Owning a home is the dream of every individual. The decision to buy a home is one of the biggest decisions in life. At one time, people used to buy a home only close to retirement when they had sufficient savings. It was not very easy to a take loan to buy a house. However, the scenario has changed quite a bit in the last one decade or so. Now, we see people buy a house in their mid to late twenties. In some cases, even before they get married.

This could be attributed to many factors. Some of the main reasons for this paradigm shift include the rise in earnings of the middle class, easy financing norms, and tax benefits available. Banks provide home loans to buy a site and build a house, buy an under-construction flat or buy a ready flat or house. Usually, banks insist on down-payment of 10 to 20 percent by the owner and fund the remaining amount through a loan. Banks check these factors while allotting a home loan:

Income and potential

The income of the applicant is the primary factor that banks look at before processing a home loan application. In some cases, the bank also considers the growth potential of the applicant as well.

Stability of income and age

A home loan is a long-term affair (usually the tenure is 10 to 20 years). Banks look for stability of the source of income.

The age of the applicant is considered while fixing the repayment tenure. Family history like number of earning members in house, number of dependents etc is also significant.

Ieally, it is good for the investors to check their loan eligibility based on their earning potential first. Once they know their loan eligibility they can identify a property they would like to invest in. Once the property is identified, they can apply for the loan.

Buying a home is an expensive deal and for most people it is an once-in-a-lifetime matter. Therefore, it is very important for buyers to plan their financial matters carefully. Also, if you are planning to take a long-term home loan to fund your dream home, it becomes even more important to plan fund inflows and outflows carefully.

These are some of the important factors that buyers should keep in mind while planning to buy a home with a home loan:

Personal requirement of space: Investments in a house is quite illiquid. It's not easy to sell and buy houses. Therefore, it is very important to carefully think and identify the minimum space requirements to fulfill your family needs based on your budget.

Location of house : This is another important factor to analyse while buying a house. The location of the property should cater to your family's needs.

Financial planning: For efficient finance planning, it is important to identify major events in life that will demand cash outflows. For example, children's education, marriage, savings for retirement etc. Also, you need to plan some contingency savings to fund any unforeseen events.

Tax saving: There is a tax rebate of upto Rs 1.5 lakhs on interest paid on home loans, and Rs 1 lakh on repayment of principal. Thus, home loans play a very important role in your tax planning as well.

Source: http://economictimes.indiatimes.com/ET_Features/
Financial_Times/Planning_a_home_loan/articleshow/2588722.cms