Buyers returning to market, but many find loans elusive

MIAMI — Thanks to the housing slump, professional couple Gladys and Raul Castillo finally found homes they could afford — new condo units in foreclosure within walking and biking distance of their jobs in Miami's Brickell financial district.

They also had the credit record to meet lenders' standards. But they couldn't land an actual loan.

"Almost all of them want 20 percent," Gladys Castillo, an administrative assistant, said of lenders they had approached. The Castillos had saved only 10 percent, and lenders were loath to get into units in buildings rife with foreclosures.

So the couple stopped searching while saving for a bigger down payment.

Reeling from an estimated $300 billion in losses from bad mortgages, lenders last year began making it tougher for would-be buyers to get financing, especially in places hard hit by the housing crisis, such as Florida. They boosted the credit scores needed to qualify and eliminated loans to borrowers with less than perfect payment histories. They asked for bigger down payments and solid proof of income and assets.

Back then, though, no one was buying.

Now, as buyers tiptoe back into the market, lending trends are frustrating real estate agents and mortgage brokers. They say byzantine underwriting standards are forcing financially sound, mostly middle-income buyers back onto the sidelines of the housing market.

In some areas, "there is no way to get a loan unless a borrower is willing to put 30 or 40 percent down," said William Zalaquett, a Keyes Co. Realtor who specializes in the Brickell district and Miami's Biscayne corridor. "Europeans, wealthy Northeasterners and the wealthy locals who have the cash can buy. The average working class here, they are left out."

As a result, more buyers are paying cash at closing. Ron Shuffield, president of brokerage Esslinger Wooten Maxwell, said 31 percent of the firm's clients in July paid cash for their homes, up from 15 percent historically.

"(It) is the highest percentage that we have ever seen," Shuffield said. He attributed the rise to tighter lending standards, but also the increased ability of buyers to negotiate better deals if they did not make them contingent on getting a mortgage.

Even wealthy individuals needing financing are having a tough time, said Alex Doce, president of Baron Mortgage, a Boston-based lender.

"Right now, I have a couple of $4 million and $5 million loans, and it's a nightmare to try and finance these people who have high net worth. The few people that were buying these loans, like Indymac, have gone out of business or don't have the capital to lend," Doce said.