Buyers wade through tangle of tighter mortgage rules

When it comes to anxiety levels, the mortgage process appears to be giving this red-hot spring market a run for its money.

That’s because in early 2014, provisions in the Dodd-Frank Wall Street Reform and Consumer Protection Act went into effect, making lenders even more skittish. Now a lender must go through great (and well-documented) lengths to prove that borrowers can actually afford the mortgages they’re getting — or risk legal consequences ranging from fines to lawsuits to criminal liability. One way for lenders to ensure they’re on the right side of the law is to write a “qualified mortgage” — one that follows a new set of rules to the letter, with the borrower meeting criteria such as a minimum credit score and sufficient verified income.

“I see some of the regulations as really a return of common sense to the process,” says Tom Gleason, executive director of MassHousing, the state’s housing finance agency. “But,” he adds, “I think banks are still a little wary of over-regulation and what it might mean if they make a loan that goes into default and foreclosure — will they be forced to buy the loan back?”

The threat of being on the hook for a bad loan has spooked some lenders, making it more difficult for buyers who don’t fit the mold to find financing — buyers like Matthew and Caitlin Edwards.

Matthew is a professional bassist, and like most working musicians, he pieces together an unpredictable living from multiple sources. He performs in community orchestras and theater productions, plays in a wedding band, and teaches a few students. He also takes catering jobs on the side.

Lenders don’t like that. They want to see steady paychecks. But when it comes to catering jobs and wedding gigs, “January, February, [and] March are slow times of the year,” Matthew says. “We were trying to get our mortgage in March and April, so I had to be like: ‘Work is coming. It’s going to happen.’ ”

Making matters even more complicated, Matthew’s wife, Caitlin, a registered nurse, had been employed for only a few months when they sought preapproval in 2014.

Lenders don’t like that, either.

“I had just graduated from nursing school, so all my previous taxes were from when I was in school and making less money working part time,” Caitlin says.

In addition to the usual pay stubs and tax returns, the couple had to provide their mortgage agent with several signed letters explaining even the smallest inconsistencies.

“I had to get a letter from my boss talking about my differentials at work,” Caitlin says. She gets paid more for weekend shifts and receives a small pay bump because of her bachelor’s degree. “It was like a matter of $250 a year.”

Still, after months of responding to request after request from their mortgage broker, Matthew and Caitlin were able to qualify for Quincy’s first-time home buyer program. Their secret? Great credit.

“I think it was above 800,” Matthew says of his score.

“Mine was higher than his, though. I know that,” Caitlin says, smiling.

Good credit? Now that’s something lenders like.

Ruth Bazinet, a public relations executive in East Taunton who bought her first home in February, has good credit, too.

“I was preapproved twice, through a credit union,” Ruth says. A single mom of two, she wanted to stay in the same ZIP code so her kids wouldn’t have to change schools. It’s a small neighborhood, and everything that hit the market was either in need of costly repairs or out of her price range, so it was more than a year before she was ready to make an offer on a home — right around Christmas.

Ruth qualified for a low-down-payment MassHousing loan — she just didn’t know it yet. One preapproval from the credit union was still active, but she met with a mortgage company representative anyway. And then another.

“My real estate agent said: ‘Hey, why don’t you talk to my mortgage person? She’s really good, and it can’t hurt to run the numbers.’ And I found out that I qualified for this MassHousing loan that the other [mortgage company] person I’d been talking to didn’t even offer,” she says.

Like Matthew and Caitlin, Ruth had to enroll in a first-time home buyers’ class as part of the program. She was able to take it online for an extra fee.

“I was in a hurry because I kind of did it backwards. I already had an offer in, and then I took the class to qualify for this mortgage program that I didn’t even realize existed until after I put my bid in,” she says.

Despite the time crunch, Ruth says, “There weren’t really many hiccups with the mortgage because I was prepared. They stayed on top of me for things. I think that’s the sign of a really good mortgage broker. . . . And even though it’s structured differently than the traditional mortgages I was looking at, it’s still so much less expensive. I put down 3 percent, which left me with more money for furniture and repairs.”

