Did you know that many homebuyers who used sub-prime lending over the last 15 years didn't need it? That's right.
The rise of sub-prime lending created a lending environment in which some unscrupulous mortgage lenders could make more money by taking homebuyers through sub-prime rather than prime programs. These creeps used and abused borrowers and basically made them think they weren't eligible for prime lending.
Don't get me wrong. There ARE folks who have really poor credit and have too much debt. Those folks just shouldn't be buying real estate. But if YOU have your financial house in reasonable order you should be able to find a mortgage lender.
So, don't panic. Regular conventional lending requires 5% down plus closing costs. The seller can pay some towards those costs to help you. If you don't have that much available, consider going FHA. Both the FHA and VA programs are still considered prime lending and with these programs the credit review is slightly more lenient and the cash requirements are lower.
Before sub-prime reared it's ugly head, I put many many families into homes using these tried and true programs.
In my experience the average family can afford to buy the average house using these programs as long as interest rates are 10% or less.
This assumes that you have had a reasonable credit history - not perfect, but reasonable. It also assumes that you are not underwater with debt.
If you can't make timely payments on your current debt, you shouldn't be buying real estate. Take time to get your financial house in order.
Here's a conservative formula to use. Take 28% of your GROSS monthly income. That's your maximum mortgage payment including taxes and insurance. If you stay in that ballpark, you won't be house poor and you'll likely not face foreclosure.