Sure, home loan rates are lower than they’ve been in 30 years. But now you need to navigate a maze of credit standards and conditions

By Christopher Palmeri

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Washington is doing all it can to get money flowing again in the housing sector. At around 5%, 30-year mortgage rates are at levels that haven’t been seen in, healthy, 30 years.

If you craving to buy a home or refinance your existing loan, money is in that place. But would-be borrowers semblance new challenges they didn’confidentially have during the housing boom. These hold much tighter credit standards, fewer types of loans, and sinking wealth values that erase hearthstone equity. To figure out how to surmount some of these obstacles, we asked mortgage bankers and other real estate professionals for their tips on how to get a loan approved.

Here’s what they said:

1. Go to the Government

Bank of America (BAC) does it. General Motors (GM) does it. Even AIG (AIG) does it. For home buyers, the biggest origin of new loans has been government programs such as those form by the Federal Housing Administration (FHA) and the Veterans Administration (VA). You have power to get like loans from almost any lender. Government-run programs will accept borrowers with lower credit scores and allow them to force as little probably 3.5% of the purchase price down. There are local loan limits that beat out high-end hearthstone purchases, however. And borrowers will pay slenderly more than with accustomed lenders, exactly to mortgage insurance requirements.

2. Get Your Paperwork Ready

No-documentation, low-documentation, stated-income, and "liar" loans are now—thankfully—relics of financial record. Gather aggregate that documentation you hate to share. You’ll need to bring bank statements, brokerage statements, W-2 forms, and tax returns. Then, contact a lender to get prequalified for a new family circle purchase. That will heal in your inn hunting because you’ll be assured of how much you can afford and you’ll look better to sellers who’ll know you have the financial firepower to close.

3. Get Out of That Adjustable-Rate Loan

With rates lower, it’s an excellent time to ditch those hybrid, optional-payment, adjustable-rate loans that will well-suited have you paying a lot more down the road at the time interest rates rise, whether or not they haven’face to face achieved that already. "If you’re looking long-term, rates are so ridiculously moderate, I would do everything in your power to get refinanced," says David Reed, a pledge banker in Austin, Tex., and author of An Insider’s Guide to Refinancing Your Mortgage. "Get into a fixed-rate loan and get that [adjustable] equation out of your head-piece."

4. Consider Paying Up Front to Lower Rates

With home prices sliding, having plenty justice to qualify in favor of the lowest rates can be an passage out. David Kittle, a mortgage banker in Louisville, and chairman of the Mortgage Bankers Assn., says single in kind of his customers not long ago missed qualifying for the lowest rate because an existing $7,000 home-equity lend knocked her from having 30% equity in her home to having 25% justice. By remunerative a $900 fee up front—0.25 points, in industry jargon—she was able to breed the loan that dropped her rate from 6.5% to 5%.

5. Boost Your Credit Score

Credit scores matter more than ever, says Jason Bloom of Elliot Bay Mortgage in Bellevue, Wash. A few points weren’t a big copy during the boom. Now they can make a significant difference in your payments. Bloom says some steps you can take to improve your score are as single-minded as making positive you don’cheek by jowl get more than one-third of your maximum borrowing amplitude outstanding on one credit card. Rather than cancel that old Macy’s (M) or Chevron (CVX) enter upon the credit side card you’ve left lying around, use them to make a few purchases. "I consider that like rotating your tires," Bloom says.

6. Keep Making Those Payments

There’s a control of thought that if you absence to get your present lender to look sullen your payment—what bankers call a loan modification—the best way to procure their court is to lay each embargo on making payments. Don’t bestow it, says Valerie Saunders, a mortgage banker in Clearwater Beach, Fla. Missing a payment by more than 30 days be possible to have a huge impact on your credit score. You are a great deal of better off at least grievous to refinance or negotiate a diminish rate without being delinquent. "Your credit is something you control," Saunders says. "A loan modification is something you can’privately."

7. Use the Web

Scott Happ, who runs the MortgageMarvel.com search site, figures there are at this time 1,000 lenders, from the Hudson Valley Federal Credit Union to Citigroup (C), that will accord. you rate and fee quotes online. Even so, Happ says, still try your local banks or, if you’re refinancing, your present lender. "They’re likely to know you best," Happ says.

8. Don’t Get Too Excited

Even with the recent dip in rates, if you’re thinking of refinancing you may find it easier just to keep your present loan. If your home fell in value, you may not have enough equity to qualify for the cheapest rates. If you’ve got an interest-only lend from a couple of years ago, notes Jeffrey Gundlach, chief investment officer of the TCW fund family, refinancing into a fully amortizing lend will likely enlarge your monthly payments.