Other factors also come into play, for example, most down payment assistance programs are not available with credit scores below 640.
Yes, very bad credit sub-prime loans do exist.
Recen't major credit issues, like bankruptcy and foreclosure, or just straight up bad credit does not necessarily prevent you from buying a home. Generally speaking, expect to need at least 10% for down payment, and commonly 20% or more down is needed. Expect to pay a higher interest rate. How high depends on your credit score.
Do not expect miracles. For example, I just recen't have a client inquiry about a sub-prime loan who has a lot of recen't late mortgage payments over 120 days old. This person whas denied.
If your score is below 500, expect a denial.
THE BOTTOM LINE
Clearly credit is important in the mortgage loan approval process. It is always best do do everything possible to improve credit before applying for a home loan.
Ready to apply for a home loan? For home mortgage loans in MN, WI, and SD, just click here to get started. If in another state, we suggest contacting a local mortgage broker in your area for the best deals and options.