Best Places to Live 2009

With national banks doing the bailout shuffle, the best chance for loans lies closer to home.

By Brigid Sweeney

The media (ahem) would have you believe that today's real estate lending scene is as dried up as Cloris Leachman. In reality, community banks and local credit unions "are very strong and still have dollars to lend," says state banking commissioner Steven Antonakes—largely because they steered clear of the exotic financing that got bigger banks into trouble.

Brookline Bank is one of the former, and its flush position is typical: The community bank has doubled its mortgage business during the so-called housing collapse, leaping from $54 million in 2007 loans to $122 million last year. What's more, its loan delinquency rate remains almost nonexistent. "We've been able to focus on new business, because we haven't been distracted by bad loans," says senior VP Wesley Blair.

Before it gives you a mortgage with a great rate, a local bank will confirm your income and creditworthiness, and also that you'll be living in the new place (house flippers are not popular with these community-focused lenders, especially now). To avoid added fees, you need a credit score of at least 720, says Century 21 agent Geoff Cramer. (Anything above 730 is generally considered "excellent" on the 850-point FICO scale.)

While the banks will scrutinize your financial history, they may be surprisingly lenient about your down payment. Although the days of no-money-down are long gone, falling short of the vaunted 20 percent mark isn't necessarily a deal-breaker. "The down-payment amount isn't as bad as people think," Cramer says. "There's still plenty of financing for homebuyers with 10 percent, 5 percent, even 3 percent down." Indeed, both MassHousing and the Federal Housing Administration offer 3-percent-down programs for buyers with healthy credit and the right income, provided they pay mortgage insurance.

Already saddled with a mortgage? You may still get a deal if Barney Frank gets his way. As chairman of the House Committee on Financial Services, the congressman is pushing to change the federal definition of "jumbo loans," which now start at $465,750 for Greater Boston, and come with higher interest rates, currently around 7 percent. But as Frank points out, what buys "a luxury home in Nebraska does not buy a luxury home in Wellesley." He's trying to raise the limit for conventional loans to $730,000 in high-priced areas—which could allow a lot of homeowners to refinance at conventional rates of around 5 percent.

For a sampling of area banks' lending activity, click here.

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