An increasing number of youngsters are realizing that there is great merit in taking financial planning seriously to buy a home as early as possible. Can you buy a home in 3 years? With the right financial planning, yes.
Whether you want to buy a home for investment purposes or for living, the sooner you start, the better it is. The conventional wisdom was that people waited to get settled in life – get married and have kids – before buying a home. Until then, they either lived with their parents or planned to live in a rented home for many years. The question of buying a home arose near the retirement age.
It was because there were no efficient financial tools available as they are now. You can get a home loan and in fact, it is easier to get a home loan at a younger age. You can even get a loan to make the down payment these days so it’s not like you need to first save a huge sum of money. With good salaries, good employment opportunities, and a little bit of financial planning, you can buy a home sooner than later.
Recent studies have shown that the average unit size demand for homes has increased by 4%. With better salaries and the standard of living improving constantly, prospective homebuyers are looking for apartments and houses that are at least 1300 sq. feet. There has also been a construction boom concurrent with the demand for high-quality housing units.
Listed below are a few financial planning tips you can implement to buy a house or home early, even within three years.
Long gone are the days when people started thinking of buying a house in their middle age. It is better to start early, in fact, as early as possible. There are many youngsters who start saving towards their home investments from the first job itself these days.
Although it is a bit difficult to get a home loan when you have had a job just for a few months, there are many habits that you can start implementing from the word go. Build a good credit score and for that, make sure that you make all your credit card payments on time, or even earlier. Avoid spending money on wasteful activities thinking that you are too young to save. Get qualified advice on financial planning on how you can start saving as much as possible as a youngster.
Even in the early stage of your career decide how much money you are going to save every month. For proper financial planning, you can prepare a budget. A budget will allow you to remain within the peripheries of your expenditure expectations. Prepare a list of all your expenses. Build separate columns for necessary and unnecessary expenses. You don’t have to remove all the unnecessary expenses as you don’t want to live a spartan life but try to minimize them as much as possible according to the amount of money you want to save every month.
Suppose in the next 3 years you want to save Rs. 5,00,000 for the purpose of down payment. You have 36 months. Approximately, you must save Rs. 14,000 per month. Create a budget that no matter what happens, you can save Rs.14,000, preferably in a separate bank account.
Given the choice, everybody would want to buy a mansion. You may set your eye on a duplex apartment in the heart of the city that is INR 2 crores upwards. If your monthly salary or income doesn’t match the property you would like to buy in a period of three years, it is better to look for a property that does.
How much down payment are you going to be able to save in the next 3 years? Take the previous example: Rs. 5 Lakh? With this much down payment available to you, how much loan will you get? Use home loan calculators available on various bank websites as well as credit websites. Then, according to the down payment, you are going to have and the loan you are going to get, look for properties. Select a few properties and according to them, begin your financial planning.
Do you know you can save more than you actually save? The money that you are saving can grow on its own if you invest it properly. You can invest in mutual funds that can give you a return of 10-15%. You can put your money in a recurring deposit that gives a 7-8% per annum interest compared to just 4% per annum for a savings account. Fixed deposits and recurring deposits are risk-free. By chance, if you inherit some money or chance upon some extra cash, buy a smaller property somewhere. You can sell the property later when its value has increased. You can also work with a portfolio manager to strategically invest your money in various financial assets so that it grows faster.
For better loan prospects, maintain your credit score above 750. Almost everyone these days uses credit cards. Unbeknownst to you, you can sully your credit score by not settling your dues on time. You keep receiving calls from your bank, but you don’t get time or you don’t prioritize paying your credit card bills. This affects your credit score.
A good credit score gives you bargaining power. Remember that when you take a loan, you pay the EMIs for many years, sometimes even for more than 30 years. Hence, if your interest rate is adjusted even for a small decimal point (6.7% per annum to 6.5% per annum), it can make a huge difference. The ability to bargain for a lower interest rate can only be obtained if your credit score is good.
When you have just started your financial planning, or even when you are just thinking of how to plan financially to buy a home in the near future, maybe in 3 years, it may seem like a distant dream. But as your savings grow, as you alter your habits to grow your wealth and grow it at least to a level that enables you to make the down payment for your home, to your pleasant surprise, you will discover that it is not as insurmountable as it seems.
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