There’s still money to lend

By Brian Eckhouse

Monday, Oct. 27, 2008 | 2 a.m.

Despite all the talk about the frozen credit market, big-ticket loans are available across the Las Vegas Valley — for those who can meet the more stringent terms.

“Nobody’s going to give 100 percent financing,” said Debbie Priebe, a local branch manager for U.S. Mortgage of Nevada. “If they did, it would be 17 percent interest, at least.”

And if you want a loan to buy real estate for a business today, you’ll be paying down a greater share than 12 months ago.

Before granting a home mortgage, Wells Fargo examines several criteria of loan applicants: credit score, debt-to-income ratio, two years of W2 tax forms, two months of bank statements and payroll stubs.

“Just about anybody could get a loan two years ago,” said Jonathan Taylor, the regional manager for Wells Fargo Home Mortgage. Today “we’re much more prudent.”

A poor credit score alone can doom applicants, even if they can put money down. A major bank rejected a mortgage application from Johnathon French, a union contractor at CityCenter, because his score resided in the 500s. Priebe’s staff ultimately identified errors in his credit report, boosting his score to 650. That enabled him to qualify for a Federal Housing Administration loan for a small two-bedroom condo near Sam’s Town.

Meeting the new thresholds is essential.

Nevada Bank & Trust has taken a “black-and-white” approach to lending, said Robyn Schaefermeyer, the branch manager in Mesquite. “Credit is so tough that even if the guy across the table is reputable — we know him, he’s our friend — we’re still making hard-line decisions.”

Not too long ago at some Southern Nevada banks, small businesses could have secured loans of 80 percent of the total cost for commercial real estate acquisitions and development. At Desert Community Bank today, that figure now stands at about 75 percent for owner-occupied properties, 70 percent for investor-owned properties and 65 percent for specialty operations, including restaurants, according to chief credit officer Gerald Buttaccio.

It’s not just the banks that are playing it safe — or safer.

A year or two ago, Lisa Merha would have strongly considered seeking a loan to open a restaurant franchise. But with the stingy credit market, Merha and her husband are financing their Red Brick Pizza joint in North Las Vegas themselves.

But the new loan requirements — including a larger down payment — made her nervous.

“The stringent requirements they’re putting on small businesses is a risk,” said Merha, who is planning to move to Las Vegas from San Bernardino, Calif.

More than a year ago, the Area Health Education Center of Southern Nevada, an outreach arm of the University of Nevada School of Medicine, decided to finance a $30 million complex with the help of a developer, according to the center’s director of marketing and development, Amanda Gillespie. That developer ultimately backed out, so the center opted to rent instead. Considering the slumped economy, the center doesn’t regret passing on the loan route.

“I don’t know if it was a little fortune-telling ... or what, but I’m glad we didn’t do a loan,” Gillespie said.

Homes today can be bought with just 3 percent down for a Federal Housing Administration loan as the 30-year-old French did. (That figure will soon increase to 3.5 percent). FHA loans were used in about 40 percent of single-family home sales in August, up from 2.2 percent the previous August, according to the Greater Las Vegas Association of Realtors. About 75 percent of the mortgages processed by Flagship Financial Group in the past six weeks are FHA loans, mortgage specialist Steve Schauer said.

“FHA would be the loan of choice right now,” Taylor said.

For those who don’t pursue an FHA loan, many banks now expect down payments of at least 10 percent for homes bought for less than $417,000 — a return to the days before the boom when 30-year, fixed-rated mortgages with 10 percent down were the norm.

In declining housing markets, which include Las Vegas and Phoenix, Bank of America requires down payments of at least 15 percent on non-FHA mortgages, spokesman Terry Francisco said.

FHA loans typically require credit scores of 580 or above; conventional mortgages need far higher scores, often in the 700s.

At the height of the housing boom, car dealerships had little difficulty approving financing for buyers with credit scores under 600. Even those with credit scores under 500 could sometimes get a deal struck with a small down payment.

“It used to be, maybe five years ago, you just had to make a judgment call based on what you knew and didn’t know,” said Steve Curtis, finance manager at Findlay Chevrolet.

Curtis estimates that two years ago, 90 percent of loan applicants at his dealership were approved. Today, that figure is down to about 60 percent.

He cites several obstacles for potential buyers: credit score; a severe depreciation of trucks and sport utility vehicles owners try to trade in, and the debt-to-income ratio.

“You may pay every bill and have a good credit score, but if you’re living on credit cards, (banks) see that,” Curtis said.

But if you’re like Elizabeth Gonzalez, a banker with excellent credit, you’re probably safe, no matter the state of the economy. The 20-year-old was prepared to have her mom co-sign her lease on a new 2009 Corolla LE from Findlay Toyota, if necessary. It wasn’t: She has a top tier credit rating.