If your intent is to build equity as a first time home owner and your credit is not up to snuff, you would be much better off taking care of your bad credit first. Bad credit mortgages can be very expensive and after years of payments you may find that the equity you have accumulated is not what you had hoped. This is because you have been paying the gigantic interest that is associated with these types of mortgages.

On the other hand, if you have accumulated a huge amount of debt but have already built up a significant amount of home equity, a second mortgage could be taken out in order to pay off several high interest debts. This usage of a bad credit mortgage makes more sense.

In either case, refinancing down the road is always an option. Of course you should focus on repairing your bad credit. This can be done contacting the credit reporting agencies and getting a copy of your personal record from each. You can then review them line by line and begin the process of getting rid of false entries or eradicating the negative marks. This can be a daunting and painfully long process but with a strong resolve and perserverance it can and should be done.

Keep in mind that the average mortgage will be with you for 30 years and as such you should have some sort of master plan. Accumulating your own equity is always a better choice than donating to someone elses which is what renting is. Even with a high interest mortgage you will still be accumulating some equity and if your are careful with your finances, pay on time, and take the steps necessary to bring your credit score up, you will find yourself in a better position for sure.

It all depends on your personal situation. Bad credit mortgages, though more expensive, will still earn equity and you can always seek out refinancing. However, if you can’t afford the down payment it may be better to keep on renting for a while longer and focus on getting your credit together first.