Buy A House - Eligibility Calculator

As humans, we all have a natural desire to own a place we can call home. It’s a dream we’ve all had since we were young and it’s something we hope to achieve in our adult lives. Owning a home is not only a financial investment but also an emotional one, and it’s a decision that shouldn’t be taken lightly.

Before making the leap into homeownership, there are several things you need to consider. Financially, you need to make sure that you are ready to handle the responsibilities that come with owning a home. Emotionally, you need to make sure that you are ready to settle down in one place for an extended period of time.

In this article, we will be discussing three important criteria you need to meet before you think of buying a house.

1) Your home loan EMI should not exceed 30% of your monthly income.

The first criterion to consider before buying a house is your financial situation. Owning a house comes with several financial responsibilities such as paying the mortgage, property taxes, and maintenance costs. Therefore, it’s important to make sure that you can afford to buy a house without putting too much strain on your finances.

A good rule of thumb is to make sure that your home loan EMI (Equated Monthly Installment) does not exceed 30% of your monthly income. This means that you should only consider buying a house if you have a stable source of income and enough savings to cover the monthly mortgage payments.

If your home loan EMI is more than 30% of your monthly income, it can be challenging to manage your finances and make ends meet. You may have to cut back on your other expenses, such as entertainment and dining out, to make sure that you can afford your monthly mortgage payments.

2) You should have at least 6 months of expenses in your emergency fund (including your EMIs)

The second criterion to consider before buying a house is your emergency fund. An emergency fund is a savings account that you can use to cover unexpected expenses such as medical bills, car repairs, or job loss.

Having an emergency fund is crucial when you own a house because unexpected expenses can arise at any time, and you need to be financially prepared to handle them. It’s recommended that you have at least 6 months of expenses in your emergency fund, including your home loan EMI.

If you don’t have an emergency fund, you may have to dip into your savings or take out a loan to cover unexpected expenses. This can put a strain on your finances and make it difficult to keep up with your monthly mortgage payments.

3) You should have an insurance cover of 1.2x of your home loan

The third criterion to consider before buying a house is your insurance coverage. Home insurance is essential when you own a house because it protects you from financial loss in case of any damage or theft. It’s recommended that you have an insurance cover of 1.2x of your home loan.

Home insurance covers your house and its contents against risks such as fire, theft, and natural calamities. It also covers any liability you may have in case of any damage or injury to a third party on your property.

Having the right insurance coverage can provide you with peace of mind and protect your finances in case of any unforeseen circumstances.

By meeting the above criteria, you can ensure that you are financially ready to take on the responsibility of owning a house. Owning a house can be a fulfilling experience, but it’s essential to make sure that you are not putting too much strain on your finances.

To help you determine if you meet the financial criteria to buy a house, we have created an Excel file that you can download for free. The Excel file will help you calculate your home loan EMI, emergency fund, and insurance coverage to determine if you are financially ready to buy a house.

We encourage you to download the Excel file and take the first step towards homeownership. Owning a house is a dream that many people share, and with proper financial planning, it’s a dream that can become a reality.

*Open this file with google sheets