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Buy A House Without Money
The home loan is certainly a good thing for those who long to buy a house but cant meet the expense of one. With various housing finance companies (hfcs) and banks growing, getting a home loan never seemed easier!
To begin with, clear all your earlier loans. Your Loan eligibility depends on your repayment capacity and your ability to qualify for a mortgage. A lender looks at what is called your debt-to-income ratio, which is the percentage of your gross monthly income that you spend on debt. This will include your monthly housing costs, including principal and interest, and any other loans you have.

Having other loans while approaching an HFC or bank for a home loan generally spoils your chances of getting a loan. This is because, the more your debts, your debt to income ratio gets adversely compromised. For instance, if you have say a personal loan while approaching for a home loan, the HFC or bank-knows-that there already is an X amount that is being spent on the repayment of loan.

Keeping in mind your income, the lender has to decide- whether you can afford an additional Y amount-for the repayment of the home loan-over and above your monthly expenses. In the whole process, you may end up getting a lower amount than you want, depending on your income, of course.

Paying credit, cards down to below 50 per cent of your credit limit generally helps in boosting ones credit-worthiness. But think before you pay off all your debts. Will that leave you with enough cash to take care of your down payment, processing fees and other such costs? If no, then paying off all your debts is not such a good idea.

In other words, dont deplete your entire savings to pay off your credit card loan or any other loans. Its important to keep sufficient money aside to meet all the inevitable expenses related with buying a house-the brokers charges, the loan processing charges, etc.

Financial security is an important aspect in determining your loan eligibility. So, if you-are looking out for a home loan, then it is not the best time to change your job. It is especially difficult for a salaried person moving to self-employment to reflect stability. To get a loan if you are self-employed, you need to have three years of tax returns filed as a self-employed individual. Lending institutions like to see steady employment and generally insist that self-employers show three years of successful income. Now, that can be quite a task if you have just made the shift from the salaried position to the self-employed position!

Considering all the inevitable difficulties, it is a good idea to delay the change of job until you purchase your new home. Similarly, as a self-employed person if you are considering changing your business from a sole proprietorship to a partnership or company, put that on hold at least until your home loan is sanctioned.

In order to determine your financial status, HFCs or banks will want to check all your account statements for the past six months, which includes your savings accounts, money market funds, stocks, mutual funds and any other investment. So, it is not advisable to unnecessarily, move your money between accounts as this could indicate that there are large deposits and withdrawals in some of your saving accounts.

Moving your money around, even if you are consolidating your funds, could make it more difficult for the lender to figure out what your inflows and outflows have been. And this in turn could make it more difficult for the HFC or bank to approve your loan.

And then, paperwork is a tedious yet significant aspect of getting a home loan. Often you may not even be aware of all the required documents such as an original agreement with the builder or developer, a copy of approved drawings of the proposed construction or purchase, copies of receipts of payments made to the builder or developer, the allotment letter of the co-operative society or association of apartment owners, etc.

You could make a checklist of all the required documents that will guide you in gathering the documents needed when applying for a loan. With a good lender, once the paperwork is in order, almost half the work is done!
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Posted on : 15/11/2005
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