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A bad credit score can make buying a home a big time burden, especially in today’s post-recession economy (or ongoing recession, depending on who you ask).

Lenders have become increasingly strict on loan and mortgage standards. Even former head of the Federal Reserve Ben Bernanke was turned down when he tried to refinance his home.

Since credit is a measure of how well you borrow money, bad credit signifies big risk to banks and lenders. As a result, they require bad credit holders to pay more interest each month than less risky candidates with a higher credit score. Over the lifespan of a major loan like a mortgage, that means paying thousands of extra dollars toward your home.

1. Improve your credit

Rather than getting saddled with high interest rates on a 30-year mortgage, see if you can improve your credit score before starting the home-buying process. How? Pay your bills on time and in full without using up too much available credit at any one time.

With a good credit score, you’re more likely to be approved for loans with better interest rates. If you don’t know your credit score, there are plenty of easy ways to find it.

2. Get a cosigner

If your credit it is in the toilet, consider reaching out to a close friend or family member with good credit to cosign the mortgage with you.

While you’re more likely to be approved for a home loan with a quality cosigner, you also put that co-signer’s entire financial life at risk if you stop paying your mortgage or default on your loan. Cosigning a loan requires careful consideration by both parties.

3. Buy within your price range

With poor credit, you’ll have a tough time being approved for any kind of loan with a decent interest rate. Research moderately priced housing options and/or start an open and honest discussion with your realtor about your credit situation to find a home well within your price range.

Not only are you more likely to secure financing for a home that falls within your price range, but you’re also more likely to stay on top of payments, giving you an opportunity to improve your credit score through your mortgage itself.

Don’t forget to check out home loans for people with bad credit. These types of loan will give you great financing options for more expensive homes.

4. Make a large down payment

The more you’ve saved up for a down payment, the more attractive you’ll be to lenders. Plan to put at least 20 percent down for your new home.

In the eyes of a lender, the larger your down payment on a home, the less risky you seem as a borrower. To them, down payments are guaranteed money regardless of your credit score.

5. Look into government programs

If you’re a first time homebuyer who can’t afford a 20 percent down payment, see if you can qualify for a loan from the Federal Housing Administration (FHA). An FHA loan can require as little as 3.5 percent down.

In addition, both the FHA and the Veteran’s Administration (VA) have lower credit standards for loan qualification. Even with a major credit blemish like bankruptcy on your report, you still may be able to secure financing.

Check with your local housing authority to see if you can utilize those and other government resources to get a mortgage, even with bad credit.

If you don’t qualify for an affordable home loan utilizing any of these programs or alternatives, take some time to get your finances in order, rebuild your credit and start saving for a down payment. In a few years, you’ll be in a much better position to buy.

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About The Author

Stefanie O'Connell is a New York City personal finance writer who lives by making her budget stretch. She shares financial planning, investing, and spending advice with national media outlets, including Bustle, US News and World Report, GoBankingRates, Intuit, CBS News, The Dr. Oz Show, and numerous other finance sites, shows, and podcasts. A graduate of New York University, Stefanie discovered the world of financial planning out of necessity. Her passion lies in helping millennials "develop rich habits" they can use for life.

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