The trend in real estate lending sure has been shifting. We are seeing further tightening of qualifications for buyers. To explain it I will have to break the changes out into two basic funding sources: Government or FHA Loans, and Fannie Mae loans. Let me explain further.

First of all in the FHA (Federal Housing Administration) is mostly used for people with limited down payments or people with less than 740 credit scores.

You see on a FHA loan the best pricing is available to everyone with a credit score of 660 or better. While the FHA will still insure loans to people with less than a 660 score, it does not demand the higher credit score needed to get the best pricing as Fannie Mae does. Fannie requires a 740+ score for the best price.

On top of being able to work with people with lower credit scores, FHA loans only require a small down payment. Currently only 3% is need for the down payment. However, a change is on the way. The minimum down payment is expecting to rise to 3.5% come 2009. This may provide the first reason to act now rather than waiting until after the holidays.

FHA still allows down payment assistance for low to mid level income earners through various cities, counties and state level bond programs. The programs in are available to cover the entire 3% down payment.

With the down payment out of the way, that only leaves the closing costs to be paid for. If you work with an experienced Realtor negotiating for you, it is possible to work out a deal where the seller pays for the closing costs. With the down payment and closing costs being covered, it very easy for people to purchase homes with to no money out of pocket.

Next lets move on to the next section of loans, loans that are under the guidelines of Fannie Mae and Freddie Mac. They have made some changes as well. The biggest changes are with loans funded through these sources with a down payment of less than 20% down.

If you put less than 20% down both Fannie and Freddie, require you to obtain mortgage insurance (MI). This is a policy to protect them (not the homeowner) in case the property ends up in default.

There are seven mortgage insurance companies in the US currently. They are the ones that really have tighten up the guidelines. They have changed the minimum credit scores to be much higher than where they where even back in September of 2008. The MI companies are also increasing the amount of income that is needed to qualify each borrower by lowering what we call the debt to income ratio. This all means that it takes more income to qualify for the same house.

Lastly, I want to touch on an area that affects both FHA loans and Fannie Mae loans. They are both reducing there loan limits. Currently we can fund loans for people with FHA or Fannie Mae loan amounts up to $729,750 in most bay area counties.

Unfortunately, the limit is going to be reduced down to $625,500 on January 1st 2009. If you were looking for a loan that falls between these two loan limits, you really need to act fast as these loans do need to closed by the end of 2008.

In the end, everyone's situation is as unique as they are. If you are looking to purchase a home, my recommendation is to work closely with a Loan Officer that has years of experience or get a referral from a Realtor that you trust. An experienced lending professional has the know how to overcome any obstacles that can come up in a transaction, and help you close your transaction with the most favorable terms.

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The complex offers a wonderful community with the conveniences of city living surrounded by lush landscaping, a common green space and park. A short two block walk has you at the Midtown Plaza Safeway or Starbucks Coffee shop. Two blocks in the other direction has you at the light rail station that will take you to downtown San Jose or Campbell. Santana Row shopping is a quick ten minute drive from your doorstep.

The community also offers secure underground parking through a gated garage. The homes also offer central air conditioning, laundry connections available inside, secured entry access from the street, a pool, hot-tub, and gym. There is also a beautifully decorated club house with complete kitchen available when you need to entertain larger groups.

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