His financial house is in order, and his credit score is well above the minimum most home-loan providers have had in place for years.

But Johns, a construction contractor, is having problems qualifying for a home loan. He's one of a growing number of Utahns caught up in one of the biggest, swiftest, nastiest shakeouts the mortgage- lending industry has ever seen - one that's suddenly making it more difficult for many to buy or refinance a home because of heightened requirements.

Sitting in a bank office a couple of weeks ago, Johns was told that although he probably would have qualified several months ago for a real estate loan, he no longer does. "My credit score is only a little bit below what they want now, but they definitely aren't making any exceptions. It's frustrating."

In recent weeks, lending guidelines have been changing so rapidly that even some veteran lenders are having trouble keeping up. Traditionally, lending standards have changed several times a year. Now they can change several times a week.

The lending crisis, however, has been years in the making.

As many of the nation's real estate markets boomed in the 1990s, lenders made increasingly risky loans to meet the increasing demand for real estate. They were loans based on inflated incomes not backed by actual tax returns or W-2s, and loans made to people with poor credit or low incomes, many of whom were ill-equipped to stay current on their payments.

During this time, lenders also trotted out a number of new, exotic types of loans. They included negative amortization (super-low monthly payments but a loan balance that actually increases over time), interest-only (low monthly payments that at some point could balloon) and an array of adjustable-rate loans with stiff prepayment penalties that made it difficult to refinance or even sell a home without incurring a huge financial penalty.

Then there were the numerous no-down payment loans made to borrowers with limited financial means or poor credit scores who had little or no cash reserves.

The problems with these types of loans began to surface about a year ago as housing markets nationwide began to sour. Many people began to see their monthly payments balloon after the introductory period on their adjustable-rate loans ended. With home values flat or declining, and homes taking longer to sell, defaults and foreclosures began to escalate.

Most mortgages are sold on the secondary market to investors. Stung by widespread losses, these investors are now demanding higher lending standards to reduce the risk that those loans will end up in default.

"It's back to more traditional lending standards," said Glen Ogden, president of the Utah Mortgage Lenders Association.

Whereas a credit score of 620 - or even less - would have been enough to easily land many types of home loans months ago, now those borrowers have fewer options - or no options at all. Lenders want more documentation verifying income and assets, and many are no longer issuing loans that require little or no supporting documentation.

As always, borrowers taking out what are perceived as riskier loans are paying more in the form of higher interest rates. But now more borrowers are being placed in the high-risk category. And it's not only people with bad credit.

Borrowers in need of a nonconforming, or so-called "jumbo," loan above $417,000, for example, used to be considered marginally more risky than those seeking loans below that amount. As a result, they used to pay only about a quarter to half a percentage point more than the rate for a conforming loan. Sometimes there was no difference.

But last week, Wells Fargo, one of the largest U.S. mortgage lenders, said it had raised by more than one full percentage point its rate on 30-year jumbo loans.

Wells Fargo officials declined a request for an interview. In an e-mail statement, a spokeswoman said, "We sell the vast majority of our loans to capital markets investors," adding that "our pricing for consumers reflects the demand and pricing requirements of these investors."

Other lenders have followed Wells Fargo's policy, substantially raising the monthly payments for borrowers of higher-priced homes. Bankrate.com reported that 30-year mortgages last week averaged 6.2 percent. Jumbo 30-year mortgages averaged 7.1 percent.

A borrower with a $500,000 loan at 6.2 percent would pay $3,095, whereas someone borrowing the same amount at 7.1 percent would pay $265 more per month, or $3,360. Jumbo loans are considered more risky than loans below $417,000 because the ability to package them to sell to investors is more limited.

Lenders also are avoiding "stated income" home loans - also called liar loans. Such loans allow borrowers to more or less state their incomes without providing documents to back up their claims.

"There's not a day goes by that some new guidelines don't come by my desk," said Michael Blackham of VelocityLoan.com in Holladay, who brokers loans through a variety of mortgage companies. There are more loans being denied than in the past."

Brady Devoe of Sun Valley Mortgage in Layton said one change affecting many first-time home buyers is the increased difficulty finding a loan to finance 100 percent of the purchase price of a property.

Many young families in Utah have purchased homes in recent years through "no down" loan programs, he said. "A lot of potential home buyers are going to need at least 5 percent to 10 percent down now."

Many of these low- or no-down loans were unheard of just a generation ago, when saving for a home meant years of scrimping and saving and demonstrating creditworthiness through paying other bills on time.

Aside from first-time home buyers, those with adjustable-rate loans who face huge increases in their monthly payments as loans reset to higher rates will be greatly affected as well. Because of the tighter lending standards, Devoe said, many borrowers aren't going to qualify to refinance into a fixed-rate loan with more reasonable monthly payments.

Some will have to put off home purchases, first saving for years for a down payment. Whatever the situation, borrowers will either have to pay the increased monthly payments, try to sell their homes or let them fall into foreclosure.

Terri Stoddard, a loan officer with Graystone Mortgage in Salt Lake City, said it's more important than ever for borrowers to shop around - especially if you're told by one lender that you don't qualify. But there are going to be those borrowers who won't qualify, even if they do shop around, she said.

And that will certainly affect Utah's once-booming housing market to some degree, lenders say, because tighter standards mean fewer buyers.

In the second quarter, home sales in most areas along the Wasatch Front were down, although prices were up over the same quarter in 2006. Many real estate agents say the third quarter will be especially dour, with inventories of homes for sale escalating and more areas popping up in which prices are flat or declining.

The tighter lending standards and the downturn in the state's real estate market could become a drag on the economy, but probably not as much as has been seen in Arizona and Nevada, said Gus Faucher, director of macroeconomics for Moody's Economy.com.

He said Utah's economy is booming, job growth is high and unemployment is low. He thinks the state's share of subprime loans made to people with poor credit is lower than many other states', which means Utah should weather the nation's lending crisis with a smaller share of foreclosures. As a result, "you are likely to see house price declines in Utah, but they probably aren't going to be as bad as other parts of the country."

He said median selling prices in Utah probably peaked at the end of last year. They probably will bottom out by the end of this year or early 2008, averaging a 4 percent decline. That compares with a national average correction of 10 percent.

Gary Cannon, president of the Salt Lake Board of Realtors, said it is important for people to realize that because of Utah's strong economy, the chances of a severe downturn - and price correction - in the state's real estate markets is slim.

"The sky is definitely not falling," he said.

The prospect of falling housing prices has rattled Johns, the borrower who was told his credit score was too low under new lending guidelines.

"Maybe it wouldn't be a good idea to buy anything now, anyway. Who knows what's going to happen next?"

lesley@sltrib.com

How to get a better rate

With lenders pinching guidelines, here are tips for qualifying and getting the best interest rate under the tougher rules:

* Make as much of a down payment as you can. Many lenders once again want to see at least 5 percent. This is especially important if you have credit issues or problems showing income or assets.

* Tackle the "jumbo" issue. It may make more sense, if you have the money, to make a bigger down payment to bring your loan under the $417,000 threshold so you don't have to pay a higher interest rate than those with loans below that amount.

* Get your credit report and work on raising your credit score. Missed payments or several maxed-out credit cards can bring a score down dramatically. Try to pay down or refinance other loans to keep your total monthly debt payments at no more than 45 percent of your gross monthly income.

* Work on building up your cash reserves. Lenders once again are asking borrowers to have at least two months' worth of payments in cash sitting in the bank.