Are you less than perfect about paying your bills on time? Or maybe you pay your rent, utilities and other bills with cash or money orders so you have no credit record.

If that’s your problem, you may still be able to buy a house or condo. Thanks to innovative outreach home mortgage programs from Fannie Mae and other major home loan lenders, if you have a reliable source of income you can probably buy a home.

For example, I talked with a hard-working immigrant Hispanic gardener whose steady income comes from about 30 homeowners. A few of his customers pay him in cash. But most pay by check. Although he has no checking account, he told me how he recently got a mortgage from a major nationwide lender, with the help of a very patient mortgage broker, to buy the three-bedroom house he was previously renting. “I really need a four-bedroom house for my wife and our three kids, but it’s a start,” he told me.

Do you have a steady income?

If you are “credit challenged,” probably because you have no credit or bad credit, you may still be able to buy or refinance a home providing you have a steady income. That’s because mortgage lenders are now under extreme pressure to keep up their home loan origination volume, especially to borrowers without traditional verifiable income sources. Virtually every mortgage lender has a special home loan program for borrowers with credit problems. The interest rate might not be the lowest available, but mortgage money is abundantly available.

To illustrate, I once received a phone call from a long-time media acquaintance whom I had never met except by telephone. He briefly told me his home loan situation, admitting he “messed up” and had some serious credit problems. I was able to put him in touch with a savvy mortgage broker who arranged a mortgage at “only” 8 percent interest. My media friend was thrilled.

Know your credit report and score

If you’re not sure what is in your credit report, or you don’t know your FICO (Fair, Isaac and Co.) credit score, which most mortgage lenders use to rate your credit, the easiest source to learn this information is at www.myfico.com . For a small charge, you can obtain your credit report, FICO score and suggestions on how to improve your FICO score. At www.equifax.com , you can check your credit reports at all three major credit bureaus for an additional fee.

How do lenders use your score?

Fannie Mae and Freddie Mac, the nation’s largest home loan lenders in the secondary mortgage market, use computerized credit scoring programs to instantly approve mortgage borrowers for home loans.

When these non-human mortgage approval programs were implemented about 10 years ago, I was very critical. But the amazing result has been more, not less, home loan applicants approved when computerized credit scores are used. Furthermore, when a home loan applicant is rejected, a human mortgage underwriter takes a second look to see if an exception can be made for the loan to be approved.

FICO scores range between 450 and 850. The higher your FICO score, the better. A FICO score above 700 is almost always a “slam dunk” approval at the lowest mortgage interest rate. Nationwide, the average FICO score is 678.

Above 620 you will probably be approved for a home mortgage, but maybe not at the lowest interest rate. Below 620, you might get approved but you will surely have to pay a higher than normal interest rate.

Make sure your credit report is error-free

Thanks to a new federal law, all U.S. residents are entitled to one free credit report annually from each of the three national credit bureaus. After you obtain your credit report and FICO score, read it. If you discover any errors, contact the credit bureau immediately. When writing, phoning or sending e-mail to one of the three national credit bureaus, you will be informed if there is any cost for the services you are requesting. The latest credit bureau addresses and phones are:

* Equifax, PO Box 740241, Atlanta, GA 30374; phone 1-800-685-1111; www.equifax.com .
* Experian (formerly TRW), PO Box 949, Allen, TX 75013-0949; phone 1-800-422-4879; www.experian.com .
* Trans Union, PO Box 290, Springfield, PA 19064-0390; phone 1-800-888-4213; www.tuc.com .

Each credit report contains different information because some of your creditors report to all the national credit bureaus, but other creditors report to only one or two. Each credit bureau must include a dispute form so you can correct any errors for correction.

Credit bureaus have 30 days from the date of dispute receipt to verify your complaint. If the credit bureau is unable to verify the information you dispute, that information must be removed from your credit report. When the credit bureau doesn’t receive a response from the creditor, the disputed item must be removed from your credit report. Be sure to follow up and insist on receiving a revised or corrected credit report.

Get pre-approved in writing

After checking your credit report and FICO score, even before shopping for a house or condo, it’s time to apply for a home loan.

Whether you apply with a direct mortgage lender or a mortgage broker who can “shop” your loan application among many lenders to find you the best terms, the first step to buying a home is to get a written mortgage pre-approval letter or certificate from an actual lender.

Don’t accept a mortgage “pre-qualification letter.” That means nothing because the issuer isn’t the actual lender. Instead, insist upon a full credit investigation and a pre-approval letter or certificate from a lender willing to make your loan, subject to reasonable terms such as appraisal of the house or condo you decide to buy.

Conclusion

Even if you have less than perfect credit, one way or another, you can probably buy a house or condo. Your first “starter home” probably won’t be your “dream home.” But it will start you on the road to building home equity rather than constructing a pile of worthless rent receipts.