Getting low interest rate mortgage loans is a task that many are facing these days and more and more people get into financial crisis with job loss, cut hours or a pay reduction. Whether or not you can get a very low rate on a mortgage loan depends on several factors, and you’ll have to do some preparation work before you begin applying for the mortgage loan. However, getting low mortgage interest rates isn’t a complicated process,it is simply one that is time consuming and requires that you know a little bit about how mortgages work and how to find the best lender. Follow these tips when seeking a low mortgage rate.

Choose the type of mortgage you want. Whether you want a long term mortgage like a 30 year mortgage or a short term that you can pay off quickly, decide on that before you begin shopping. You’ll also want to decide if you want to go with a fixed rate mortgage where the rate will stay the same during the lifetime of the loan, or you want an adjustable rate mortgage that will change according to the mortgage rates set forth by Fannie Mae and Freddie Mac. Choosing the term and type of mortgage is important before you begin shopping for mortgages and interest rates.

Make sure your credit is up to Par. When it comes to mortgage loans bad credit can affect your interest rate more than anything else.  If you have good credit then you will quality for the prime rates that are offered by banks and other lending agencies that are the lowest rates on the market currently. However, if you have bad credit then you may have to go with a subprime mortgage lender. These lenders are called subprime lenders because they offer rates that are higher than the rates that are offered to those that have good credit – the so-called prime rates. This is why it is so important to have good credit before you begin applying for mortgage loans.

Make sure that your debt to income ratio is good, and that you have a solid down payment. If you have a bunch of personal loans and several cars that you are paying on, and are maxed out on your credit cards, then you will have a hard time getting a loan because your debt-to-income ratio is too high (this is also abbreviated DTI). Ideally, you want a DTI of below 30 percent and you want to have a down payment around ten percent. The higher your down payment is, the more leverage you have to get a better interest rate and the less of a risk you’ll be to the lender. If you can put 20 percent down, then you can also skip paying for mortgage insurance.

Use a mortgage broker. Mortgage brokers know the market better than anyone else and they can help you find rates that are what you want, or are among the best in the nation. Mortgage brokers know lenders that offer low rates to those with good credit, but can also find you a better subprime rate. They will charge a percentage of the loan but it is well worth it for all the help that they give you and for having an advocate for dealing with lenders. A mortgage broker can help in many different ways and they may not cost as much as you think, if they can get you a better rate than you could have gotten on your own.

There are some extremely expensive loans out there. I remember a comment that someone left on one of our other articles that asked if we could offer low interest rate personal loans. It seems like that’s almost impossible these days. Even signature loans at banks are going to cost 11-12%.

There are also loans that are quite affordable. I know a few people who only borrow money through a home equity loan. If they need to buy a new car, they get a home equity loan. If they need to improve their home – they refinance their home equity loan or their home loan. As long as you leave some room in your mortgage and can afford the payments, it’s not a bad way to go. It also makes your car payment almost insignificant.

I’ve given a lot of thought to how people can get low interest loans and thought that today I would help out by providing some solid advice. If you have any questions, please feel free to ask in the comments. I’ll do what I can to help you out.

Step 1: Improve Your Credit Now

It’s not possible to get loans with low interest rates unless you have awesome credit. Unless you’re going to ask your mom and dad for a loan this just isn’t going to happen. Lending money and staying in business is all about risk management and if you’re a bad risk, you’re going to have to pay a lot of interest to get a loan from anyone that’s smart enough to survive long term.

The most important factors in improving your credit score are paying bills on time, paying down your credit cards, and maintaining multiple lines of credit. I personally have four credit cards and am smart about how I use them. Right now they all have zero balances because I pay them off each month. This gives me an on time payment and a low revolving credit balance. These three factors make up more than half of your credit score – don’t slack on any of them.

Step 2: Evaluate Your Financial Position

If you own a home, take a look at how much equity you have. Borrowing with your home as collateral is going to be the cheapest way to borrow money in most cases. Low interest  rate mortgage loans are a lot more common than most other low interest loans. Banks have an asset on their books (your home) that protects them in case you get lazy and default on your loan.

If you don’t have equity in your home, your loan is going to be a lot more expensive and you should plan accordingly. A cheap signature loan is still going to cost you 10%, but that’s probably your best option if you don’t have an asset that can be used as collateral.

Step 3: Choose The Cheapest Option

Home loans will be the cheapest loans out there, followed by home equity loans and then auto loans. After that you’re looking at signature loans followed by a lot of BAD loans. Make sure to choose the cheapest option that’s available to you.

Bonus Tip:

Student loans are often the cheapest loans. However, you obviously have to be a student to get them.