Many people believe you just can not get a mortgage if you have bad credit. Well …. that just isn't true anymore. The American Dream of owning your own home is alive and well -- even if you have bad credit!

There are many lenders that are willing to give home financing to people who have a bad credit report.

Who are these lenders and how does a bad credit mortgage work?

Each of the lenders who offer these loans has their own programs and features. Many of these lenders never even look at your credit history. There is no pre-qualification involved - you are usually notified within 24 hours if you will receive the money.

Here are the most common terms for bad credit mortgage loans:

* High Interest Rates…

Lenders that are willing to take the risk of giving loans to people who have poor credit want to be compensated for that risk. So they will grant these bad credit mortgage loans with a higher interest rate to the borrower.

While you might not want to pay a higher rate -- if your credit score is low -- this might be the only type of mortgage you will be able to get.

This type of mortgage loan has many benefits -- I personally used one of these several years ago. I had poor credit - I was able to obtain a mortgage loan with the interest rate at about 3-4% higher than the average. I paid this loan every month on time - which helped my credit rating… 3 years later - my credit score was higher and I was able to refinance to a mortgage with a much lower interest rate. This was a win-win situation -- I benefited obviously because I was able to purchase a home and repair my credit and the lender benefited with the higher interest rate they received.

* Larger Down Payments…

Again - the lender looks at the "risk" they are taking by granting these types of loans. Because of that risk they usually want a larger than average down payment.

While gathering that larger down payment might not always be easy -- the up side of this is - the larger your down payment - the lower your monthly payments will be.

* Other Things….

Points - While points are not usually charged on most mortgages today - they are indeed usually part of these types of mortgages.

Pre-Payment Penalty -- Lenders that are willing to give these alternative mortgage loans want to ensure they get compensated. Usually these loans carry a 1 or 2 year pre-payment penalty.

Do Your Research…

To find these companies the easiest thing to do is go to google.com and type in bad credit mortgage loans. You will get a big list to choose from.

There are many alternative companies that offer these bad credit mortgage loans. Go to the websites - read their terms - ask questions. Another place to get info is to check in credit / debit forums.

Owning your own home can truly be a dream come true for you and your family. If you have had some financial difficulties in the past -- the American Dream is still alive for you.