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Millions of people who probably couldn’t afford a home before were offered an opportunity to take out a mortgage when loose credit and subprime loans became the vogue, but now it is time to pay the piper.

No down payment home loans, with adjustable rates (sometimes teaser rates to attract business but still elevated because of the borrower’s poor credit) seemed like a perfect idea.

But the housing bubble burst, and home values are falling and interest rates are going up.

Rates on these mortgages could be as high as 10%at the time when prime mortgages were available at less than 6%, frequently resulting in mortgage payments of over $2,000 on modest homes. At these rates, and the excess loan balances because of no down payment, even small increases could increase the monthly payment by as much as 20%. Re- financing is out of the question since credit conditions have tightened and home values have fallen. (The home loan balance is higher than the probable sales price of the house.)

Can these homeowners find a solution? Congress is looking into ways to help homeowners out of this crisis, but on an individual basis, each homeowner faced with the possibility of not making his loan commitment should be very pro-active in addressing the issue.

The one thing a homeowner should not do is to ignore the problem. If it looks like this month’s payment is not going to be made, make sure you call the lending institution and explain what’s going on. In many cases, they can work out a payment plan, especially if there has been some problem such as a loss of a job or illness.

Contact a counselor. The Department of Housing and Urban Development can offer a housing counselor in your region who will help you find steps to dig yourself out of the problem.

Cut back on non essential expenses, especially if you have credit card debt. You may not be able to reduce energy and food expenses, but now may not be the time for the cell phone plan with a phone for each member of the family, or the premium high density television package from your cable provider. The savings can go to your high interest credit card balances or to catch up on mortgage payments.

Discover if you are a candidate for assistance. There is a program in which some low income families can change their adjustable rate mortgages to fixed year, 30 year loans at reasonable rates.

There are some more drastic solutions, but if all else fails, you may not have a choice.

Dump the property. Selling the house in today’s market may mean a loss, but working with the lender may also mean that they will take the sales price in settlement of the ourstanding balance. It is often a better solution for them.

Go into bankruptcy. This is a last ditch resolution since you will be hampered in terms of your long range financial plans. It will further damage your already poor credit, but if you have no other solution, it is a way to have debt consolidated, reduced and in some cases even cancelled, depending on your income.

The bottom line is that the smart borrower will attempt to take steps before late reminders pile up and foreclosure is the only answer.

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Of course you realize that you want the lowest interest rate, smallest fees, and lowest monthly payment on your home loan. But to get these optimum results, you have to do a bit of footwork.

After you have decided upon the type of mortgage you want, take a few important steps to help you in this pursuit. So you will have to initially decide between a fixed or a floating rate mortgage.

The difference between these types of loans is that a fixed rate mortgage has a rate that never changes. An adjustable rate loan “adjusts” periodically over the life of the loan, which may be one, three, five or more years.

The advantage of an adjustable rate home loan is that the rate set is at a lower rate than longer, fixed term loans. If you think you will move out of your home within the next 5 or 10 years, an adjustable rate mortgage is probably a good idea.

However, a fixed term, typically thirty year, mortgage would probably pay off if you thought you’d be in the same home for an extended length of time.

After you have made the decision as to which type is better, call a number of lenders, or better yet, research on the net for rates. Make sure you get all the fees involved in addition to the rates. A rate that is lower may be counterbalanced by fees that are higher. Once you have this information from different sources, you can make a list to compare.

You should try to have information on a minimum of three banks. More is better, if you have the time to give to this labor. A home loan is a major commitment, and you want to have the best deal.

Once you have this information, you can contact the best ones and find out if you can qualify for a commitment. Supplying good information is critical at this point so they can give you accurate rates. All information is verified, so trying to get a lower quote with false financial numbers will not work in the long run.

Another issue to be aware of is that you may not be accepted, even if your qualifications are excellent. Lenders frequently have other issues to deal with. Lenders try to maintain balanced portfolios and yours may not be the type of loan they want to have at this moment.

When you have some tentative approvals, start to inquire with family and friends to see which bank is preferable.

In addition, you should make sure the lender is a good fit for you. If you have an agent who is not able to spend time answering your questions, you will not be happy working with him over time.

Pick the lending institution that meets your criteria and ask for a pre-approval. This will permit you to start looking for your house while they work on your application. You will still be giving the lender information about your application, but this will give you an edge.

You may consider locking in an interest rate once you have focused in on the house of your choice. It is difficult to do so much sooner because lenders are not willing to fix a rate very far in advance of a closing date, since the rates may move against them. Don’t forget that the opposite is true; you may fix a rate and then rates move down. You can cancel the application, but you may incur charges if you do.

Following these simple tips will help you obtain the best mix of interest rate, loan maturity, closing and processing fees as well as customer service on your home loan.

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