The only thing different from a VA loan and a regular Fannie Mae type loan is that the VA guarantees the loan so you won't need Mortgage Insurance. The thing is its still a loan and subject to the FNMA guidlines...ie credit, debt ratio and down payment. There is no such thing as a VA high Risk loan. If you have very poor credit you will not qualify for a VA loan period.
If your credit is the issue you will need to go Sub-prime for a couple of years until your credit recovers. You also get to have the high Sub-Prime interest rates. Once your credit recovers, you can refinance to a standard conforming (A-Paper) type loan with a lower interest rate.
Hers the other problem you have. If your credit is shot, no none, not even Sub-prime lenders, are gonna wanna give you a loan where your are going to strip out the equity in the home. Keep in mind when you start playing with the equity in your home you are screwin with the "Loan-to-Value" ratio of that property.
For example, you buy a home for $200K that is worth $250K. Regardless of what the home is worth at time of sale, the loan is based on Sell-price of the contract. If you dont have any money to put down you will be asking to finance 100% of the value..a VERY High risk loan for a sub-prime lender and not possible if your credit is not at-least 580 or better, and even then you are getting about 10-12% interest rate. Once you close on the home you can then re-finance the home based on the appraised value, $250K. NOW your equity is realized, BUT, if you start stripping it out, you are asking for a higher risk loan and now higher rates and payments. Not to mention this will require a refinance meaning paying closing costs all over again. The best loans occur when you finance no more than 80% of the value of the home. Put 20% down and borrow 80%. Gets you the best rates possible for your credit range.
The hard part you will run into is your credit holding you back. Not to mention I don't know what you make a year but the debt to income ratio is also an issue. Also, if you been keeping up with current events, the Sub-prime markets are hurting hard right now with alot of defaults, so I would expect it is getting harder to qualify with sub-prime.
I am a Mortgage Consultant in North Carolina.