Few may know it, but some of the better interest rates available through "alternative" or "sub-prime" lenders can be just as competitive as those found in the conventional environment. Both loan officers and borrowers sometimes hear the word "sub-prime" and immediately conjure up pictures of fire-breathing dragons and interest rates that are sky-high. Not so, in fact, a little homework can show that often a sub-prime loan needs to be considered shoulder-to-shoulder. Here are a couple of examples.

The first is a couple with good credit and scores above 720. A conventional loan is an automatic, right? Maybe not. A sub-prime rate quote on a 30-year fixed-rate mortgage with zero money down can be found at the time of ths writing for around 5.75 percent by most lenders who offer such a product. That's not the best interest rate available, but it's competitive for 100-percent financing. On a $200,000 mortgage loan at 5.75 percent interest the principal and interest payment is $1,167. At the same time, a conventional lender might offer a zero down loan at a higher rate, say seven percent. That makes the principal and interest payment $1,330 -- $163 higher than a sub-prime quote.

Now, let's say a couple has damaged credit, maybe a score of 550. Most sub-prime fare for zero down requires only fair credit, a midscore FICO of 580 will do it. So, even if the conventional loan did have an interest rate to compare with sub-prime, the borrower with a 550 wouldn't get approved for a zero down loan. Using that same scenario with no money down but with a credit score of 580, the rate on the sub-prime loan rises another 1.25 percent to 8.25 percent. The payment is $1,502 .

If you find yourself wanting to buy a home with no money down, don't fret; there are choices available to you. You need to give sub-prime and alternative lending a shot.
For more on zero down loans, please click here.