise and nice to have a backup plan. Saving some amount as emergency funds will help you to float on your rainy days. Emergencies can rise during the pre-purchase period or the post-purchase period. In such cases, your emergency funds will have your back.
The current COVID-19 pandemic has brought in changes everywhere. It has affected all the sectors, including real estate. It has extended its reach into the buying and selling of properties. It has affected us economically and socially.
However, having a single or double income does not decide what you can dream and achieve. The dream of owning a house, however big or small, is everyone’s right. Buying a house on a single income is doable but would require a tad bit more effort than a dual income household.
Starting savings a bit early in life would also be very beneficial, especially for the single income households. You can try to-
Set a practical money-saving plan
Explore first time buyer schemes
Invest where you are likely to get higher returns
It may seem like there is a whole lot to take in. It is true that buying a home is not an easy task. But it need not be a difficult task either. A little patience and a lot of research will take you a long way. Moreover, there are many firms that would help and guide you through the entire process. You can also find several articles online that would familiarize you with the real estate market.
You can refer to our previous articles - “Will Real Estate Continue to Remain the Safest Investment During This Pandemic?” and “Tips for Buying Property During Lockdown” for more information on the real estate market in relation to the pandemic.
Also, do keep an eye out on our blog for more tips and suggestions relating to real estate!
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