Sliding home prices have made homes more affordable in some areas, though tighter lender requirements and bigger down payments have locked some buyers out of the market.

Real estate agents and brokers say they have seen some unconventional loan types, such as those higher-risk loans that have been blamed for bringing down the subprime and credit markets, largely vanish from the market while government loan products are becoming more prominent.

Stricter lending is definitely taking its toll on the market, prompting the National Association of Realtors’ president to lash out this week at the current state of private lending practices.

"It appears there is some overreaction on the part of some lenders now in requiring higher down-payment percentages than may be necessary," said Richard F. Gaylord, the group’s 2008 president and a RE/MAX broker in Long Beach, Calif., in a statement this week.

Gaylord said there is some relief for buyers in the form of "more lenient policies" for FHA loans, which are mortgage loans insured by the U.S. Federal Housing Administration that are intended to serve those who cannot afford a conventional down payment or qualify for private mortgage insurance.

Mike Motta, a broker in Assonet, Mass., south of Boston, said, that tighter lending requirements have killed some real estate deals.

"There was a period of time a few months ago when the mortgage qualifications rules seemed to be changing daily," Motta said. "That seems to have settled out, and things are much calmer in that regard."

It is "a little trickier for many buyers, particularly those with little or no down payment or with credit problems," he said.

More buyers are looking to FHA loans these days, he said, though conventional fixed-rate mortgages are still popular and "few people I’ve talked with are considering anything with a variable rate."

With more limited mortgage options for some buyers, Motta said it’s "more important than ever that an agent team up with one or two mortgage providers that can be relied on" to serve their clients.

In Indianapolis, FHA and Veterans Affairs loans (VA loans), which are loans guaranteed by the U.S. Department of Veterans Affairs, have returned as popular loan products, said Pat Haddad, a broker-associate who leads an agent team for Keller Williams Realty, Indianapolis.

"The days of 100 percent financing are basically gone. Underwriters are being very cautious. Subprime lending is not as lenient as it once was. Credit scores must be a little higher. Debt-to-income ratios have changed, also," she said.

Haddad said she refers all of her clients to a lender who she believes is "honest" and "knowledgeable."

"I cringe if someone tells me they are working with a lender they chose out of the Yellow Pages. It is important to have someone trustworthy to handle this very important part of the transaction," she said, adding that agents are perhaps "more protective" these days in advising clients to work with reputable and recommended lenders.

FHA loans are assisting entry-level buyers in the Orlando market, said Paula Bean, an Orlando Realtor. "For first-time home buyers, (loans) are not really a problem." A former mortgage licensee, Bean said the mortgage landscape has changed dramatically, with various loan programs entering or leaving the market.

In Corvallis, Ore., Mark Fullwiler of Coldwell Banker Valley Brokers said that qualified buyers who have a job, credit scores above 680, a good credit history and who plan to live in the home they are purchasing can get 30-year fixed-rate financing at interest rates under 6 percent.

"I personally will dissuade buyers who are not strong financially from buying a home. The only buyers I’ve had in this past quarter who were denied financing were college students who had a down payment but no job. They shouldn’t have obtained it, even if offered," he said.

And farther north, in Fairbanks, Alaska, Jesse Clifton of ERA Northern Lights Realty said buyers with credit scores above 640 are able to secure loans, and financing is available through Fannie Mae and Freddie Mac, the Alaska Housing Finance Corp., and VA.

With the exception of the VA loan program, buyers do need to bring at least 3 percent of their own funds to the closing table or it won’t work, he said.

"Many alternate financing programs … have disappeared entirely. Without a doubt this has pushed many buyers out of the market."

Some sellers are pitching in toward the closing costs or down payment amount, "but it’s still a pretty small segment of the market that is engaging in offering … concessions," he said.

"I haven’t personally seen that many transactions die because of lenders failing or due to underwriter denial of the package. I’ve always taken pains to ensure that the buyers … were already fully vetted with their lender so as to avoid any surprises.

"Those agents who don’t take that initial step and rely on a pre-qualification letter a lender wrote, based on verbal information from the borrower, are probably seeing a much higher failure rate," he said.

In Lafayette, Calif., a community in the San Francisco Bay Area, Pete Sabine of J. Rockcliff Realtors, said earlier this year there had been confusion among consumers and real estate professionals about federal changes to the conforming loan limits.

Congress and the Bush administration have since approved a temporary increase in the conforming loan limit, which will reach as high as $729,750 in high-cost areas. The temporary increase expires at the end of the year.

Sabine said that a big challenge in high-cost real estate markets like the San Francisco Bay Area is "increasingly tightening loan underwriting and property appraisal standards."

He added, "I am skeptical that Wall Street is ready to come back into the jumbo (non-conventional) loan market until the subprime fallout and multibillion-dollar banking and investment firm loss write-downs have subsided."

The return to more traditional lending standards has "eliminated at least half of the potential buyers in the market," Sabine said, which has slashed demand and sales.

Buyers with documented income, assets and job stability and FICO credit scores above 680 can still purchase properties, these days, he said, and the higher loan limits should allow more first-time buyers to use FHA financing to buy properties "at the bottom run of the real estate food chain."


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