Also, make sure to include all the income you have. If you have any equity in any stocks or other financial accounts, make sure to mention that to the broker as well.

The more money you can put down on the loan, the more likely it is that you can get approved. FHA loans usually only require 3-5% down. They are also usually open to working with people with credit problems.

Figure out what type of loan best fits your needs.

To determine what type of loan best fits your needs, you need to know how much of your monthly budget can be allocated to a house payment. Once you know what you can afford to pay each month, you can decide if you want to take a 15 or 30 year mortgage, an interest only loan, a fixed interest rate mortgage, or adjustable rate mortgage. Each of these types of loans provide different rates of interest.

Take steps to improve your credit.

Your credit score affects your interest rates. Before you apply for a mortgage, make sure to close any old credit card accounts that you no longer use. It is even a good idea to lower the number of accounts that you have open and actively use. Don't apply for any new credit cards in the months before you apply for your mortgage, because each time a potential creditor pulls your credit report, it affects your credit score. Obtain a copy of your credit report from all three reporting agencies and make sure that it doesn't contain any mistakes that could raise the interest rates that companies will offer you. If there are mistakes, make sure you get them fixed before you apply for a home mortgage.

Shop around for the best rates.

You aren't obligated to take out a mortgage from the bank you have an account with. Take the time to shop around with other lenders and let the lenders know that you are shopping around, so they have more incentive to offer you better rates. By comparison shopping, you may find a company that is friendlier to first time homebuyers or find a company that is more willing to work with buyers that have bad credit. Talk with your bank and see if they offer a better rate to borrowers that have the monthly payment automatically deducted from their checking account. 

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The average rate of interest on mortgage loans continues to fall and has been under 5 percent for almost all of this past year, with this recent round of rate cuts seen as the lowest for borrowers in years. The reason, many borrowers today have bad or at least less than perfect credit scores. Still a borrower with less then perfect credit an jump through a few hoops and get a fairly decen rate on a loan.