To understand how the credit crisis is hitting home in South Florida, consider the plight of Teresa and Hoover Encalada. The couple found a two-bedroom condo they loved at the Plaza on Brickell. At $434,000, the price was right. Their credit was good.

Friday, they got the bad news: The lender wants 45 percent down on a five-year loan with an initial interest rate of 7.8 percent. Now Encalada, a 39-year-old administrative assistant, and her husband, an Ecuadorean banana grower, are waiting on a second bank offer requiring only 40 percent down before they proceed.

Existing home prices in South Florida have fallen 20 to 30 percent over the past year, putting once-unaffordable homes within the grasp of buyers -- if only they could qualify for a loan at reasonable rates.

Credit markets have gotten so tight that in many cases it is impossible to qualify for a loan with less than 20 percent down. Compounding the problems of financing, especially with condos, is the dearth of PMI, or private mortgage insurance, which is required for down payments below 20 percent.

''For every broker and developer, the biggest issue in 2008 is a lack of mortgage financing. The pendulum has swung this year to the other side: No mortgages to anybody, unless they're Boy Scouts and Girl Scouts,'' said Craig Studnicky, president of International Sales Group, an Aventura firm that specializes in marketing new condos.

The Encaladas thought they'd have no problem. At most they planned to put 30 percent down, leaving enough money to buy new furniture. ''Now, I can only get the place,'' Teresa Encalada said. ``Furniture and improvements will just have to wait.''

Gone are the days of easy credit. With home values on the slide and new capital tight, lenders are sometimes asking for extraordinary terms.

Last week there was a ray of hope in the troubled South Florida housing market when August sales figures were released. Sales of existing single-family home rose 22 percent in Miami-Dade and 12 percent in Broward -- albeit from very small bases a year ago. Meanwhile, condo sales rose 13 percent in Miami-Dade and stood flat in Broward.

But real estate and mortgage brokers say those sales numbers would be far higher -- if would-be buyers could just get a loan.

It's a far cry from the go-go days of 2004 and 2005, when mortgage lenders were doling out cheap loans with no down payment and no credit checks -- the kind of deals that often have gone sour, spreading chaos throughout financial institutions in the United States and around the globe.

TOUGH LIMITS

Now even solid borrowers are facing stiff guidelines. Lenders want buyers to put some skin in the game, and with home prices in many markets still sliding, they want an extra safety margin. The problem is exacerbated by the billions of dollars in ailing mortgage securities on the balance sheets of many financial institutions that hamper their ability to offer new loans.

Real estate brokers, developers, and mortgage brokerages are watching closely as the Bush administration and Congress hammer out a $700 billion bailout plan with hopes it will stabilize U.S. banks so they can keep extending credit to businesses, home buyers and other individuals to keep the economy flowing.

By moving bad debts off their books, the banks would be in position to raise new capital and make new loans.

Studnicky said his firm is seeing more people shopping for condos, but the deal-breaker often is they can't make the hefty down payment required or lack the credentials needed to meet rigorous new borrowing standards.

The Federal Reserve Board, in its latest survey of senior loan officers in July, found about 75 percent had tightened lending standards on prime mortgages, or those made to people with good credit, up from 60 percent in the previous survey.

Tight credit means those with cash are in the catbird seat: Devang Desai, a 33-year-old lawyer, doubts South Florida's housing market has hit bottom. But after eight months of shopping, he recently took the plunge, buying a pretty little 2/2 on a quiet, tree-lined street in Coral Gables.

''It's a great long-term investment,'' said Desai, who confesses to looking at so many houses ''I must have driven my agent crazy.'' The well-manicured, yellow home at 517 Alminar Ave. was just the style he had in mind, located near his office at Gaebe, Mullen law firm. ''I was able to drive the train as far as price,'' said Desai, who paid $450,000, or $69,000 below the asking price, thanks to a motivated seller.

Crucial to the deal was the financing: Desai anted up a 20 percent down payment. With good credit and a good job, a mortgage was no problem.

''He was a great buyer -- a young attorney with excellent credit,'' said his agent, Elena Kemper, a Realtor with Esslinger Wooten Maxwell brokerage firm.

But she worries two other pending deals are shaky because of the credit crunch.

''A lot of people are buying with cash now, because of the financing problems,'' said Alicia Cervera, who is founder and chief executive of Cervera Real Estate, which markets new condos. ``They think they'll pay cash and then when the terms of the market become more appealing, they'll get a mortgage and get their money out.''

She said foreign buyers face particularly rigorous lending standards.

First-time home buyers and others who haven't built up a war chest of capital are also at an extreme disadvantage, despite the recent plunge in prices that has made South Florida housing more affordable.

About 46 percent of single-family homes for sale in Miami-Dade and 62 percent of condos for sale are less than $300,000, according to Ron Shuffield, president of Esslinger Wooten Maxwell in Coral Gables. In Broward, 49 percent of the single-family homes on the market and 78 percent of condos are listed for less than $300,000.

SHORT ON CASH

The problem, Shuffield said, is buyers at the lower end typically are less able to put up a substantial down payment. FHA mortgages are available for as little as 3 percent down, but they're only available to select buyers.

As a result, inventories of homes on the market are still swelling in Miami-Dade, although they have dropped a bit in Broward.

In a normal market, where supply and demand are in equilibrium, the housing inventory amounts to a six- to 12-month supply, based on recent sales. Miami-Dade has a 32-month supply of single-family homes and a 41-month supply of condos, while Broward has a 20-month supply of single-family homes and a 29-month supply of condos, according to South Florida Regional MLS listings data.

''We've just never dealt with so much inventory and never dealt with so much fear in the market,'' Shuffield said.

Britt J. Rosen, an appraiser with Brittex Appraisal Services in Miami, said the absorption of excess inventory is the key to stabilizing prices. ''Nobody really knows, but I think it will be two to three years until it gets back to a normal inventory,'' he said. ``Until I see the numbers come back to six months to a year absorption, I don't see we'll have a bottoming out in prices.''

Miami Herald staff writers Monica Hatcher and Matthew Haggman contributed to this report.

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