I am a lender, so I can give you my advice. The advice above is all good, but really nobody can really say without knowing your exact situation.
Your first step should be to meet with a mortgage professional, whether a broker or direct lender (a bank). The only fee you should pay them is a credit check fee, about $25.00
It is not possible for a lender to properly advise you without knowing your exact credit and income situation. One persons idea of bad credit is sometimes not that bad after all, and vice versa. As far as credit scores go, your score will determine the rate and loan programs available. For first homebuyers with little down payment money, and FHA loan is a good bet.
These had gone by the wayside during the fat times, but are making a strong comeback. FHA requires you to pay 3% down, as well as a monthly mortgage insurance fee. MI (mortgage insurance) is dependant upon the loan amount. The higher the loan, the higher the MI.
Contracts with lenders are 100% completely unbinding. As mentioned above, never pay a lender any money upfront, with the exception of the credit fee. Also, avoid letting several lenders pull your credit.
Multiple inquiries hurt your credit score. If you desire to meet with multiple lenders, obtain a copy of your credit and keep it with you when you meet with other lenders.
A few rules of thumb:
1)FHA is the most credit forgiving program. If you have above a 620 credit score, you can usually quailfy. If you have down payment money, you may qualify for lower rates and thus lower payments.
2) Never, ever deal with a lender that you cannot meet with face to face. This is a no brainer.
3) Lending is a referral based business. Lenders that are honest and do a good job build their business on referrals from past clients. Ask your friends, coworkers and family who they would reccommend.
Most lenders are very honest people.
Good luck and feel free to post any further questions.