The best option is to delay your home purchase for a year or two. During that time make all credit card and loan payments on time, make sure that there are no errors on your credit report, and save money for that down payment. For
many potential borrowers with
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poor credit, the amount of interest on the loan and the amount of required down payment are just beyond their means. There is nothing wrong with putting the home purchase on hold while you work at cleaning up your credit. In fact, lenders will be positively influenced by such a move. To the lender, that shows that the borrower is making a real effort at dealing with the credit problems before taking on a mortgage.