Owning a home is part of the American dream. Its also the biggest purchase that most of us will ever make, and because of that, almost everyone will be borrowing money to do it. Unfortunately, for many people that means a bad credit home loan, and that might be hard to get.

Its simple. Imagine going to a bank and asking for $200,000. And then imagine that you have bad credit. Youre always behind on your bills, your credit cards are stretched to the limit or you have no credit cards and you have no collateral. Now try and imagine what the bank will say.

Having a home is a big part of the American dream, but having bad credit is a big part of the American reality. There are a lot of people with bad credit who want to buy homes, but how can they convince a bank or other lender to give them money if its clear theyve never been able to pay their bills on time?

The first thing to do if youre contemplating buying a home and you have bad credit is to try and establish good credit. Make sure you pay your bills promptly. If you dont have a major credit card, get one, use it and pay the bills promptly. Youre trying to convince a lender that you can be trusted to pay back money youve borrowed. Next, you want to carefully check your credit score.

Your credit score is a history of all of your financial activity as it pertains to credit; in other words, how much and how often you have borrowed and how promptly youve paid it back. Credit scores are generated by three companies: Experian; Equifax; and TransUnion, and youre allowed one free credit report a year from each of these companies. If youre thinking of borrowing for a house, check your credit report; its entirely possible that there are mistakes that could lower your score.

Now assume that youre on your way to establishing credit (but youre not quite there yet) and your credit report is accurate. The next step is to find someone who is willing to lend you money, and that is probably the easiest step of all. With so many Americans have bad credit, mortgage companies have responded by loosening restrictions on loans and almost all of them have special bad credit programs. Of course, these people arent giving the money away. Youll still have to go through the application process and there are some criteria loan-to-value ratio, debt-to-income ratio, and monthly income that they will use to determine whether or not you are a good risk. However, dont forget that if you have bad credit and a mortgage company is willing to talk to you, they want your business, so dont be afraid to negotiate.

But what if the private mortgage companies and the banks turn you down? Are you out of options? Not at all. There are a lot of different ways you can get money for a house if you have bad credit. A good place to check is the Federal Housing Authority (FHA.) FHA loans have very generous conditions (the down payment can be as low as 3% or less), they are willing to help people with bad credit and they have various programs that offer excellent deals to professional people police officers, teachers to encourage them to become homeowners in the community where they work. Another good choice is Fannie Mae. This private company can make home loans easily available even if you have bad credit through their Expanded Approval Program.

Getting a bad credit home loan can take extra time, but its worth the effort. Interest rates are low and there are a lot of options. Dont delay your dream.