An application for any type of loan will result in a check of the history of credit responsibility on the part of the borrower. If certain types of poor financial management decisions are consistently apparent in a review of the credit history, many lenders will refuse to take a chance on the potential borrower. This can make it very difficult to get a loan for any reason, but particularly for a home mortgage. 
When completing an application for a home mortgage, one of the things the applicant agree to is that the lender has the right to check the credit history. Most lenders have some type of rating formula that they look at in order to come up with a numerical ranking. Two different lenders may come up with different ranking scores because they prioritise the different aspects of the credit history differently. For example, current steady income may be more important than an outstanding bill. Others may grade higher for the person who has lived in the same place for more than five years.
Most lenders don't look further than the credit score and will only work with applicants whose score is over a certain level. People who don't have credit scores high enough to qualify for these lenders can still obtain a mortgage under bad credit mortgage programs offered by specialist lenders. Even more unfortunate, when you apply for a mortgage or any other type of loan and are turned down for any reason, the turn-down further degrades your credit score.
Unfortunately, a bad credit rating can be due to things other than missing payments or being turned down for loans. It can also be the result of unconventional income sources.
Bad credit mortgages are designed to first of all, enable a person with less than perfect credit to obtain a mortgage on a home of their own. Through special programs which may guarantee the mortgage, through higher interest rates so the lender will agree to carry the additional risk, or through a lower loan to value rate, bad credit mortgages are possible to obtain.
Often though, a bad credit mortgage is one which costs more in interest. The interest rates may be two, three, or even four points higher than those charged to buyers with good credit scores.
Of even more benefit in some instances lenders are willing to combine credit repair efforts for the borrowers with the mortgage loan. They work with the borrower to improve the credit rating so that eventually a standard mortgage can be obtained with potential for better terms.
Cleaning up the negative items on a credit report before applying for a mortgage is an excellent way to obtain better terms for the mortgage. If the borrower sets out a personal plan for improving the credit picture then a bad credit mortgage followed by a remortgage as soon as possible will allow the borrower to begin building equity in their home, while working toward a clean credit picture so that better mortgage terms can be obtained.