Guide To First-Time Home Buyer Loan

Buying your first home is exciting but also overwhelming, especially when it comes to financing. A home loan designed for first-time buyers often comes with benefits that make the process easier and more affordable.

People easily avoid costly mistakes when they have a proper plan for purchasing a house. Moreover, this allows them to ensure that they do not get entangled in unnecessary expenditure in the future.

Moreover, data from the World Bank suggest that the interest rate on home loans reaches around 8.57%. Thus, this shows that purchasing a home, even with the help of loans, is not really an easy task in India.

However, the terms, conditions, and the rate of interest vary from bank to bank and from the loan provider. Thus, the first-time purchasers of a home should not buy things based on the go with the flow approach.

They should properly check out all the offers available in the market, based on which they should compare all the available loans.

This prevents first-time buyers from getting entangled in unnecessary, misleading expenditure while avoiding the hidden costs.

This article seeks to help people about the first-time home buyer benefit in India.

What Makes You A First-Time Home Buyer: What Are The  First-Time Home Buyer Benefits

The authorities and the government consider you to be a first-time buyer if you have not previously owned a home. Some lenders even consider people who have not purchased properties in a considerable number of years.

Thus, the first-time homebuyer benefit includes lower interest rates, better benefits, and a plethora of other benefits generally not available to others. Thus, first-time buyers should be specifically aware of the benefits offered in the market by various loan providers.

1. Additional Tax Benefits For First-Time Buyers

The purchasers get a standard deduction under section 80C and 24(b). However, the first-time home buyer benefit includes a deduction that goes beyond the standard deduction under section 80EE.

Moreover, this allows the person taking the money to reduce atleast ₹50,000 on home loan interest. However, this is subject to some conditions. The amount of the loan should not exceed ₹35 lakh. On the other hand, the property’s value should remain within ₹50 lakh.

Moreover, these savings reduce the tax liabilities and, at the same time, reduce the liability for the person who is taking the loan.

Thus, the borrower should always utilise the first-time home buyer benefit when it is available to them.

2. Lower Interest Rates And Special Schemes

The borrowers receive preferential interest rates. Moreover, the lenders provide these benefits under the  first-time home buyer benefit.

Governments often back several affordable housing schemes and provide low-cost loans with subsidies. However, the homes should be priced within a certain range. The buyers should always seek available schemes in their own states.

How Much Should You Borrow?

The criteria for borrowable loans remain high so that the lenders can lend money. However, people should understand that they should cut their coat according to their cloth. Thus, they should not borrow more than they can repay.

The borrowers should calculate their monthly income and deduct all the expenditures from it, and then decide if they can actually afford it.

The borrowers should try to keep the loan amount at least below 40% of their total monthly income.

The borrower should also keep other factors in mind, such as registration, stamp duty, and interiors. Moreover, these things come up as additional costs.

Building A Strong Credit Profile

The credit scores often play a very important role. Thus, the first-time buyers should keep in mind their credit scores as well.

The users should use their credit cards and others more responsibly, before they avail the first-time home buyer benefit.

First-time buyers often have limited credit history. Moreover, a credit score of at atleast 750 significantly improves the chances of getting proper approval. The borrowers can avail themselves of lower interest rates and other things.

The people with lower scores should first try to improve their score before trying to avail the first-time home buyer benefit

Choosing The Right Property

The borrowers should decide if they wish to move into a ready-to-move home or whether they want to go for an under-construction property. Moreover, the under-construction properties often cost less than the ready-to-move ones.

However, they may be subject to risks related to the property’s completion. On the otherhand, the buyers can move immediately into the completed homes.

The property should clear all the legal ties, including government approvals and other problems. First-time buyers should also purchase land in areas where they find good infrastructure in their surroundings.

Understanding Loan-to-Value Ratio

Lenders typically finance 75-90% of the property value, depending on the loan amount and property type. This means you need to arrange 10-25% as a down payment.

A higher down payment reduces your loan amount, lowers your EMI, and decreases the total interest you’ll pay over the tenure. Start saving early to build a substantial down payment.

Calculating The True Cost Of Borrowing

Your home loan cost isn’t just the principal and interest. Add in processing fees, legal charges, property valuation fees, and insurance premiums.

Some lenders also charge for prepayment or foreclosure. Request a detailed cost breakdown before signing the agreement so you’re not caught off guard by hidden expenses.

Preparing Documentation

Gather all necessary documents before applying. You’ll need identity proof, address proof, income proof (salary slips or income tax returns), bank statements, and property documents.

Having everything ready speeds up the approval process and reduces back-and-forth with the lender.

Avoid Over-Leveraging Yourself

It’s tempting to stretch your budget to buy a larger or better-located property, but over-borrowing can lead to financial stress.

Stick to a property you can comfortably afford, considering your current income and future plans. Homeownership should improve your life, not burden it.

Things To Understand About The First-Time Home Buyer Benefit

First-time home buyers benefit from additional tax deductions, special schemes, and often lower interest rates. Build a strong credit profile, save for a substantial down payment, choose the right property, and borrow only what you can comfortably repay.

With careful planning and understanding of the process, your first home purchase can be smooth and financially sound.