Trying buy a home these days can be both very exciting and very frustrating. With the real estate bubble bursting in the late 2000s, home prices are lower than ever, which makes home ownership often cheaper than renting for many people. However, for those with low credit scores, trying to find a bad credit mortgage is a challenge. The good news is that there are two options available to you, even with less than perfect credit.

The Federal Housing Administration or FHA was founded in 1934 as a means for the government to help encourage home ownership at a time when no one could buy a home. As a self-funded federal agency (that is, no tax dollars go towards its support) the FHA offers loans to individuals who need help buying a home due to credit problems or because they do not have a sufficient amount of money for a down payment. Qualifying for an FHA backed mortgage will allow you to work with banks and other private lenders who would otherwise turn you away due to your bad credit. This is because FHA insurance guarantees the value of the loan to the bank and assumes the risk involved in dealing with home buyers with shaky credit pasts.

If you are concerned about the mortgage you will qualify for and don’t want to overpay for the financing, you need to do your homework and research lenders before taking on a loan. The fact that your credit is bad means you will have to pay more for the mortgage; how much more you pay depends on how much time you are willing to invest cleaning up your credit and shopping for the best mortgage.

Some people do not have a home. If this is the case then you will need to look for an unsecured personal loan of this sort. However, your credit will be a much bigger issue in your acquisition of a personal loan, since it will cause the lender to raise interest rates due to the amount of risk you present. It is also likely that the lender will only offer you a small sum of money to start. Though personal loans can be given up to $50K, most lenders will only offer you up to $5K to start if you have bad credit. Obviously, the better your credit, the more likely you are to find a personal loan at a reasonable rate. Borrowers with bad credit can still get these loans, however, from private lenders.

Ideally, if you have bad credit you will be able to submit bids from several online lenders for a mortgage and then compare their rates and terms. Once you have all those numbers before you, it will be easy to spot the best deal and work from there.

Learn more about Obama Mortgage Relief Plan Qualifications.