Many people dream of buying their own home. Although having good credit makes the process easier, it is still possible to buy a home with bad credit. It may take a bit longer to get a loan, but it can be done.

The first step is to review your credit report. You can obtain a credit report from any one of the three major credit reporting agencies, which are Experian, Equifax, and TransUnion. You are entitled to one free report per year. If you request more than one per year, there is a fee for every report received after the first one.

After you obtain your credit report, determine whether there are any errors. Credit card companies may have reported information incorrectly, and mistakes can be corrected. If you find something you feel is a mistake, you may file a request with the credit bureau to have the entry corrected or removed, depending on the nature of the error.

One option you may want to consider if your credit score is below 650 is waiting a short period of time before buying a home. With very low credit scores, you may be able to obtain a home loan, but the interest rate will probably be very high. Waiting six to twelve months, and trying to improve your credit score during that time, may result in a better interest rate. While you wait, be sure to always pay your bills on time and reduce credit card balances as much as possible.

All home lenders prefer that buyers have a down payment, but for people with poor credit, it is even more important. If you have money to put down, it will greatly improve your chances of getting a loan. Plan on a down payment between ten and twenty percent of the purchase price. The more you can put down, the better.

Home lenders also look at income and job stability. While you are trying to obtain a home loan, it may not be the best time to jump to another job. Lenders want to be sure you have stable, reliable income.

Some lenders may allow a co-signer if your credit is bad. If you have a family member who has good credit, and they are willing to co-sign a loan for you, it may improve your chances of obtaining a home loan. Keep in mind if you default on the loan, the co-signer is responsible for payments.

An alternative way to purchase a home, which may work for people with bad credit, is through a lease-to-own option. Specific details vary depending on the terms the renter and seller agree upon. Generally, these programs work by both parties agreeing to a selling price and a date to sell by, usually 12 to 24 months from the date the lease started.

The renter makes rent payments and a small portion of the rent is set aside to go towards a down payment. It gives the buyer with poor credit time to fix credit problems and qualify for a home loan with the price of the home locked in.