by Ryan Zimmerman

When I have the initial consultation with a new client looking to purchase a home, they will often ask questions related to how difficult it is to obtain financing “these days.” The fact is, financing isn’t as difficult to obtain as one might think.

Back during the mortgage meltdown in 2007 and 2008, lending guidelines became extremely strict—or at least more strict than completely lax, which they had been for years. Buyers needed to have higher credit scores, income verification was more difficult (especially for self-employed persons) and loan products were limited.

Buyers who wanted to build their dream home were out of luck, unless they could pay “cash” for the land, as there wasn’t a lender around who would loan on vacant land. Fast-forward to 2015 and a lot of that has changed.

Buyers are now able to obtain conventional loan financing with as low as 5 percent down. No longer does a buyer need to come up with a 20 percent down payment to avoid the costly and often unaffordable FHA loan, which can be obtained with as little as a 3.5 percent down payment. In addition, lenders are coming out with more and more specialized loan programs to help homebuyers qualify for a loan.

First-time homebuyers, above all others, experience these concerns, as most of them are a little tighter on cash for a down payment than repeat buyers. First-time homebuyers also have a different perception of the market and the home purchase process. For them, the only experience of buying a home is what they have seen on TV shows like House Hunters, which is an incredibly unrealistic and misleading dramatization of the experience. First-time homebuyers don’t come to the deal with the real-time experience from a prior home purchase. Here are some tips for the first-time homebuyer to keep in mind:

Become Pre-Approved Early: Without the pre-approval, the offer is as strong as if it were written on a napkin. Listing agents and sellers will almost always require seeing one before taking any offer seriously. Also, it is recommended that the lender providing the pre-approval is a “Direct Lender” and not a mortgage broker. A mortgage broker needs to still shop your loan to investors, who can oftentimes be fickle and have been known to pull out at the eleventh hour, leaving the mortgage broker scrambling to find another investor, lest a deal fall apart. A direct lender has the ability to fund the loans they give “directly,” thus their pre-approvals come with a bit more confidence in success.

Zillow is not gospel: Unless a buyer has experienced how home values are set in the real market personally, they often put a little too much weight in what on-line valuation sites have to say. Realtors are constantly having to explain away Zillow’s “Zestimates” to first-time buyers, as they are more often than not incredibly inaccurate. The listed data available on these sites is also frequently outdated and misleading. Sites like Realtor.com, or an agent’s MLS search they can set up for you will have more accurate up-to-date listing data. Online sites are great for looking at pictures and getting information about the house, but leave the valuation advice to an experienced local realtor who has an intimate knowledge of the market values in any given neighborhood.

Be prepared to act quickly: In a fast-moving market like the one we are currently in, good homes that are priced well are selling quickly. First-time homebuyers can at times be more hesitant and slower to make a decision on a property. This is completely understandable. This is new territory for them. It’s likely the biggest purchase they have ever made, and going to be one they will live with for many years to come. That said, I see many first-time buyers go through heartache a couple times over “lost homes” before they are ready to become more aggressive on the next one. If you find a great home that meets your criteria and you get that good feeling when inside, don’t wait. Those couple days to “think about it” can cost you the house and result in a lot of regret and hard feelings when another buyer beats you to the punch.

In 2015, the market is growing and prices are slowly and steadily moving upwards. Interest rates remain in the low 4 percent range and are playing a big part in the rebound of the market and the rise in prices.

As money is more affordable and attainable, people are able to purchase homes and to get “more house” for their money. The million-dollar question is, what is going to happen with the interest rates in the near future? The FED has been hinting at rising interest rates for a couple years now, but we have yet to see it happen. The reality is, if and when interest rates do rise, they will have an adverse effect on home sales and prices. A modest increase in rates will likely not show signs in the market. However, a jump in rates to say 6, 7 or 8 percent would have a significant impact on the market.

The higher interest rates would price many homebuyers out of the market, lowering their affordability index and resulting in “less house” for the money they have. When buyers’ affordability goes down, prices are pressured downward in kind.