Housing Recovery depends on credit...

I found this to be an interesting article from USA Today on a couple who is trying to get back into home ownership, maybe you know of a few people like this as well.

Adele and Josue Montoya missed the housing bubble and bust.

Still, the first-time home shoppers are in a situation not unlike that faced by millions of Americans in the years preceding the start of the housing collapse in 2006.

Then, as now, home prices were rising rapidly in the Sacramento area where they live. Investors chasing fat profits on rising prices were a big part of the U.S. housing market, just as they are now. Buyers, such as the Montoyas, thought prices would go up further.

One thing is very different now, from then: It's far harder to get a home loan.

To pre-qualify for a home loan, the Montoyas had to submit reams of documents to show that they could actually afford it. That often didn't happen in the loose-lending days leading up to the housing bust, which helped drive Lehman Bros. into bankruptcy five years ago.

What's more, new lending rules have been put in place to guard against the worst lending abuses that fueled the housing bubble, the mortgage industry says. But critics say the rules aren't shaping up to be tough enough.

"We've created this false sense that we've made mortgages low risk," says Edward Pinto, resident fellow at the American Enterprise Institute. "But as time goes on and the push for looser lending occurs ... the same thing could happen again."

The change isn't a bad thing, says Adele Montoya, 38. She works as an office supervisor. Her husband works as a produce supervisor in a grocery chain. The couple wants to know they can afford whatever loan they get.

"I don't want any surprises down the road," she says.

One big change is that, starting in January, lenders must make home loans that meet new federal qualified mortgage standards or face greater liability from borrower lawsuits, should the loans go sour.

Even the Montoyas have decided to hold off on buying in the frenzied Sacramento market, where prices were up almost 27% in July year-over-year. They expect new home construction to add to the supply of homes for sale, increasing their chances.

"We're just going to wait," Adele Montoya says.