Many people want to know how to buy a house with bad credit -- and with good reason.

These days with a recession in full swing, conventional lenders are tightening the purse strings on their lending. This means that getting loans with bad credit is very difficult to do. Lenders are not willing to give out loans to people with bad credit.

Unfortunately, this puts a lot of people in a bind. Bad credit, these days, is more common than good credit; the lending institutions refusal to give out loans to people with poor credit means that a good percentage of the population is barred from getting loans.

However, despite this there are ways how to buy a house with bad credit. With bad credit you are limited to getting a subprime loan. Subprime loans are loans that are given out to people with less than a 620 credit score. In essence, it's a loan that's given to a person with high risk. Subprime loans always have much higher interest rates, ranging anywhere from a couple percentage points about a conventional mortgage interest rates to more than ten percent higher, depending on one's credit score. The lower the credit, the higher the interest rate.

Conventional lenders such as banks and credit unions won't give you a conventional mortgage with bad credit. However, there are ways that you can get such a mortgage. One way is to put a sizeable down payment on the home. Lender will be far more inclined to give you subprime mortgage financing with down payment than if you don't put one down. A down payment will also go a long way convincing lenders to ignore your bad credit status. Another advantage of putting a down payment down on a home is that you can also get conventional mortgage interest rates even with a subprime mortgage.

If you don't have a down payment, then your options are more limited. Depending on your credit history, you may be able to qualify for a subprime loan with a bank, but it's still going to be difficult - especially in lieu of the recent housing crises. But if you seek out a bad credit lender (also called subprime lender) you stand a very good chance of getting a mortgage with poor credit.

Subprime lenders are always more willing to give you a loan when you have bad credit because they specialize in this type a loan. Thus, the chances are much higher of secured a subprime loan with one of these subprime lenders than with conventional lenders.

The best place to look for a bad credit mortgage lenders is online. There are many of these types of lenders easily found online. When shopping around for this type of mortgage, you should spend a great deal of comparing the loans offered by different subprime lenders. This means you should spend a good deal of time looking at subprime lenders' websites to see what loan offers they have.

Among subprime lenders, there can be a huge variety of different loan packages and interest rates. For example, one subprime lender may offer a mortgage for 5% higher than a non subprime mortgage and another lender may list the same package at 10%. You can literally save thousands of dollars by just a few more minutes of searching.

Now, ultimately, the best way how to buy a house with bad credit is to look actually improving your credit history. By improving your credit history, you ensure that all future loans will be much easier to get. You can use a mortgage loans for people with bad credit to improve your credit history. In general, two years of paying your mortgage on time and astute usage of your credit card will give you good credit. You stand a good chance of being able to refinance your subprime loan for a conventional loan. The subprime loan is one of the best ways to buy a house with bad credit.

So all though, if you have bad credit, you may have to accept loan terms that are not favorable, this is only a temporary condition.

How to buy a house with bad credit depends on what route you want to go. Ideally, the best situation is to repair your credit for two years then try and apply for a conventional loan (meanwhile saving up a down payment). At the end of two years, you are in an excellent position to buy a house. If you need a mortgage loan with poor credit quickly, than you will have to opt for a bad credit loan. Before you take any action, however, you should do as much research as possible so that you get the best loan terms.