How To Finance A New Home: How you finance your home is potentially the biggest financial decision you will ever make and almost certainly the biggest purchase. For that reason, you might be tempted to shy away from it for fear of getting it wrong and continue to rent or live with family and friends for as long as possible.

However, while there may seem like there are a confusing number of options for those who cannot afford to buy a property outright, your individual circumstances will narrow down the options available to you.

You’ll almost certainly need a mortgage

As mentioned above, there are those who can afford to buy a property with what they already have in their bank account, but the chances are that if you are reading this, you aren’t one of them. So, the chances are that you will need some sort of mortgage, and this is where it usually starts to get confusing. This first step can be made a lot easier by finding either a person or a website like to do a lot of the groundwork for you and even give you a few options you didn’t know existed.

Check your credit score

The rest of the groundwork you’ll have to do yourself and which of these options apply to you will be based on a number of factors, including your credit score or rating. This indicates how reliable you are at paying back credit and how responsible you are when it comes to taking additional credit on. For this reason, it’s good to check yours and make sure it accurately reflects your financial history, and there are no nasty surprises. If your rating isn’t where you’d like it to be, there are a number of techniques you can use to improve it over 6 months to a year.

Look at the size of your down payment

The conventional wisdom is usually that you put down as much as you can, and there are several reasons for this. Firstly (and most obviously) that the more you put down at the start, the less there is to pay back over the period of the loan. Secondly, lenders have been known to offer better deals to those who put more down at the start, with better interest rates for those who can put down 15% instead of 10%. This can also be help with approval of the property you are buying needs work and could be considered a greater risk by your lender.

Think about your future finances

Once you have narrowed down your options using the criteria above, you might be lucky enough to be in a position where you can look for a mortgage that suits what you want to do in the future. These might include the option to overpay any loan and clear the overall debt faster or provide additional lending over time to improve the property, as a second charge linked to the initial mortgage. Options like these change over time and can depend greatly on where you happen to live.


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