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As mortgage lending tightens, people with weak credit get shut out

With a second child on the way, Chris Shields and his wife, Michelle, wanted to move from their two-bedroom apartment in Southern California to a house with more space.

But because their timing coincided with a shakeout in the mortgage market earlier this year, their credit now isn't good enough to get a loan to purchase the house they wanted with no money down.

Rising interest rates and dropping home prices have squeezed a market that had been propped up by risky loans and easy credit during the housing boom. As mortgage bills came due, foreclosures rose, and the easy credit dried up for families like the Shields.

"Now we're stuck in the apartment," said Shields, 31, a firefighter who lives in Manifee. His wife gave birth to baby Gabriella at the end of March, and they are running out of space without options for a house.