It's hard to buy a house if you have bad credit.

One mortgage broker we spoke with says only about one in five applications from subprime borrowers -- those with credit scores of 620 or less -- were approved last month.

We all know why.

For several years lenders pushed millions of subprime borrowers into dangerous, adjustable-rate mortgages they couldn't hope to repay just because unwitting investment funds were willing to buy those loans.

When the rates went up, payments soared and about 20% of those loans are now in default. Angry investors cut off the money, forcing more than 100 lenders out of business and causing dozens of others to stop making subprime loans.

But if you know where to look you can find safe loans, at reasonable rates, and with little or no down payment. That's right, 100% financing is available -- just not easily available.

The worst kinds of mortgages -- option ARMs, or "1% loans" as they're sometimes called, interest-only or 2/28 and 3/27 loans -- have virtually disappeared.

That's a good thing since they're wrecking the financial lives of so many borrowers. If someone still tries to sell you one, get up and walk out.

What you need is a federally-backed loan program.

Freddie Mac and Fannie Mae are two large, government-chartered companies that buy loans from banks and mortgage companies. Their programs provide lenders with the money they loan to you if you meet all of Freddie Mac and Fannie Mae's qualifications.

With an FHA mortgage the Federal Housing Authority guarantees your mortgage will be repaid, even if you default. That allows banks and mortgage companies to make loans they might otherwise turn down, and charge lower rates than they would without that guarantee.

If your credit score is 600 or above...

...Consider Fannie Mae's "My Community Mortgage" and Freddie Mac's "Home Possible," which are specifically designed to help first-time buyers.

The offer up to 100% financing and interest rates that are only slightly higher than borrowers with good credit are paying.

You can choose a 30- or 40-year fixed-rate loan or a long-term ARM, which means the initial rate will be fixed for five to 10 years before it begins to reset, not the one month to three years in the bad old subprime loans.

The My Community Mortgage and Home Possible programs are limited to low- and middle-income borrowers, so there may be a maximum-income requirement in some areas.

Both companies also offer programs specifically for borrowers with past credit problems and with no income caps.

Fannie Mae's "Expanded Approval Mortgage" offers 30- and 40-year fixed-rate and long-term ARMs with up to 100% financing.

Freddie Mac's "Affordable Merit Rate" mortgage is a fixed-rate loan that requires a 5% down payment and a good payment history on any previous mortgages. But if you make 24 consecutive on-time payments, Freddie Mac will cut your interest rate by 1 percentage point.

Click here to locate nearby lenders that work with Fannie Mae. You'll have to ask lenders if they participate in the various Freddie Mac programs.

If your credit score is in the upper 500's...

...an FHA guaranteed loan is a better bet. You'll need a 3% down payment, but that money can come from state and local programs or private down payment assistance programs. Click here to learn all about FHA loans, including where to find participating lenders near you.

Another option is to ask friends and Realtors for a mortgage broker who is still working with subprime borrowers and has an underwriter on site. They work for a lender and are responsible for the up-or-down decision on your application. If you can speak directly with them, they may be more flexible. And if an in-house underwriter won't approve your application, the broker can still seek out other lenders.

You have a much better chance of qualifying for any loan...

...If you have one or more of these things going for you:

• A steady job you've held for least two years and that can be documented with W2s and tax returns.
• A low debt-to-income ratio. Your total monthly obligations (credit cards, loan payments, alimony -- anything you pay on a monthly basis), including the potential mortgage payment, representing 36% of your income or less.
• Good "trade lines." That's lender speak for paying your credit accounts on time for at least two years.
• Money in the bank. "It used to be you could get away with just having one or two monthâ??s mortgage payments in the bank. Now, lenders want to see 6 to 10 months worth of payments there," says mortgage broker Tom Scurlock of Silver Spring, Md.
• A big down payment. Paying 15% to 20% of the purchase price will get you a long way in today's market.

If your credit scored is below 550...

...The general consensus is that you're out of luck.

Federal programs usually won't accept borrowers with scores this low. And even if you find a lender still willing to work with you, the interest rates and fees will be outrageous.

"In this case, your first step should be to call a lender and ... take the steps they suggest to improve your credit score," says Duffy Gilligan of First Medallion Mortgage in Chapel Hill, N.C.

Sometimes just paying your bills on time for six to 12 months can help and give you time to save for a larger down payment. The lender may also be able to recommend which debts to pay first, inaccuracies to dispute, accounts to close, and other actions that will help you reach a more acceptable level in a short amount of time.

Click here to see our advice on how to raise your credit score.

By Tracy Needham

Interest.com Contributing Editor

Have a question about your finances? Ask us at editors@interest.com