Make house purchase, a part of overall wealth creation strategy

Usually , buying a home with a home loan is thought of as an independent decision that is not related to investments or financial planning. The decision to buy a house is often made on the basis of how much a lender is willing to give, rather than on the ability to pay based on an overall financial plan. Home or property is just another asset class that forms a part of your over all wealth, and buying a house should be treated as an asset class that fits into your overall wealth planning. So, when the time is right to purchase a home, the first thing that needs to be done is to check how it fits into your overall financial plan. 
BUDGETING, THE FIRST STEP

This first step before you buy a house is to develop a budget. Doing so gives you a better idea on how the new house will affect your total expenses. When budgeting for your purchase, if you are taking a loan, you will have to consider payments such as your own contribution, the fees charged by all the financial institutions, the amount required to be paid upfront, broker's fees, new furniture etc. A home is a long-term purchase and it should fulfill your requirement for the next 7-8 years. So do not cut corners .

Use housing loan to increase your liquidity Mortgage, if used wisely, can be a great financial tool. If you can make more money through investments than what the mortgage costs, it makes perfect sense to keep the mortgage instead. Additionally, it will increase your liquidity, as you will have more financial assets. Although it sounds logical to pay more to save your interest payments, it's not always the best move. You need to consider other issues, such as your need for cash reserves and the yield of your investments. Home equity loans are an attractive borrowing tool for many people these days. DEBT-TO-INCOME RATIO

Having a very high debt level leaves very little money for unforeseen emergencies. From a financial planning perspective, for a single person, the EMIs should not exceed 60-65 % of the net income and for a married person the EMIs should not exceed 35-40 % of the joint income.
Find out if the proportion of your home loan along with other debts like credit card etc fall within this level.

TAX ADVANTAGE

Interest payments on a housing loan are tax deductible. The rates for housing loans are usually lower than those on other types of loans, and they're easy to obtain. The principal part of the EMI on your housing loan is eligible for income tax deduction under Section 80C of the Income Tax Act up to Rs 1 lakh. Further, the interest payable on a home loan is eligible for income tax deduction under Section 24. The maximum deductible amount - maximum interest you can claim for income tax deduction - under Section 24 is Rs 1.5 lakhs. 
Source http://economictimes.indiatimes.com/