This economy has changed a lot of things about the landscape of American lending and credit. One of the items that has been dropped like a hot potato are mortgage bad credit no down payment loans, where individuals with bad credit can get 100% financing. The main reason for this is that these products are one of the causes of the economic meltdown – or rather, the writing of these products by banks, then the banks' sale of these product broken up into loan packages called CDOs. As jobs were lost and home fprices fell, so did the likelihood that these loans would be repaid – so banks have run as fast as possible away from offering these types of loans.
But what is a person with bad credit supposed to do? Everyone needs shelter. If you ave bad credit, and it's seriously bad say under 600, and you have no down payment, then realistically, you should be looking at renting at an affordable rate, and trying to save money. Banks will just not want to work with you, and the FHA, which guarnatees 95% of the loans in the United States, suggests a credit score of 640 as the bottom score for which you can qualify for a mortgage.
It's especially hard to find loans because no one is sure whether home prices will stabilize or go down. So, if you buy a home today with 100% financing, and the price of the home drops, you aren't the one losing equity – the lender and the government are. So lenders do not want to take the risk of taking back a home that isn't worth what they lent.
Does that mean you can't buy a house with bad credit? No. If you can get your redit score up to the 640 range, which is still considered bad credit, you can qualify for a first-time loan (if you have never had a mortgage, or haven't had one in the past 3 years). As a "first time" homebuyer, you can buy a home with 3.5% down. There will also be closing costs and fees, but if you can meet that bare minimum standard, which is still bad credit, you can get a home for almost no money down.
Be sure that if and when you do buy, you can afford it though – today, you can probably rent more house that you can buy for the same monthly payment. Make sure you do what's right fo ryou financially, and avoid continued habits – like borrowing no money down – which keep you in financial difficulties into the future!