If these 3 percent down payments sound low, that’s because they are. Just a year ago, housing finance agencies like MassHousing were some of the only organizations to offer such requirements. Mortgage rules have tightened in the past year in some ways, but they’ve loosened in others.

Fannie Mae and Freddie Mac, the nation’s largest mortgage buyers, announced that they’re once again purchasing loans with down payments as low as 3 percent — mortgages for borrowers with very good credit and stable incomes.

“Fannie and Freddie have said: ‘OK, we’ve come out of the Great Recession. We do believe if you have common sense and prudent underwriting, you can make mortgages with people who have low down payments,’ ” MassHousing’s Gleason says.

It’s not exactly a flashback to the mid-2000s housing boom, though.

Four years and a lot of paperwork later, Liz and Chris Stuart (pictured with children Harper, 5 months, and Leighton, 3) purchased their Braintree home. rose lincoln for the boston globe

Chris Stuart bought his first home, a two-family in Quincy, back in 2006, at the height of the real estate bubble. Last summer, after a four-year search, he and his wife, Liz, purchased a single-family home in Braintree.

Was the mortgage process different this time around?

“From 2006? Oh, God, yeah,” Chris says with a laugh.

“When I bought that house, I didn’t have 20 percent down, so they offered to give me a second mortgage at 9.25 percent . . . And the documentation? Nothing,” he says. “Like, ‘This is what you’re making? OK. Fine.’ ”

This time around, despite the couple’s good credit and ample savings, “They were very strict,” Chris says. “We had to send them a lot of paperwork. Lots of stuff. They kept coming back to us, and it was always like, ‘We need something else.’ ”

Liz, a biotech regulatory affairs specialist, had been at her job for only a year and a half, and prior to that she had taken time off after their first child was born. “There were gaps in her employment, so they needed us to actually write a letter to explain all that,” Chris says.

So if lenders are so hard to please, what are they looking for?

“I think the good borrowers in the market are those that have a good credit history, stable employment, and enough money to support the mortgage on the house that they’re buying,” Gleason says.

In other words, Drew Liechtenstein, a project lead at HarvardX, and his wife, Peipei Xiang, who works for a Boston nonprofit. The young Cambridge couple have been looking for a two-bedroom condo in their current neighborhood.

“We have great credit and no loans, no debt. We don’t have a car. That’s one of the reasons we want to stay in Cambridge or Somerville . . . we like to be able to walk everywhere,” says Drew.

Cost is an obstacle, however. “The prices are obviously outrageous here,” says Drew, who was searching for something around $450,000 or less. “We’ll likely get a roommate or Airbnb the second bedroom to kind of help keep the costs low, for at least the first couple of years.”

But then there’s the matter of the market itself.

“It’s on fire,” says Jim McGue, owner of Granite Group Realtors in Quincy, and that creates its own mortgage mayhem.

“I was with an agent in Dorchester yesterday talking about a single-family home that went under agreement for $45,000 over asking the first day,” he says. “The list price was on the high side, yet it still got bid up by anxious buyers.”

But while buyers might feel their dream home is worth any price, lenders might not agree.

“Getting that home appraised will probably be an issue, and it could lead to fallout with the lender,” McGue says.

“I caution my clients not to get caught up in the new-car smell,” says McGue, who has seen this type of frenzy only a few times in his 32-year career. “In my view, buyers are making life-changing mistakes by overpaying in this spring market,” he says.

By mid-April, Drew and Peipei scaled back their home search, vowing not to make that mistake. Drew says the Cambridge housing market feels too inflated.

“We still look at listings and go to open houses,” Drew says, but the results are always the same. “We either like the place and it’s far beyond our price range, or there’s something we don’t like about it — often the size — and the price doesn’t feel commensurate with the problem.”

“We’d rather wait a couple of years and save up a larger down payment for somewhere we really like than rush into anything,” Drew says. “I may be a bit optimistic, but I don’t think the market can get much worse for buying than it is now.”

So despite changes that have made it harder to get a mortgage, it turns out that, for a lot of Boston-area buyers, that’s the easy part. Finding a home is the bigger challenge.