Right now mortage companies have tightened up from one extreme (giving money to anyone with a pulse)to the other extreme (not loaning at all). they have so many homes in foreclosure that there is no such thing as subprime loans right now. There are companies that are doing them but they require a large down payment. Beware of companies who offer to fix your credit or get you a loan for a payment, all you will get is a lighter wallett and no loan.
However, it is important to analyze why your credit report is "bad." When you say your report is "bad," what do you mean? Do you have any bankruptcies, foreclosures, or collections? Have you had any late payments showing up, high balances compared to your credit limits? It is important that you work with a knowledgable and professional Mortgage Consultant that can help guide and refer you to reputable companies that can help clean up your credit report. Although some companies that claim that they can help you clean your credit report are sham operations, some reputable companies do exist.
I have been able to help my clients contact such trusted companies and they have been able to clean up their credit reports. It all depends on what actually shows up on your report and an analysis is necessary to devise a stratagey to improve it. Please feel free to let me know if you have any further questions.