Secrets to getting a mortgage with so-so credit

     NEW YORK (CNNMoney) -- Getting a mortgage can be tough these days -- even people with near-perfect credit have been rejected for loans. But for some lucky borrowers, things aren't as bad as the doom-and-gloom crowd says.

     At a recent press conference, Federal Reserve Chairman Ben Bernanke said lending standards for mortgages have tightened so considerably that "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."

     Indeed, roughly one-in-four mortgage applicants were denied in 2010, up from about 18% in 2003, according to data from the Federal Financial Institutions Examination Council. And those are just the ones that apply -- many discouraged potential borrowers don't even bother to apply anymore.

     Yet, there is money to lend. Bob Ryan, the acting commissioner for the U.S. Department of Housing and Urban Development, or HUD, recently said that mortgage money "is flowing, it's stable, it's tightened from the boom years, but it's there."

     And many of those potential home buyers sitting on the sidelines may just have a shot at it -- as long as they take a few crucial steps.

"The belief is that you can't get a mortgage at all -- but you can," Keith Gumbinger, of the mortgage information provider HSH Associates.

What you need for traditional mortgages

     Most of the major mortgage underwriters have only returned to the more prudent standards of the days before the housing bubble. Now, according to Tuck Bradford, a branch manager with lender Mortgage Master, borrowers usually must meet four criteria in order to get a mortgage backed by Fannie Mae (FNMA, Fortune 500) or Freddie Mac (FMCC, Fortune 500), the two government-run mortgage giants:

     ·         The ability to make a 20% down payment, plus closing costs.

     ·         A good credit score. Borrowers usually need a minimum credit score of 620.

     ·         Enough income to afford payments. The general rule of thumb: no more than 28% of your gross income

         should go toward housing costs.

     ·         A loan-to-value ratio of 80%. Lenders want the home value to far exceed the mortgage balance because if  

         a borrower defaults, the bank sells the home to recoup the loss.

     In today's market, however, even having all four of these factors in place doesn't always guarantee that you will get a loan.

By Les Christie July 5, 2011: 2:40 PM ET, Secrets to getting a mortgage with so-so credit. Accessed July 11, 2011; LinkedIn.com; http://www.linkedin.com/news?actionBar=&articleID=617066521&ids=0QdzwNdP8TcjoIcPkTe38Td34Sb3wVdjkMc3oNdyMNczkSdz0TcjoIdj0Ud3gOdP4S&aag=true&freq=weekly&trk=eml-tod-b-ttle-44