The good news is the banks have money and are willing to lend it. The bad news? The days in which anyone who could "fog a mirror" could get a loan are gone.
Banks are now carefully scrutinizing earnings history and credit scores, having learned from a Great Recession powered by subprime loans.
"It's gone back to old school," says Brian Case, mortgage planner with Willamette Valley Bank in Medford. "It's like 9/11. Before that, you walked on the plane. After that, you take off your shoes and belt, walk through the metal detector and, if they don't like you, you go in the back room."
Mortgage loans are "back to a full documentation environment," says Case, adding that at the height of the subprime boom, there were lots of "stated income loans" or "reduced documentation loans," meaning they took your word about your assets, income and ability to repay.
Broker Don McCoy, of John L. Scott in Medford, says, "You'll never see that again. Every generation has to go through some new Ponzi scheme that sucks us all in."
What you will see if you sit down in front of a loan officer today are requirements for credit scores and several years' documentation of sources of income, says broker Claudette Moore of Coldwell Banker Pro West in Medford.
You also need a down payment.
For Federal Housing Administration-backed loans, common now among first-time and middle-income buyers, you need documentation of your minimum 20 percent down and it needs to be seasoned money — in your accounts for at least half a year, to demonstrate you're not borrowing the down.
Appraisals have to be third party, not assigned by the lender, and banks will take a much harder look at the roof, dry rot, electrical and such, says Moore.
FHA-backed loans are now topping out at $270,000 in Jackson County, down recently from a ceiling of $422,000, she notes.
If you're putting down less than 20 percent, she adds, be prepared to pay mortgage insurance rates that are dramatically bigger than ever: $150 to $200 a month for the top end of FHA homes.
"That can really change what people can afford to buy," she says.
Adjustable rate mortgages, says Moore, are something "I haven't seen for ages. I was never impressed with them, unless you plan to sell after two years, when you could avoid prepay penalties. They've always been dangerous, if rates go up or you get cut back on your job. Today, it's back to basics."
In today's post-boom-and-bust hangover, you don't have to have awesome credit scores but can get loans with mid-range numbers, says Case.
"It's starting to get more lax now," he says.
With FHA, you can now go below 600 on scores, where it was 640 half a year ago. During the boom, it was well under 600.
You can forget about searching for low-fee or no-fee loans, says Case, because if you get these, the cost of the loan will be added to interest and — surprise — "there's no such thing as a free lunch."
McCoy says lenders now dig into your finances and personal life, "asking really personal information, like where is she living and how long has this relationship lasted and how long do you expect it to last. It blew my client's mind. He was really upset. It's a very personalized audit, like an X-ray on your personal movement. They want to know almost everything, very stringent, but they seem to be loosening up lately."
The FHA clampdown seems to be making it more difficult to buy a home, even among people with a good debt-to-income ratio. But, says McCoy, "The pendulum has swung back far to the other side. It would be nice if they find a balance."
Borrower Darcy Danielson of Ashland, seeking a refinance, found fees, documentation that included three years of IRS statements and delays as her bank processed everything. The bank, she says, was even unhappy with her not filing tax returns on time.
She "timed out" on the process of getting all documentation in on time, even with high credit scores, and decided to try again with a different lender and lower amount, she says, just to get it through.
"I'm very unhappy with the banking industry for their dealings in the mortgage crisis. ... Now they make us feel this is such an imposition on them," she says. "Now they have such strict standards. They almost tanked the country. So I appreciate that now they have some standards. I view it all as a game and I'm happy to play the game."
Pharmacist Cody Biller, who just bought a home in Jacksonville, says the process takes some months.
"They wanted documentation of anything and everything, all the pay stubs and when you take money out for the down payment, they want to see it come out," Biller said. "You definitely have to be patient. If you have good people, they help you at each step of the way."
John Darling is a freelance writer living in Ashland. Email him at email@example.com.