Potential homeowners with poor credit history are referred to as "sub-prime" borrowers. This title indicates to potential lenders that, based on your credit history and/or financial situation, there is a high risk that you will default on your loan agreement. Purchasing a home with bad credit can usually be offset somewhat (in the lender's eyes) by raising enough capital for a significant down payment. Purchasing a home with a low income will necessitate saving money for a long time to put a hefty amount down on your new home.
Get your credit in order to give yourself the best chance of impressing future lenders. Have a banking institution run your credit report and check it for any possible mistakes or incongruities. Prepare a report detailing your income and assets to present to potential lenders. Banks and lending institutions are very unlikely to approve loans for sub-prime borrowers who have not drafted an extensive and realistic plan for repayment (References 1).
Set a realistic goal for purchasing a home. Bad credit severely limits the number of mortgage offers you will receive and you will be required to put down a large amount of money against the house to secure your loan (it is impossible to secure a loan without a down payment, even with stellar credit). Begin saving in a high-yield account and add as much as possible. It may take a couple years to save up the money for a significant down payment. But without a hefty income or stellar credit, this is your only option (References 2).
Ask friends and family for money to help you get closer to your goal. Find personal and professional references to put down on your loan application when that time comes and try to track down a co-signer if possible. Having someone with good credit sign on your lease will improve your potential loan terms and could possibly lower the down payment required (References 2).
Speak to a mortgage broker to discuss your financial situation with a professional. Bring your finance report with you. They will give you a realistic breakdown of what kind of loan offer you can expect to receive from a bank. Use this to set your price range for a home (References 1).
Draft a repayment plan with a financial planner in which you delineate how much you will put down and how you will support the mortgage payments. Present this to your mortgage broker to set up a provisional loan which you will finalize when you finally purchase your new home (References 2).
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