Buying a home with bad credit is just a matter of following the basic guidelines for making any major purchase. Knowing your budget ensures you dont get in over your head. And some quick comparison shopping guarantees you find great rates. The following steps will help you to secure financing at reasonable rates.

Step 1 Know Your Credit History

Do you know if your credit report has any mistakes? How many open credit accounts do you have? If you dont know the answers to these questions, you should take a look at a free copy of your credit report.

You can get your report from the reporting agencies or credit monitoring service companies. You might also want to peek at your credit score to have a general idea of type of loan rates you can qualify for. Dont assume that just because you have some negative credit marks that you have bad credit.

Step 2 Pick Your Financing

There are several different types of financing available to home buyers. You can go the traditional, secure route of a fixed rate mortgage. Or you can choose an interest only loan to get in with a low monthly payment.

Probably the most common loan for people with bad credit is the adjustable rate mortgage. With low rates for the first couple of years, people can qualify to borrow more. Some financing lenders will also allow you to refinance in a couple of years to secure rates.

Picking the right financing package depends on your budget and housing goals. The average family moves out of house in seven years. So paying for points to lower your interest rates doesnt always make sense.

Step 3 Research Lending Companies

Once you have a general idea of what type of financing you need, you can start researching lending companies and their rates. Shopping online allows you more options that just your local lenders. Often financing companies will offer special internet deals that you can find on mortgage broker sites.

The best way to sift through lenders is to request a free initial quote. Compare the APR of each offer, which also includes fees.

Step 4 Lock In Rates

When you have found a good deal, lock in the rates. You can do this by getting pre-approved for your loan. Rates can fluctuate daily, so quotes are no guarantee.