I second the suggestions for meeting with a loan officer to find out what your credit is. I could refer you to some who would coach you to improve your credit/finances until you are ready to buy. There is no charge to meet with someone to go over tips with you. Just let me know!
As Bill mentioned, you should meet with a mortgage broker who has access to information on multiple lending programs. Depending on the program, you may be eligible for more than you think at this point.
I would also recommend getting a copy of each of your credit reports from the three main credit reporting agencies. This way, if you see anything incorrect, you can start to fix it now rather than later. And you won't be surprised when the mortgage broker or banker asks you about it.
If you are in need of some mortgage contacts, let me know. If have a few names I could give you.
Have you met with a mortgage consultant? Many people are suprised after meeting with a loan specialist that their credit is not as bad as they thought it was.
Our recommendationis to not assume your credit is bad but to meet with a loan agent to qualify you for programs that might meet your needs.