The dream of homeownership fills your heart and mind no matter your current or past financial reality. If you already own a property, your focus may include repairs, upgrades, and renovations. You may think that bad credit, high debt, and a low credit score will keep you away from achieving these dreams. There are options, however, for home loans with bad credit and without punitive interest rates or pay back schedules.

Before you learn how to get a home loan with bad credit, however, it is important to consider if it makes sense to get one at all. Can you afford to buy a house with your current income? Is a renovation or upgrade a smart choice overall? The answers to these two questions will help you create a plan to qualify for available home loans.

FHA, VA, Fannie Mae, and Freddie Mac Options

Government organizations that assist with buying a new home have more opportunities for people with bad credit to get a chance at property ownership. However, they have unique requirements and limits for house cost, down payment amounts, and interest rates. For example, the FHA mortgage lenders require just a 3.5 percent down payment if your FICO score is over 580, but a 10 percent down payment below that.

Increase Your Credit Score Before You Apply

One of the best ways to ensure that you get a home loan at all is to do everything possible to improve your credit score and debt to income ratio before you apply. Pay off outstanding bills, do not open new credit cards or apply for other loans, avoid large purchases, and check your credit report for free to make sure there are no errors or discrepancies.

Save Up More for a Down Payment

Lenders are more likely to take a chance on you if you have more money available for a down payment when you apply for a mortgage or home loan. If you can delay homeownership for a longer period of time, do everything you can to save money by living frugally or increasing your income with side gigs or a part-time or temporary job. Save up at least 10 percent of the total loan amount. If you have more, your payment terms and interest rate may go down considerably.

Consider a Co-Signer to Increase Your Chances

If you cannot find a home loan offer that suits your needs, look for a responsible person who will cosign the application for you. While this person will be responsible for covering your bills if you do not pay them, their financial track record will help you get loan offers so that you can build your credit with responsible payments.

The dream of owning a home or getting a loan to help your residential situation is possible even if you have a low credit score. By following these tips and researching all options, it may happen faster than you thought possible.