Things to avoid that can deteriorates your financial stability for buying a home

Posted on 12 Jan 2021

Investing in a property requires lots of courage not only mentally but financially too. It is probably one of the biggest investments we ever make in a lifetime and that is why it should be done with proper planning and strategy.

Before potential buyers go for house hunting, first they verify their financial capability and then they begin their search. House hunting isn't an easy task, it will not be wrong to say that it is like finding a needle in a haystack. From battling with other buyers to securing a loan, indeed, readying to buy a property is stressful. And when it comes to securing a home loan, the last thing you want is to drag out, or appear as an ineligible borrower due to mismanagement of your manageable financial condition.

Consistency is the key to manage finances for buying a home because it is a long term process that begins even before you go on house hunt or ends till the time you pay the last EMI to clear it off. However, it is alright to lose a spot for once or twice but what happens is often a potential home buyer either fails to manage the finance while looking for a house or takes it lightly or gets confused. Your credit and finances need to be monitored right up until your loan closes.

Here are the prime things that you should avoid doing for maintaining a stable financial condition for buying a house:

  • Don't go for new debt - The very first thing you need to keep in mind while managing the finance for home is to not to take on any new debt and if possible try to settle the previous one. Sometimes, potential buyers think it is okay to go for a small debt to financially aid the house hunting but it affects your credit score adversely. The decision of buying a property brings along the list of expenses, from the fee of a realtor to the cost of acquiring a loan to the interior of the house and the list goes on. Credit score plays a very critical role in determining your creditworthiness so don't depend on debts to pay the short expenses.

  • Don't try to change your credit score just before applying for a loan - As soon as you decide to buy the house, get the report of your credit score and check it, if you find any error, apply for the correction. Complete this thing and once you get the notification regarding the correction, apply for a home loan. Usually what buyers do is, first they apply for a home loan and then try to disrupt the credit score, which might delay your home loan process because this correction can take months. At the time of the home loan, if you disrupt your credit score, it can increase your credit score artificially which many banks do not accept.

  • Don't delay the payments of credit cards and EMIs - If you use a credit card then do not delay its bill payment, clear it three-four days before the last date as it brings a significant change in your credit score. Along with it do not in any condition delay EMIs of the debt if you have one. Often while looking for property individuals tend to forget EMI as it could have serious consequences. A missed credit card bill/EMI or delayed can lower your credit score that could jeopardize your chances of securing a loan. Even if your score isn’t low enough to disqualify you, a delayed and missed payment is a big change that might deteriorate your creditworthiness.

  • Don't spend money unnecessarily - Hold the reins of your financial expenditures, many small expenses are reoccurring in nature and for that, you need to maintain your liquid position. That's the reason you shouldn't move your money around once you decide to own a home, especially if you had already applied for the home loan because your loan approval is based on the financial image presented at the time of application.  Now any changes you make whether it is adding or taking away money will impact.

Final thoughts
Owning a home is a big decision, don't let your financial stability affect it. Be wise enough to control your income-expenditure balance. You will have to make choices to ensure you have a sufficient amount in the bank account to deal with any type of situation because the home loan process can take time.

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