The thought of owning your own home has become the proverbial American dream for many people throughout the country. But a lot of borrowers around the nation never get a chance to own their home home due to bad credit or little cash savings that may disqualify them from obtaining a home loan. Unfortunately, in this new mortgage age, poor credit with a combination of no money down may be what disqualifies a borrower from purchasing a house.

However, there are lending institutions out there like the Federal housing Administration (FHA) that may offer a mortgage to borrowers with very little money down and with less than perfect credit. But the facts are that there are not many options at the current moment for those with no cash to place as a down payment for a home.

Buying a house with no money down and bad credit may simply be a hopeless situation for many dreamers in this turbulent mortgage market. Many Americans purchase houses now without a great credit score and they do it with a decent down payment that is around twenty percent. This way they do not have to purchase private mortgage insurance (PMI). But for the others who are cash poor, this is not possible.

Here are a few simple rules to remember when applying for a no money down, bad credit loan.

-Attempt to raise your credit score above 640-680. While there are some servicers that offer mortgage to borrowers with poor credit, borrowers must meet the minimum lending requirements set forth by the bank. It is quite rare for a lender to offer a mortgage to a borrower with a score less than 640-680. Therefore, it is wise to first obtain a copy of your credit report before applying for a mortgage. The Fair Credit Reporting Act allows consumers to obtain one free copy of their credit report a year. If you found your credit to be poor it is essential to take the necessary steps to raise a low score. This may include paying all of your current debts on time while eliminating the ones you do not need.

Try and improve your credit score any way you can! Improving your credit score will allow you to do business with lending companies that charge a lower loan rate for their services.

-Rethink your spending habits. If you are trying to obtain a home but have absolutely no savings, what makes you think you can manage your monthly obligations? Many mortgage professionals would advise not to take on a home with no down payment because you will more than likely be stuck with bogus terms. Also if you have no funds to put down on the home, you may want to really consider whether or not you can afford to make monthly payments. in most areas your mortgage payment will be at least $1,000 or more.

-The Federal Housing Administration (FHA) can offer loans to borrowers with a down payment of about 3.5%. This will work for people who have some cash savings, but you will still need to work on rebuilding your score to obtain this loan.

-Find a co-signer for your mortgage. If you are able to get a close friend or family member to co-sign on this debt the chances of obtaining a mortgage will dramatically increase. You may also be able to secure a good interest rate if the co-signer has great credit. However, this should only be done is you are sure you can repay the loan because if you do not their credit rating will be destroyed as well.

Some people do not care whether not they get a terrible deal on a loan. If you have bad credit and no money down rest assure you will be served with very high interest rates and probably even a devastating adjustable rate mortgage (ARM). These loan may seem attractive at first, but a few years later when the rate adjusts you may find yourself in a world of trouble. Many times you will also have to obtain a second mortgage to cover the entire value of the property.

If you’re looking to buy a house with no money down and bad credit, you probably have made some financial mistakes in your life. It’s OK, just as long as you can handle the higher interest rates and fees that are associated with loans of this type. Even if you have been turned down for a loan to buy a new house before, it doesn’t mean that all lenders will feel the same way. Just remember not to put in multiple loan requests at the same time and your credit score will not take a turn for the worse.

There are many lenders on the Internet who will cater to people with bad credit, so keeps your hopes high. After you have received a price quote from all of the lenders that will accommodate your needs, compare them to see which one has the best rates. Getting a loan won’t be too difficult, but staying on top of making the payments may pose somewhat of an obstacle. Remember to only take on this loan is you are 100% sure you can manage your monthly bills.

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Moe Bedard
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My name is Maurice "Moe" Bedard. I am the founder of America's #1 Mortgage Forum, My online work has been featured in the New York Times, LA Times, Fox Business, and many other media publications. I currently live in Carlsbad, California with my beautiful wife and children.

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