It's gotten harder to get a mortgage at the same time that real estate prices remain a bargain. Meanwhile, the local banks have money to lend for those with good credit scores and the means to pay their bills, but low interest rates have started to creep up since early November.

On the other side of the equation, there is a glut of real estate on the market and a significant number of homes in the midcoast that are either in foreclosure, being sold for less than owed the bank on a "short sale," or are part of a bankruptcy.

Lending is tight but available

A loan officer at a local bank said business has been brisk for refinancing, but not for home sales, which slumped after the federal first-time homebuyer tax incentive ended in June. The process for refinancing has slowed down because of the increased applications, with the average time from application to closing stretching now up to eight weeks because property appraisers and lawyers are backed up.

At the same time that super-low rates hovered around four percent earlier this month, more people are being turned down because of the tightened regulations and because appraisers are coming back with real estate values that are considerably lower than the owners expected and the bank will accept.

"It's just tighter everywhere," said M. Jane Irving, senior vice president of Bangor Savings Bank and head of the mortgage division. "There has been a tightening of lending criteria, and I think it's going to remain firm going forward. Personally, I see this as a positive. It's good banking practice."

Irving said those with a good credit score, employment and equity in their property and the standard documentation will have access to the low rates.

"If your credit score is below 740, there are still options, but you'll be paying points or be looking at other products like a standard adjustable-rate mortgage with a schedule and a rate cap," she said.

A point refers to one percent of the amount being borrowed, which the borrower must pay the bank to acquire a loan. For example, if a borrower seeks a $100,000 loan and their credit score is not up to par, the borrower may have to pay two points, or $2,000, to get a loan.

"Or they could pay a delivery fee or three percent of the mortgage to the secondary lender," said a loan officer for a local bank. "It's risk related."

Sub-prime and even nontraditional loans are off the table for local banks. It's the tried-and-true mortgages, like the 30-year fixed, that banks have to offer.

Another local loan officer said a credit score of 720 or above would be acceptable to secure a low mortgage rate if it was to refinance no more than 75 percent of the home value with no cash out and no second mortgage - and the borrower had stable employment.

Several loan officers from local or statewide banks said they expected tight lending practices to continue for the foreseeable future, which agrees with what senior loan officers said nationwide in the latest Federal Reserve Bank survey, released November 8. Specifically, smaller lenders will continue to have tight lending practices while larger lenders are tending to be slightly more lenient because they are willing to accept more risk.

Mortgage rates historically low

Scott Hammond, chief investment officer for the First Advisor division of The First bank, said radical interest rate increases are unlikely in this economy.

The increase in unemployment rate is one reason the interest rates are as low as they have been, but he sees other favorable indicators that the economy is improving, including an increase in retail sales and the stock market rising.

"Even today, when the unemployment rate was announced at 9.8 percent, the stock market was flat," he said. "It wasn't as negatively affected as it could have been."

"I've been in this business 30 years and a good rate for a mortgage then was 11.25 percent. Now a 30-year mortgage is four to five percent. These are historically low rates," said Hammond. "I don't see that changing anytime soon."

As to whether it is worth it to refinance or not depends on how much you owe. According to one loan officer at a local bank, if a homeowner owes $50,000 on a mortgage, the interest rate would need to go down three percentage points to save any money through refinancing. If the debt was $400,000, a drop of three-quarters of one percent in the interest rate could make refinancing attractive.

Several loan officers noted that application volume dropped after Thanksgiving and will pick up again after the holidays.