Based on this evaluation, borrowers are offered loans rated on a scale from A to D. The more damaged your credit history, higher of a risk you are to lenders.

Because of your blemished credit history, you will more than likely have to get a “sub-prime” loan. These types of loans come with higher interest rates and more points. Don’t assume that just because a lender offers sub-prime loans, that you will automatically be embraced. Be prepared to explain to lender why you had credit problems and what you’ve done to prevent situation from occurring in future.

Don’t feel pressured into going with first lender willing to make a loan. Doing so may cause you to pay more than you should. Get to know your mortgage market. Shop several lenders, comparing interest rates and fees, to obtain best loan. Compare loan costs line-by-line for various programs through several prospective lenders. Also keep in mind, that there may be other ways to get a lower interest rate, such as putting down a bigger down payment.

Remember your past financial problems don’t have to stop you from experiencing joys of homeownership.

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Research property. The most common way first-time investors lose is by failing to investigate a property thoroughly. Look beyond front door. Investigate reputation of school district, crime rate, and plans for expanding a nearby highway or developing vacant land. Check out Ask a local real estate professional about area, its history, and how fast (or slowly) properties are moving. Find out tenant demand in that market.

Inspect home you're considering for signs of water damage, such as stains on ceiling and crinkling or gathering wallpaper; open and close every door and window; and check all electrical sockets by plugging in an appliance. Get an independent home inspection, roof inspection and termite inspection. Unexpected repair costs can eat away resale profit. Because even best inspection can't always predict problems, try to set aside some of rental income for unexpected repairs.

Spend time driving streets of community noting condition of other properties. Are lawns maintained? Are roofs in good shape? Are homes kept up?

Be ready to make fixes quickly and respond to renter's needs. If you're not prepared to be a hands-on landlord, consider hiring a property management firm.

Find a real estate professional who has experience in investment properties in your market. They can pass on valuable information about rental prices in your market and sale prices of other rental properties in community.

Remember, investing in a property is much different than living in one, and while emotion and attachment can be prime motivators when it comes to homes, it is return on investment that counts when investing in real estate.