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There was a time when buying a home with bad credit was next to impossible. Fortunately (for people with bad credit), times have changed.

This change is the result of many factors: increased competition in the mortgage industry, a wider variety of loan programs, Internet-based lending, etc. Some lenders today even specialize in offering home loans to people with bad credit.

Like I said, times have changed.

But while it has gotten easier to buy a home with bad credit, you still need a solid plan of action. Here, then, are your four steps to home buying success:

Buying a Home with Bad Credit ' Four Steps to Success

1. Get a copy of your credit report.

For starters, you should obtain a copy of your credit report from all three of the credit agencies: TransUnion, Experian and Equifax. Review them closely for errors. The last thing you need are errors that drag your credit score lower than it should be.

If you find an error on your report, you can dispute it online through the credit agency's website:

www.equifax.com * www.transunion.com * www.experian.com

2. Shop for a lender.

Do plenty of research to find a good lender. Be wary of predatory lenders who take advantage of people with bad credit (because they don't have as many loan options). Get quotes from multiple lenders. Ask around. Go with trusted names. Do some online research to identify 'red flag' lenders.

Here's some good news -- through a combination of government regulation and increased competition in the mortgage industry, the number of reputable lenders who offer bad credit mortgage programs continues to increase.

3. Focus on improving your credit.

Improving your credit score will help you in the short term (to obtain a loan) and the long term (to avoid bad credit situations for good!). You can improve your score by paying bills on time, especially your mortgage.

Don't open any new lines of credit, and try to pay down your existing lines of credit. Once you raise your credit score, you'll be able to refinance the mortgage at a lower interest rate. And that leads us to step #4.

4. Refinance as soon as possible.

Buying a home with bad credit can actually help you improve your credit. By holding down a mortgage and making payments on time, you can eventually elevate your credit score to the point that you quality for a lower interest rate.

When that happens, you can refinance the mortgage at the lower rate, which will in turn lower your monthly payment and get you back on track. Better credit, lower mortgage. You can do it!

* Copyright 2006, Brandon Cornett.