Mortgage interest rates have greatly decreased over the past seven or eight years, mainly due to the economy sagging. If you got your mortgage before the interest rates went down, you're probably envious of the people who have the same amount of mortgage you have, but much lower payments due to their lower interest rate. But wait, you too can get a lower interest rate and decrease your payments as well. All it takes is refinancing your mortgage, and you can accomplish this even if you have poor credit. There are mortgage loans for bad credit available.

What Is Refinancing?

When you refinance your mortgage, you essentially take out a new loan to pay off the existing mortgage. This loan comes with a cheaper interest rate and typically cheaper monthly payments. Mortgage loans for bad credit have a higher interest rate than those with good credit, but it still might be lower than what you're currently paying.

Obtaining a mortgage loan for bad credit can actually help you to better your poor credit score, if you decide to refinance your loan for more than the mortgage and use that money to pay off other existing debt. This is known as wrapping your credit card debt into your mortgage, which is a bit like loan consolidation.

4 Steps to Getting Mortgage Loans for Bad Credit

1. Shop Around. Many people believe that in order to get good refinancing, you need to have good credit. That's simply not the case, in this economy, lenders are more willing to extend refinancing to those with fair or even poor credit. The key is to simply shop around and be willing to do a bit of research before you refinance.

2. Look for Lenders that Specifically Offer Mortgage Loans for Bad Credit. Some of the big name lenders only publicize that they refinance to those with good credit. But most of them also offer plans for mortgage loans for bad credit. Seek those out, and if you find a lender that says they only offer refinancing for people with good credit, ask them if they offer anything at all for people with poor credit. More than likely, they will.

3. Don't Fear the Higher Interest Rate. Let's set one thing straight right now: you will not get the same interest rate refinancing as someone with a better credit score would. You should see a rate that is lower than what you currently have, though, and it's important to realize that even if it's a little higher than you'd like, you can always refinance again in a few years once you've bettered your credit score.

4. Apply Over the Phone or Via Mail. When you apply for refinancing over the internet, the application is usually reviewed by a computer, which can spell automatic bad news for refinancing if you have bad credit. That's why you should apply by phone or via mail, as you'll be turning your application into an actual human being. Again, with how bad the economy is, and how desperate lenders are to loan money, you'll have much more favorable results as the person who is reviewing the application will see that you are genuinely interested in getting a lower interest rate and in making your refinanced mortgage payments on time.

Greatly improve your chances of getting mortgage loans for bad credit by increasing your income through a second job or business. If you're turned down because of poor credit, spend the next six months paying down your debt and improving your credit score, then reapply.