If you have bad credit and are currently renting while considering buying a home, you're faced with a classic dilemma. On the one hand, buying now ensures that you start putting money towards an asset and towards equity. On the other hand, buying with bad credit can be risky. It means that your mortgage rate will be more expensive and until you get your finances in order, buying a home can be quite risky. You could wind up unable to pay for your home loan.

If you have poor credit and are considering buying a home, the first thing to consider is where the bad credit comes from. If the bad credit is caused by a recent divorce or other situation, you may still want to purchase a home and start working towards equity that can help you in the future. However, if you have bad credit because you are barely able to pay your bills right now, you should think twice before buying a property. Being late on your mortgage even a few times can mean that your home can go into foreclosure. If you cannot afford to rent €" or can just barely afford to rent -- you should think hard before you decide to buy a home. At the very least, you should work to put aside some money and to make your financial life more stable.

If you decide that you want to buy a property despite bad credit, your first step is to make sure that you improve your credit as much as possible before trying to buy. Unless the market is extremely hot or unless you find the home of your dreams at the perfect price, you can easily afford to put off buying a home for a few months. This should give you enough time to start paying your bills on time and paying down your loans, so that you can present a better credit rating to potential lenders.

Another thing you can do to get financing despite a bad credit is to look for lenders who specifically work with sub prime borrowers. These lenders are often willing to offer credit at a much higher rate than traditional bank loans. If you expect that your financial situation will improve very shortly, you can take on one of these loans in the short term and then refinance for a better rate six months or a year down the road. However, if you decide to get a bad credit loan, make sure that the penalties associated with refinancing are not too costly.