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RISMEDIA, Sept. 12, 2007-(MCT)-Easy credit…no money down…bad credit OK…no income verification. Those come-ons for home loans were common just a few years ago, as numerous lenders tried to cash in on the home buying frenzy and the impossible hype that house values would rise higher and higher each year without end.

“If you were a landlord with a home or apartment for rent, would you even think about renting to someone without first checking their credit and income, and not requiring any deposit?” asked Wendy Teixeira, president of the Santa Maria Association of Realtors and an agent with Winsor Properties in Orcutt. “But that’s what happened with so many lenders. The guidelines were too loose.”

The bubble has burst on slippery lending practices only to be replaced with a new hype—that it’s impossible to get mortgages now. Calls to several mortgage lenders around Santa Barbara, however, prove that’s not true, and even first-time buyers can still qualify for loans.

“You can’t go out and get what we call a ‘toxic’ loan anymore,” said one mortgage broker at a large company, who asked that his name not be used. He was referring to the once-popular loans made without income verification to people with shaky credit who didn’t have to come up with a down payment. “A year ago those ‘toxic’ loans were commonly made to the people who shouldn’t get a loan. But people who have good credit, good jobs and some money in the bank can still qualify for loans.”

As many loose lenders have closed up shop, the result has been the prevalence of conforming loans (limit of $417,000) or jumbo loans at higher rates than the once-standard 6% or lower.

“It seems like everybody has turned into doing only conforming loans these days,” said Tim Taylor, senior loan officer at Metrocities Mortgage in Santa Barbara. “Buyers can still get mortgages, but lenders now want full documentation (of income) and at least 5 percent down (payment). And you don’t need perfect credit. It can be as low as 620 and still qualify.”

To meet the $417,000 conforming loan limit with 5% down means buyers would be limited to purchasing a home with a price of under $450,000.

Finding such a home is not impossible, contrary to what most people believe. Though the median home price on the South Coast currently hovers at around $1 million—not counting sales in the exclusive areas of Montecito and Hope Ranch, there are properties available for half that amount. Most of them, however, are condos in less desirable South Coast neighborhoods, or in the North County bargain areas of Lompoc and Santa Maria.

The lowest-priced condo available for sale this week on the South Coast is listed at $329,000 for a one-bedroom, one-bath on Dearborn Place in Goleta.

There were nearly two dozen other properties on the South Coast listed for under $500,000, the majority of them Goleta condos.

“If you look at what’s available to first-time buyers right now, it’s really not much different than what it was a few years ago during the housing boom,” said Harlan Green, at Bankers Mortgage in Santa Barbara.

“We’ve always advised them to go to Ventura, Santa Maria, or Lompoc if they want to find the best deal on a house.”

For those buyers who can’t let go of the dream of living in Santa Barbara city limits, and who seek a traditional single-family home, a jumbo loan (for more than $417,000) will typically be required.

Rates on jumbo loans were ranging between 6.75% and 8%, according to one nationwide broker. Mr. Green and Mr. Taylor said “hybrid adjustable rate loans,” which are fixed for around five to seven years, were available for rates ranging from approximately 6.25% to 6.5%.

“Historically, those are still good rates. If you compare it to 1998, they’re really good. But compared to a few years ago, when they were below 6%, they’re higher. And that can be a hard adjustment for people,” Mr. Taylor said.

John Bahura, an agent with Village Properties in Montecito, said he sees many potential buyers struggling to get loans they can afford.

“It’s really hard to get a loan right now, especially for a jumbo loan. And nearly everyone who wants to be in a desirable area in Santa Barbara needs a jumbo loan. You need it to get something in the $1 million range.”

Rates on jumbos may come down in the near future as big-name lenders compete to gain market share from the fallout of fringe lenders.

Well-known lenders such as Chase Home Finance and Wells Fargo have become more aggressive in marketing their loans to people who have decent credit and good incomes.
There has been a dramatic increase in financings at big lenders lately because a lot of the competition has been eliminated, several brokers said.

Yet the widespread perception is that the housing market is collapsing.

While that may be just overblown fear, it still impacts buyers’ decisions, said developer Jarrett Gorin of Centerpointe in Santa Barbara.

“Many buyers are sitting on the fence thinking that prices are going to keep on dropping. And there is a lot of fear out there right now,” he said.

“So homes are taking longer to sell, or sellers are taking them off the market.”

At the new 37-unit Willow Creek Townhomes development on Hollister Avenue in Goleta, sales appear to be slow, but some units have found buyers. The lowest-price, two-bedroom condos available at the moment are listed at $565,000 and $575,000, and one three-bedroom is going for $695,000, according to Matt Benwitt, a sales agent for the development.

He said that he recently closed two sales at Willow Creek, both for two-bedroom units, but he did not disclose the sale prices.

“One of them was a first-time buyer,” he said. “The other one was sold as a vacation home to someone from L.A.”
Editor’s note: next week, the News-Press looks at the economic impact that housing woes have had on Santa Barbara County and how sellers are using creative means to attract buyers.

Copyright © 2007, Santa Barbara News-Press, Calif.
Distributed by McClatchy-Tribune Information Services.