The overall mortgage process may seem complicated and overwhelming, but we break it down into simple steps that are easy for you to follow.
1. Get your financial house in order
Before you start looking for the home of your dreams, take this important first step to organize your finances.
- Figure out where you stand with outstanding debt. Your housing payment (principal, interest, property taxes, hazard insurance, Private Mortgage Insurance, and homeowner's dues) should generally be no more than 28% of your total monthly gross income. Additionally, your total monthly debt (including auto loan, credit card payments, etc.) should generally not be more than 36% of your total monthly gross income. With compensating factors, the debt ratio may be as high as 31% for housing and 45% for total debt.
- Check your credit report to make sure there aren’t any surprises.
- Limit large purchases before you apply
Getting pre-qualified shows you’re a serious buyer and will give you the advantage of competitive bidding. Make an appointment with a mortgage lender and you’ll receive a written commitment assuring a specific loan amount. This will let you establish a relationship with your lender and allow the loan process to happen quicker. Getting pre-qualified before you start house hunting lets you shop with confidence.
3. Finding the right home
There’s no doubt, searching for your dream home is exciting. Work with a Realtor to decide which features you want in your new home. Prioritizing what you need compared to what you want will help you stay within your price range. Plus, it will let you have what’s most important to you.
4. Applying and working with Iowa State Bank
Once you’ve decided on the home you want, it’s time to review what type of loan will work best for you and secure your rate. Before you make an offer, you may want to think about consulting an attorney or other conditions regarding your offer (i.e. a property inspection, an appraisal, homeowner’s warranty, survey and homeowner's insurance). Next is to negotiate your purchase commitment by making an offer and signing the Purchase Agreement. This legal contract lists the type of loan you’re applying for, purchase price, total down payment, interest rate, and you’re anticipated closing date.
Lastly, you’ll need to complete the mortgage loan application. We go through each step of the application process with you to ensure it’s all filled out accurately. After we receive your completed loan application, we will provide you the early disclosures required by regulation. If the stated terms of the mortgage loan are acceptable, you will be required to pay $400.00 to cover the cost of ordering your appraisal and credit report. Iowa State Bank will review and confirm all of the submitted information. At the same time, the following steps will be taken:
- An appraisal will be requested to determine the value of the property
- A credit bureau will be ordered to review your credit history
- We’ll verify the down payment and any other assets
- We’ll update the abstract and a title search will be conducted to uncover any problems with legal ownership of the subject property.
Iowa State Bank requires a termite inspection. You will also need to provide proof of homeowner’s insurance.
Before closing you will want to do a final walk-through inspection to make sure all repairs have been made and no items in your agreement have been changed or removed from the house. Prior to closing you will receive a Settlement Statement summarizing all costs related to your home purchase for both the buyer and seller. Make sure to review this information carefully.
Closing is the actual transfer of ownership from seller to buyer and the final step that officially makes the home yours. At this point, you will sign the promissory note, the mortgage, and any other related documents. Typically, down payment and closing costs are due at this time. The seller is paid for the agreed purchase price and the mortgage is activated. Congratulations, you are now a home owner!