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In the past house prices took off, banks gladly gave home loans to everyone including people with bad credit, because home equity made up for the risk. To everyone it seemed like home prices were going to continue to rise, so the banks continued to loan money and make commissions on those loans. As the real estate business continued to grow, houses continued to be built.

Unfortunately they built too many, too quickly. What followed was the "mortgage crisis" that everyone talks about and which we're still feeling the effects of. Because there were too many houses on the market, prices started to go back down. Sometimes people had a mortgage loan that was more than their house was worth.

During these boom times, people with bad credit were given loans, but these loans often had high interest rates. Sometimes the rates started out low, but then increased as the years went by. Since the home loan was more than the worth of the house, it was impossible for people to sell, and because the payments were going up, they often were stuck with homes they could not afford.

People began to default on their loans, and their homes went into foreclosure, where they were taken back by the bank who gave out the mortgage. This led to more and more houses being put on the market, which made prices go lower, which led to a vicious cycle that we are all still feeling the effects of today.

It is becoming more and more difficult for people with poor credit to get a home loan. In the aftermath of the mortgage meltdown, lenders have become much more rigid about who they will give loans. Even those with good credit are noticing that it is harder to obtain a loan, or to obtain one with good rates. Through the time period when home prices were on the rise, many mortgages were made available with little or no down payment. This practice made it simple for people to get loans when they didn't have much to put down, but that is no longer the case.

It is entirely possible to obtain a loan, even with bad credit, however, you are likely to be required to put more money down on the loan to begin with. Sometimes the bank may require a down payment of as much as thirty percent in order to give final approval on a loan. You can compare mortgage lenders to discover who has the best loans with the best terms.