Consult with a mortgage broker or mortgage banker in regard to your credit history and score. Home loans often come with a minimum credit score that is considered acceptable for approval. Your loan officer will probably recommend an FHA government insured loan, as those are easier to obtain than conventional loans when credit is questionable.
Apply with your loan officer for an FHA loan. You will need to provide statements detailing the circumstances of late or missed payments that affect your credit score. Circumstances that show hardship such as a job loss, layoff or medical emergencies are the easiest to reference when attempting to get a home loan approval, and are the only reasons that an underwriter might overlook certain credit blemishes.
Provide your loan officer with references for nontraditional sources of credit. Good examples of this are rental history payments, and payment histories for all utilities in your name. This will help to solidify a file and show a willingness and ability to pay a mortgage. Once your file is complete, your loan officer will submit it, and you will wait about a week for a decision.
Once the file is approved based on these factors, you can begin shopping for foreclosed homes. It is important that you have a mortgage approval, as a bank will want to see that prior to entertaining an offer on a foreclosed home. Additionally, you also will be required to pre-qualify with the bank that owns the property in which you are interested. While you are not required to use their services as a lender, it is part of the process so that they are confident you can close on the property.
Submit an offer on a foreclosure property and include your mortgage approval letter. Follow their directions on pre-qualifying for a mortgage with them, and render a decision on what financing is better for your personal situation. Once you have completed the offer to purchase the property, you can make preparations to finalize the purchase.