NIAGARA FALLS, N.Y. (AP) _ Many abandoned Love Canal homes are now free of contamination, but local banks have refused loans to potential buyers, making it hard to repopulate the area near the former toxic dump, officials said.

''We've talked with virtually every bank in the area,'' said William Broderick, director of the Love Canal Area Revitalization Agency. ''They're all antsy about taking risks because of the uncertainty of the environmental situation.''

In the 16 months since the homes went on sale, no bank, credit union or government agency has agreed to provide a mortgage for Love Canal housing, he said.

Bankers said they won't mortgage Love Canal homes because they can't get insurance on the loans.

''It's a form of redlining that's being forced on the banks,'' said Norstar Bank Vice President John Virtuoso.

Broderick's agency was created by the state and federal governments to re- occupy more than 200 homes near the Love Canal that are now considered safe.

The homes were in the outer ring of about 600 houses abandoned in the late 1970s and early 1980s because of chemical contamination from Love Canal. The canal was used as a chemical dump in the 1940s.

The state and federal governments bought the homes during the chemical crisis and turned them over to the revitalization agency for resale.

The agency has decided to finance the loans itself, and 32 houses have been sold. But the agency's mortgage operation requires buyers to pay thousands of dollars more up front, limiting the pool of potential customers, Broderick said.

Joanne Lewis, whose family was the first to move back into Love Canal in February, said several banks turned down their mortgage application.

''Once we mentioned where it was, they wouldn't even talk to us,'' Lewis said.

Extensive tests by health and environmental agencies show Love Canal is safe, Broderick said.

''This is probably the safest place in the world to come to because nobody else knows what's in their back yard, but these people do,'' Broderick said.