Buying a Home in Iowa City: Step One: Getting Pre-Approved for a Home Loan

Buying a Home in Iowa City: Step One: Getting Pre-approved for a Home Loan


This is the first part of a 7 part series geared towards "first timers". I'm thinking not only first time buyers, but also anyone relocating to the area. I figure folks relocating to the area are also first timers as generally if you're relocating to Iowa City you won't know the area. Then there's the fact that the buying process is a little different from state to state. (And very different if you're moving from overseas).

The very first step when you're thinking about buying a home is to start by finding out how much you can afford. Now of course there's nothing less exciting than a trip to a mortgage lender, (except maybe a trip to the dentist), but it is a necessary step and usually not nearly as painful as you imagine it will be.

How do you choose a lender? That's certainly one of the things I can help you with. Depending on what kind of home loan you're looking for there are a number of mortgage professionals I can refer you to. Here are a couple of questions I may ask you before referring you to a lender:

Are you looking for a loan with a low or no down payment option? Or... Do you intend making a large down payment of 20% or more?

For those looking for no or low down payment options there are several available here in the Iowa City area.

FHA loans offer a low down payment option and although there are a few lenders in town that offer them, I prefer to send my clients to someone who specializes in them. (FHA loans can be tricky, so you want to work with someone who knows the program inside out).

100% Financing Options are still available as in-house loans with some of the local banks here in Iowa City. They are usually 5 or 10 year adjustable rate mortgages (ARM's) and are very popular with people relocating to the area who know they may only be here for 3 to 4 years. Fellows or Residents to the UI Hospitals or Faculty and Students to the UIOWA spring to mind - There is a high demand for these loans as we do have a lot of people relocating to Iowa City.

I should mention that I also serve clients in the North Liberty area and there is another 100% financing option for rural areas in the form of the USDA loan. North Liberty is growing fast, but does still class as a rural area. 

These are just a few examples and as you can tell from just this relatively small amount of information, depending on your circumstances there are many different loan programs, so it's really important for you to hook up with the right lender. If you'd like me to help you find the right lender to best serve your needs, just give me a call.

Pre-Approval vs. Pre-Qualification: Talking on the phone with a lender before visiting them is always an option and of course it saves on time. It's fairly simple to get yourself pre-qualified with just some basic information about your income and what kind of recurring costs you have every month. It's helpful as far as giving you a ball park idea of what you can afford, but is not really much help when it comes to making an offer. Ultimately, the information you give for a pre-authorization will need to be verified before a bank will pre-approve you for a loan.

For a full pre-approval it's better to visit the bank and provide the documentation required. A few of the lenders I work with in Iowa City will in certain circumstances pre-approve you over the phone if you provide your social security number and allow them to pull your credit to verify your recurring costs. This pre-approval would still be contingent upon you providing certain required documents as soon as possible.

*Documents Required by Lenders to secure financing:

Full Loan Application (If applying by phone this would be sent out by the bank the same day).
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)

*Depending on the loan, other documents may be required.

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.


Before you start looking at homes you really are best served by making sure you are pre-approved beforehand. Look at it this way: Can you imagine how heart breaking it would be to find "the perfect home" only to find you don't qualify for a high enough mortgage to finance it?

Here's the link to the next step in my series: Step 2: Buying a Home in Iowa City - Choosing the right area to live

Buying a Home in Iowa City: For your reference: links to all steps in my 7 part series:

Step 1: Getting pre-approved for a home loan
Step 2: Choosing the right area to live
Step 3: Finding the Right Home
Step 4: Making an Offer
Step 5: Home Inspections and Repairs
Step 6: Preparing to Close on Your New Home
Step 7: You're Closing on Your New Home

When you're new to the home buying process - a first time buyer or maybe relocating to the Iowa City area - all this information may throw up more questions than answers...There are a couple of solutions for that. You can either leave me a comment and I'll respond to that, or you can contact me directly either by phone or email, whatever suits you best.