How to know if you’re ready to buy a house?

 A large choice like buying a home requires preparation on both a financial and emotional level. Purchasing a home may be thrilling and terrifying. It implies that you are establishing roots and getting ready for the next stage of your life. However, it also implies that you are assuming the most debt you would conceivably ever have to repay.

The financial reality of getting ready to buy a house can be quite stressful, unclear, and full of concerns like, "Will I be approved for a loan?" How much will I be able to get? How much money do I have for a down payment? The list continues. 

You'll feel more at ease with the investment you're about to make if you learn as much as you can about the home-buying process before making a choice. The greatest approach to prevent unforeseen fees that could make your dream home purchase into a nightmare is through knowledge.

Here are some essential factors that will enable you to decide whether you are prepared to purchase a home:

• Budgeting and Savings

If you plan to purchase a home outright, the most important—and possibly the only—question to answer is whether you have enough money in your savings to cover the cost of the home you want. Banks and other financial organisations won't give you the whole loan amount if you apply for one. While it varies from bank to bank, the loan will never be more than 90% of the home's worth. In this scenario, your savings for a down payment must equal around 10% of the home's worth.

• Good financial standing 

The most important requirement to meet before even considering purchasing a home is sound financial standing. Although banks have their own standards for determining how much of a loan you qualify for, you shouldn't base your choice on those standards. You should be able to assess your monthly expenses and determine how the added burden of a loan might affect them.

To prevent loan defaults, which will lower your credit score, it's critical to maintain a healthy debt-to-income ratio.

• Do you intend to resell?

You can buy a house to live in it or to utilise it as another form of investment. Real estate is frequently cited as a smart investment option that generates large returns. A home loan will typically last for 20 years if you are buying anything for your own use. This indicates that the debt servicing will take up nearly half of your working age.

It's critical for you to assess your capacity to manage a debt with such a protracted term. If you are simply considering the house as an investment opportunity, it would take around five years for it to generate a sizable return. Think long and hard about whether you can afford the investment fo r at least five years, as well as the hazards that come with it.

• Tax advantages 

In an effort to ease the load, a home bought with a loan also offers a few tax advantages. These exemptions are temporary in nature and subject to modification when the Budget is presented, but under the existing rules, you are eligible to deduct up to Rs. 2 lakh from the amount of interest paid on a home loan while it is occupied by you, your family, or is empty. Similar to this, principal repayments up to a maximum of Rs. 1.5 lakh can be written off under Section 80C. There are certain additional requirements that you must meet as a borrower in order to qualify for these deductions, so keep this in mind as you decide whether or not to purchase a home.

• Extra costs 

Purchasing a home is always accompanied with additional costs. Stamp duty, parking fees, and society registration fees are a few examples of them. You would occasionally need to renovate the interior of the home, including the kitchen and storage rooms. Make sure not to overextend yourself by including these costs in your budget. A person should have a debt load of roughly 35%, but a mortgage can increase it to 45–50%. This may be an issue, but the ratio may be worse if you have extra income sources, such as your spouse.

• Current market's condition

Finally, take a look at the market, particularly if you're purchasing a home as an investment. The real estate market is erratic and frequently the first to be affected by a recession. Take a close look at the neighbourhood you wish to buy a house in as well as the current real estate market conditions.

• Your lifestyle

Homeownership might not be the best choice for you right now if you anticipate moving before you can repay the significant upfront costs associated with buying a property.

Nowadays, few people stay employed at the same place for decades, but a renter who is prepared to purchase a home should have employment stability. The likelihood that you will stop paying your mortgage payments and go into default on the loan is reduced if you have solid employment and steady income.

Conclusion

Are you prepared to purchase a home? In a nutshell, if you can afford it, sure. But "afford" isn't as straightforward as how much money you have in your bank account right now. You should factor a wide range of other financial and lifestyle factors into your estimates.

If you take into account all of these components, "if you can afford to do it," it becomes clear that there is more to it than meets the eye. However, taking into account financial aspects before making a purchase might help you avoid costly errors and later financial difficulties.