Home loans harder to obtain, but opportunities still exist

They bought a house with features on their wish list – a cathedral ceiling and a fireplace – but they had to jump through more lending hoops than they would have a year ago.

“(We were) not sure if things were going to work out," Lemiere said.

Glenn Astolfi, a mortgage broker with DNJ Mortgage, said more paperwork is needed now to secure a home loan – more tax returns, more job history and more proof that potential buyers can afford the property.

“Compared to a year ago, loans are more difficult to obtain, but they can still be done,” he said.

The sub-prime meltdown began with reckless lenders who looked the other way on credit scores and buyers’ long-term ability to pay.

“I think there was a segment of the population probably that was getting an opportunity to buy a home where they probably shouldn't have,” said Jeremy Salemson, a mortgage banker with Corporate Investors Mortgage Group Inc.

Now, there's far more scrutiny on credit scores. Lenders say scores at 740 or higher will still get borrowers the best rates, but every 20 points lower will cost more.

Those in the 620 to 680 range get into the risky area where some home loans will be rejected. Those with scores below 600 will need to rebuild their credit.

“You're not going to get a loan anymore below 600,” Astolfi said.

The bar has gotten even higher for those searching for high-dollar homes. Loans of more than $417,000 not only require more proof of credit worthiness, buyers also need a minimum down payment of 10 to 25 percent down payment.

“I'm in the business to provide people loans, but I think this kind of restriction is good for our economy overall,” Astolfi said.

That said, he said he believes some rules go too far. For instance, the rule requiring five or six comparative appraisals instead of two or three.

“If you're a credit-worthy borrower, there are still many good opportunities out there for you,” Salemson said.

St. Louis and Lemiere said they spent close to four months searching.

“It just seemed like there was more paperwork than there might have been,” St. Louis said.

Working with their lender, they found a home and a government-backed mortgage they could afford.

“It was very exciting, a lot of anticipation,” she said.

The key for buyers is to work with an experienced lender even before they start looking to buy. Plow through the paperwork early because it will take more time.  Also, they need to figure out how to improve their credit, if needed, and find out what loan options are best for them.