1. You may want to learn more about FHA (Federal Housing Administration) loans. With FHA loans, the FHA insures your mortgage - in other words, the government pays the lender if you don't. Because the government will cover the debt if you default, lenders are willing to extend FHA loans to buyers with lower credit scores, the down payment requirements are lower, and the interest rate you will be charged will be fair (close to the market rate that someone with better credit would get). The official site to learn about FHA is here: http://www.hud.gov/offices/hsg/sfh/fharesourcectr.cfm. However, I prefer this non-official site because it is more user friendly: http://www.fharesearchcenter.com/
2. In this age of foreclosures, your credit score is the only way a bank knows how likely you are to repay the loan that it makes to you. Getting a loan is getting harder and harder for people with low credit scores. If you have some time, take a few months and learn about how to get your score up. http://www.bankrate.com is a wonderful resource for consumers looking to learn about credit, and here is a link to their article on improving credit scores:
http://www.bankrate.com/brm/news/credit-scoring/20040128a1.asp. Be very careful about so-called "credit repair" companies. Some of them are just scams.
3. Be wary of predatory lenders who may be looking to take advantage of you - they can sell you loans that seem reasonable now but have payments, fees, penalties, and interest rates that will soar in a few years. Use a reputable bank, or if you use a mortgage broker, make sure he or she has references.
4. Remember that you should shop around for a loan. Call a few different lenders and compare rates.
5. Remember that every time someone checks your credit in order to verify your credit score, your credit score goes down (just a little)! So know your credit score in advance and ask "Based on my credit score of x, what loan products do you have for me?" Only when you have decided on a lender should you let them verify your score. However, don't worry too much if several lenders check your credit in a 30 day period, because that "hit" to your credit score only counts against you one time over 30 days (in other words if 3 banks verify your credit report within 30 days, it only counts against you once).
What I would suggest is that instead of trying to buy now you sit down with a lender and discuss your credit history. Find out what you need to do to bump up your credit score and then do it. It might take you 6 months to a year but it will save you money in the long run and the possibility of a foreclosure because you got into something you were not quite ready to purchase. I hope this helps..