Do you have a bad credit history, and you're planning to buy a new home for the first time? You may have heard or been told by a financial services representative in Tennessee that first-time homebuyers who have FICO scores below 580 do not get credit easily.
As per the FICO credit scoring scale, bad credit scores fall within the range of 300 and 579. You need to have a credit score above 580 to be eligible for a home loan. Mortgage lenders always consider this aspect before lending money to buy a new home.
Fortunately, although you have bad credit, some professional credit repair companies like Total Credit Solutions can help you repair your credit score to ease home-mortgage.
Tips for first-time buyers with low credit scores
If you have bad credit, buying a first home will not be easy. With a negative credit history and poor credit score, you cannot get a mortgage at attractive interest rates. So, your wealth management advisor in Tennessee will suggest repairing your credit to realize your dream of buying your first home a reality.
Order your credit report
US citizens are permitted to get their free credit reports per year. Upon accessing your credit report, your credit advisor in Tennessee will ask you to check for any errors and take the mandatory corrective measures. All you need to do is send a letter to the concerned credit reporting agencies.
Lower Your Debt
If you're nearing your maximum credit limit, you should take steps to lower your debt. Only by reducing your debt can you boost your credit score.
A professional credit management services provider will suggest reducing your debt by paying the loans with high interest rates every month. Also, pay the minimum amount due on your other loan accounts every month.
After your account shows a balance lower than 30% of the maximum credit limit, proceed by clearing your payments of other accounts.
More so, the finance management TN experts recommend paying the outstanding amount on your credit card. It would be best if you cleared your auto and personal loans' balances. By reducing your monthly debt payments, you can improve your debt-to-income (DTI) ratio, which is the part of your gross monthly income that you spend on repaying your debts.
The wealth management companies propose maintaining your total DTI ratio at 43% or below, for mortgage lenders will lend money to you more readily then.
Talk to Mortgage Lenders
Although you're not able to buy a home as of now, you may want to consult your mortgage lender. They can help by checking your credit score and following suggestions to improve your credit score.
Further, your Tennessee credit management company representatives can guide you on the different types of loans available after repairing your credit.
Find new ways of earning income.
The reputed wealth management firms will advise you to look for additional means of earning extra income. Consequently, besides paying your debts, you can also save for a down payment. For this, you can work overtime at your job or take up a side hustle.
With higher income, you can not only reduce your DTI ratio but also become eligible for a mortgage.
Note that your job history says a lot about your financial position to lenders. So, work towards having a 2-year history of regular employment.
Make a larger down payment.
As a first-time homebuyer with a bad credit history, you can compensate by increasing your down payment. If you do so, you can assure your lender that you will not default on your payments. As such, they will be more inclined to lend to you as compared to a borrower who pays a lesser down payment.
Apart from that, the credit repair for mortgage approval managers will advocate making a larger down payment. In turn, you can reduce your monthly mortgage payouts since you're making less money.
Improve your credit score by calling on the financial experts at Memphis, Tennessee, USA, today.
An important point to note is that you've to be consistent in your efforts of repairing credit if you have a bad credit history. Nonetheless, a credit repair services company Tennessee advisor can help you all along the way.