In some housing markets, home prices and sales are up and mortgages are available. The catch: Buyers must have very good credit and cash reserves to ink a deal.

Sales were up 28.1 percent in California during the third quarter of 2008 compared to the previous quarter, mostly due to steep declines in the median price for existing single-family homes, according to the National Association of Realtors.

Bargain hunters and investors looking for distressed situations -- foreclosures and short sales -- are fueling sales, and most of these transactions are still financed by mortgages.

"For first mortgages, financing is, without a doubt, available," says Robert Satnick, chairman of the California Mortgage Bankers Association. "Folks with a 700 (credit score) or greater are not having any problem finding financing," he says.

You can use our mortgage rate search to find such ready and willing mortgage lenders in your area.

Buyers in the 650 to 700 credit tier will find their applications scrutinized a little more closely. Those with credit scores between 620 and 649 will find it challenging to get conventional financing, and buyers with scores under 620 may be out of luck -- in California, at least.

Even those with great credit will be expected to have a healthy amount of cash available for a down payment to qualify for a conventional mortgage, according to Satnick.

"Cash is king. So 20 (percent) to 30 percent down gets you the best financing," Satnick says.

In the Decatur, Ill., area, the median sales price of existing single-family homes rose 8.7 percent to $93,400, followed by the Bloomington-Normal, Ill., area, where the median price rose 8.1 percent to $168,400 in the third quarter of 2008 versus the same period last year, according to the NAR.

Mortgage applications in Illinois are up slightly, according to one local mortgage expert.

"I don't have an exact tally, but I do know the numbers are up. Sales in those areas are up because they didn't have the rapid run-up on prices that the Chicago metro area did," says Jorge Gomez, president of the Illinois Association of Mortgage Brokers.

As in the West, Gomez says buyers with adequate cash reserves and credit scores north of 700 have no trouble getting mortgages, although the trick again is to come up with a 20 percent down payment.

A favorite summer haunt of Mark Twain, Elmira, N.Y., also posted solid price gains recently. The median single-family home price was $105,000 in third quarter -- a gain of 12.5 percent from a year ago, according to the NAR.

In the Elmira area, buyers are getting loans mostly through local banks that have closer ties to the local real estate community, says David Oldfield, a senior loan officer at Twin Tier Mortgage.

Oldfield says the smaller community banks, such as credit unions, tend to be more flexible in their underwriting standards and have a greater stake in the local community than the larger corporate banks that originate loans based on more rigid guidelines.

"If you want a home loan in the Elmira area, you'll need at least a 650 credit score, and the loan-to-value will be maxed out around 80 or 90 percent," he says.

Loan-to-value ratio, or LTV, is the percentage of the home's price that is paid for by a mortgage. Generally, the higher the LTV, the less money the buyer has to put down on the property.

If you can't qualify for a conventional mortgage, a government-insured loan through the Federal Housing Administration may be the way to go, because it technically does not require a minimum credit score, although some lenders impose their own credit floors.

Cash-strapped and credit-challenged buyers appear to be taking advantage of the FHA program in increasing numbers.

The government-insured share of mortgage applications, which consists mainly of FHA loans, increased from 9.4 percent in January 2008 to 32.9 percent in November 2008 -- the highest level observed since February 1991, according to the Mortgage Bankers Association.

"For people who are not in those higher credit tiers, FHA really is the only game in town," Gomez says.