“Do you really need to buy a house?” If I was paid a dollar for the number of times I was asked this question, I would have been a millionaire by now.
Purchasing a property and particularly a house was on my bucket list forever. It is indeed a major milestone. When I decided to finally go in for a purchase, I got down to doing a bit of research. Unfortunately, the concept of a small business owner/freelancer buying a house is still an alien concept in India. Particularly if you are a single woman. I did not have a guide to refer to. By sharing my experiences, I hope to help freelancers and small business owners smoothly sail through the process.
Build a strong corpus
First and foremost, you need to decide the average cost of the house you plan to purchase and build a strong corpus. The payments as a freelancer are often sporadic. Although banks fund around 80% of the cost, I would suggest building a corpus of at least 40% of the cost as fluid investments. This would not only take care of the loan downpayment but also the additional costs such as registration fees, transfer fees, etc. Furthermore, it helps in the loan approval process when you have a substantial amount to show as a fallback when payments are delayed. It is only fair for the bank to confirm that you have the ability to pay back the loan.
Another thing to keep in mind is the cash component. The whole black vs. white thing. The bank would approve the ongoing price listed at the registrar’s that is not necessarily the actual price of the property. It is often only 75% of the original price. Make sure the corpus accommodates this price difference.
Check your credit score
Next, check your credit score. If you use a credit card, ensure that you don’t have a large amount pending. If you already have a car loan, it might actually help in approval. There are a number of services such as bankbazaar.com out there that allow you to check the score. Freelancer or not, an average to bad score is definitely a deal-breaker. Work on improving it before applying for the loan.
Get your taxes in order
Do you pay your taxes as an individual or a company? The balance sheets and profit and loss statements have a lot of say in the approval process if you are a freelancer. This really worked for me since I was able to prove I had a substantial amount of earnings in the previous few years.
Do a fair bit of research before purchasing
When I went house hunting, it was just me and my mother. With no man in tow, the brokers did expect that they could pull a fast one. Do a fair bit of research before purchasing. If a deal appears too good to be true, it probably is. Acquaint yourself with the process beforehand.
Similarly, research the banks and the interest rates offered. Does the bank offer a fixed rate or a floating rate? Do they charge a penalty for prepayment (the RBI guideline is only limited to the floating rate loans)? The first bank I approached (due to their competitive interest rate) insisted on including my mother as a borrower since she had a regular pension. I refused to agree and moved to the bank I have been dealing with for the past 22 years. Lesson learned. It is best to go with your home bank if you are a freelancer. The bank account where you receive the payments. They are aware of your finances.Are you a Freelancer planning to Purchase a House? Irregular Payments need not be a Deal-breaker. #BohoPonderings #MyFriendAlexa Click To Tweet
Buy that home loan insurance
Life is unpredictable. I did not want my mother or my brother to be stuck with repayment of my loan in case of any eventuality. It might appear to be a long shot, and a lot tempting to use that money for prepayments. Do your loved ones a favor and buy that home loan insurance.
Check and recheck the property documents
Opting for a home loan actually works in your favor here. Banks require the property to be registered in your name before they release the payment cheques to the seller. The bank representative ensures that the property registration and transfer documents are in order. That said, do check and recheck the documents. Do not be afraid to ask questions. It is your hard-earned money here.
Update and transfer all property related connections and records
Electricity, water, and, piped gas connection. Property tax records. There are numerous records that need to be updated. Make sure you transfer them to your name. Most brokers may suggest otherwise but dig your heels in. You could be in for an unpleasant surprise later.
I had quite a harrowing experience purchasing a house, but you don’t need to. Irregular payments need not be a deal-breaker. With a fair bit of planning, you can indeed purchase that dream house.
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