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Subprime lending crisis changes buying, selling plans

New contingencies, larger down payments becoming standard

It's hard to avoid negative news about the mortgage lending business. Defaults are rising, subprime lenders are closing shop, and fortunes could be lost as mortgage-backed securities go up in smoke. Sounds ominous, but how will these trends impact someone who's trying to buy or sell a home? The first thing to understand is that lenders are moving back to basics. No- and very low-down-payment mortgages are available only to buyers with high credit scores. This means no more 100 percent and 95 percent mortgages for subprime borrowers. Lenders are also backing away from low-documentation and stated-income mortgages. Many lenders now require buyers to have a cash down payment, good credit and the ability to verify income. For years, home buyers stretched the price they could pay by using adjustable-rate and interest-only mortgages. Not long ago, lenders qualified buyers for these loan products based on the lower initial rates and on interest-only payments. Now, borrowers m...