I just read an interesting article written by Marc Roth at McGraw Hill in which he discusses the current mortgage lending environment.  In a nutshell, he did some digging and found that banks and mortgage brokers can still provide a mortgage of $417,000 or less at the best rates through Fannie Mae (FNM) and Freddie Mac (FRE) programs if you have a credit score as low as 660 and can put 20 percent down. Jumbo loans of $417,000 or more remain more expensive.

For people who can put 20 percent down but have a credit score of only 630, or people who have a score of 630 and only 10 percent to put down, deals can get done but borrowers will be asked to pay an additional quarter- or half-point. This means that instead of getting a 30-year mortgage at 5 percent, you would have to pay from 5.25 percent to 5.5 percent. That is really a very good rate so it is not much of a hardship. 

Buying or refinancing with average credit but zero equity is another story unless you are able to use some of the soon-to-expire homebuyer credits for your deposit but the important thing is to remember that we are in a period of historically low prices AND low interest rates, and anyone who has been around the real estate market for a few years will tell you this combination is extremely unusual and very desirable for buyers.