This is the first in a series directed at buyers in a life changing situation buying a home in Iowa City. This could be first time home buyers, buyers relocating to Iowa City or buyers downsizing after living in the same home for many years. You all have one thing in common – The home buying process is a complete mystery to you! As we help a lot of relocating buyers it’s possible the posts will slant in the direction of questions they’ve asked as there is a difference between buying a home in a neighborhood you already know and relocating from somewhere else and not having a clue about the Iowa City area!
Why You Should Visit with a Lender Before Looking at Homes
Step One is probably the least exciting (and most underestimated) step in the home buying process. Step One requires that you go see a lender to figure out how much house you can afford. (This ranks right up there with a visit to the dentist, but it’s worth mentioning, just like the dentist, it’s worth the visit!) If you’re a well qualified buyer with excellent credit you may think this step is unnecessary. You know what you can afford to pay for a house. You’ve looked at one of those online calculators and figure you’ve got a ballpark idea. You might be close, but on the other hand you may be a couple of hundred dollars off. That couple of hundred dollars will make a big difference to your monthly payment so it’s really worth your while to check your numbers with a lender.
Even worst than the higher monthly payment scenario is if you find out that you qualify for less of a house than you thought in your head you could afford. The last thing you want to happen is that you go out looking at homes in a certain price range to find out later you qualify for less. That’s time and energy wasted and a very demoralizing start to the home buying process.
Choosing the Right Lender
There are many choices when it comes to lenders and your best plan is to have a ballpark idea of what you’re looking for before you go visit with one. Just as Realtors have their speciality areas, so do lenders. Iowa City still has lenders that offer 100% financing options. Or you may be looking for a low down payment option with an FHA loan. If you’re a Veteran, you may qualify for a VA loan. As you can see, there are many loan options and knowing what type of loan programs the different lenders specialize in is not easy if you’re not dealing with it on a daily basis.
Visiting with a lender is technically the first step in the home buying process. That said, talking to a (good) Realtor before you visit with a lender will be of major benefit and end up saving you time and energy and in all likelihood will keep your stress levels down too. Buying a home is not a walk in the park. And neither should it be. It’s a major financial transaction. Having a good agent to turn to who knows the ins and outs of the process of buying a home in Iowa City will make life a whole lot easier on you in the long run. That’s what Buyer’s Agents are good for. They can point you in the right direction when you’re looking for answers on the way to buying a home.
How to get Pre-Approved by a Local Lender if You’re Relocating to Iowa City
If you’re relocating to Iowa City, you may be wondering how you can go about getting pre-approved by a local lender when you’re not living in the Iowa City area. It almost goes without saying that the Internet makes it possible to pick a lender without needing to actually visit with them in person. Phone and email is how you do it. Of course lenders are as diverse as real estate agents. Some are better at electronic communication than others. A good agent will be able to help you figure out the best lender to help you in your situation.
Regardless of how you start the pre-approval process, there will be documents you will need to provide in order to get pre-approved. Below is a list of the most common documents needed by lenders. (There may be more depending on the loan program).
Documents Required by Lenders to secure financing:
2 years of tax returns or W2 forms
Paycheck stubs for most current 30-day period
Monthly debt (who with, how much, loan number)
2 months recent bank statements to verify cash to close
Address of mortgage company or landlord for past 2 years
Drivers license (Legal aliens will also be required to provide visa or alien registration card)
Comparing Lenders: It’s always a good idea to compare lenders. Particularly closing costs vary greatly from lender to lender and you want to be sure you get the best deal. Making sure you get a GFE (Good Faith Estimate) is the only way to easily compare quotes, so make sure you get one from every lender you speak with.
That just about covers the first step of the process of buying a home in Iowa City. No-one said it was easy, the trick is not to let it overwhelm you. One thing’s for sure – Being prepared will make the process a whole lot easier. If you take the time to prepare when it comes time to look at homes you’ll find it to be a big time saver. Read about that in the next article in this series: Step 2 – Your Wants Needs and Wishes List.