photo credit: Casey Serin

Times are indeed changing when it comes to the mortgage game. Federal Reserve Chairman Ben Bernanke, at a recent press conference, said, "The bottom third of people who might have qualified for a prime mortgage in terms of, say, FICO scores a few years ago cannot qualify today," because of stricter standards from mortgage providers. In 2010, about one in four applicants was denied for a mortgage loan. This represents an 18% increase since 2003, reports the Federal Financial Institutions Examination Council. Bob Ryan, acting commissioner for HUD (U.S. Department of Housing and Urban Development) said that money is "flowing, its stable, its tightened from the boom years, but its there." Keith Gumbinger of mortgage information provider HSH Associates says there is a belief that you cant get a new loan, but thats not the case at all. According to Tuck Bradford, in order to have your mortgage backed by "the big guys" i.e., Fannie Mae or Freddie Mac, a borrower must meet the following guidelines:

• Be able to pay 20% of purchase price as a down payment, plus any closing costs.
• A credit score of at least 620.
• A high-enough income to cover monthly mortgage payments usually no more than 28% of gross income should go to mortgage payments.
• A loan-to-value ratio of at least 80% in order for the home value to be greater than the loan balance in the event of default.

Oddly enough, however, some potential borrowers are finding it difficult to get funding even with great credit. A loan officer in Westport, Connecticut had a client who was trying to refinance his home and ended up having to do a short sale due to one imperfection on his credit report. Since the homeowner ended short selling his home, hell have an even bigger blemish on his credit report for several years.

The Federal Housing Administration can help those who have been rejected by conventional lenders. The FHA is intended to help working-class Americans achieve home ownership, and therefore, has less stringent lending rules. FHA requires minimum credit scores of 580 for a 3.5%-down loan and 500 for a 10%-down mortgage. There are, of course, some banks that require higher credit scores in order to protect their investments. If you have less-than-perfect credit, FHA is willing to overlook it as long as you have other favorable factors to counter-act the bad. You may even see borrowers with a bankruptcy or even a past foreclosure on their records receive FHA financing. Such stains make any financing more difficult but not impossible.

Read more.