hot news on loans and mortgages and finance april 1 2007

Not too long ago, ads for "zero-down" and "low introductory rate" mortgages were as common as credit card offers. Now, with more loans going into default, lending standards are tightening.Loans with low down payments and adjustable interest rates still can be had.But the borrowers who need those loans, including many first-time buyers, will have to make a stronger case.

Here's how to proceed:-- Improve your credit scoreMost of the lending pullback has occurred in what is called the subprime market, or loans made to borrowers with a higher risk of default. It's not hard to see why lenders are growing more cautious: The latest survey from the Mortgage Bankers Association shows that delinquency rates are rising, particularly among subprime loans.

Factors such as your FICO credit score (which stands for Fair Isaac Corp., the company that developed the credit rating), income, outstanding debts and savings determine whether you're considered a subprime or a prime borrower.Prime borrowers generally qualify for the most competitive interest rates and flexible loan terms.As a first-time buyer, you may not have a cushy income or savings account.

You also may be paying down credit card debt and student loans.So beefing up your credit score is key. You want to aim for a score of 680 or higher, said Keith Gumbinger of HSH Associates, which tracks mortgage data. Credit scores range from 300 to 850.To get there, start whittling down credit card balances and make sure to pay your bills on time for at least six months before you apply for a loan."The credit score alone can be a reason to put you into a non-prime loan," said Bill McNamee, president of the Illinois Association of Mortgage Brokers.-- Start savingAnother sticking point could be the down payment.

During the recent housing boom, lenders eased up on down-payment requirements, sometimes financing 100 percent of home prices.Today, though, those loans are not as prevalent."They don't exist the way they used to," McNamee said. "Some lenders have gotten out of offering those loans or have a higher threshold for qualifying today."Buying a home with no money down is a risky proposition anyway. Now that home prices have stalled or even declined in some communities, you could end up owing the bank if you had to sell.

You don't necessarily have to save much."You can find 97 percent financing today that used to be 100 percent," Gumbinger said.-- Consider first-time buyer programsSome loan programs are directed at first-time buyers, though generally you have to makes less than your community's median income.State and federal agencies, such as the Federal Housing Administration , are one option.

You also can check with a credit union. In the last year, the Credit Union National Association rolled out the Home Loan Payment Relief mortgage specifically aimed at first-time buyers. Some 20 percent of credit unions now offer the loans.The HLPR loan finances 97 percent or more of the cost of a home. For the first three years, the interest rate is fixed at 1 percentage point below the national average, recently 6.25 percent. three years, borrowers switch to either an adjustable- or fixed-rate mortgage.

Even with an adjustable-rate loan, the interest rate never climbs more than a percentage point per year, with a lifetime cap of 5 percentage points.And, unlike FHA loans, the HLPR may not require mortgage insurance, an additional monthly fee."These loans are straightforward," said Bill Hampel, chief economist for the Credit Union National Association. "They're not putting buyers into the possibility of payment shock."