The Mortgage Process
Buying a home is an important financial decision that should be considered carefully. The following information will help you become familiar with the various stages of the mortgage process and help you avoid any pitfalls that may delay homeownership.
Step 1: Get Pre-Qualified - Determine What You Can Afford
The first step of purchasing a home and getting a mortgage is to determine what you can afford. To do this, you should work with a Peoples State Bank Lender to get pre-qualified. A pre-qualification is an estimate of how much house you can afford and how much money a lender would be able to loan you. To get pre-qualified, you will need to provide documentation regarding your current financial situation including:
- W-2 forms from the last two years or federal tax returns if you are self-employed
- Pay stubs from the last month
- Bank account statements from the last two months
- Investment account statements from the last two months
With this information, we can get a good picture of how much new debt you can take on with a mortgage and empower you to confidently shop for your new home.
Step 2: Choose Your Loan & Apply
Once you have an accepted offer on a property, it’s time to choose which mortgage product is right for you and complete a formal mortgage application. A Peoples State Bank Lender will be happy to help you decide which loan option is right for your specific situation. They will also work with you to determine your mortgage rate, estimated monthly payment amount, and estimated closing costs.
Step 3: Receive a Loan Estimate & Closing Disclosure
Once you have found the right mortgage program for your situation, you will receive a Loan Estimate that will list the estimated costs of closing on your home. The Loan Estimate will give you an idea of the expenses that you will need to pay at closing. These charges may include:
- Appraisal Fees
- Origination Fees
- Escrow Accounts
- Title Services
- Recording Fees
- Homeowner's Insurance
- Private Mortgage Insurance (PMI)
Your Peoples State Bank Lender will order the appraisal and title work. Your lender will let you know when the appraisal is received.
Before you close on your loan, you will receive a Closing Disclosure that will accurately list your final closing costs. In some situations, the total closing costs listed on the Closing Disclosure can differ from those listed previously on the Loan Estimate. At closing, your lender will walk you through each item on your Closing Disclosure.
Step 4: Close on Your Mortgage
At closing, you and your lender will address all the paperwork that is required to transfer legal ownership of the property over to you. This process will include:
- Signing Legal Documents — The agreement between you and your lender and the agreement between you and the seller will be spelled out in the following documents:
- Promissory Note: This document states your promise to repay the mortgage. It details the amount and terms of the loan and what the lender can do if you fail to make payments.
- Mortgage: This document is recorded at the Register of Deeds or County Recorder to secure the note and give your lender a claim against the home if you are unable to fulfill the terms of the Promissory Note.
- Closing Disclosure (CD): This statement is a detailed record of your settlement costs. Be sure to review all the documents carefully and resolve any issues before signing.
- Paying Closing Costs and Escrow Items — At closing you will be required to provide a certified cashier's check or wire funds to cover your down payment (minus your deposits), your closing costs, prepaid interest charges, prorated homeowner's insurance, and other pre-paid items from the seller (oil remaining in the oil tank, etc.)
Once you have completed the four steps above, the house keys are yours and you will have successfully bought your new home! Get started by contacting a Peoples State Bank Lender.
How Much Home Can You Afford?
Costs of Purchasing a Home
Before you begin house hunting, it's important to know how much home you can afford to buy and then live in. Once you understand all the factors involved in purchasing and maintaining a home, you'll be able to search the properties that fit your budget today and in the future.
When you get pre-qualified for a home loan from Peoples State Bank, we will help you find out how much you qualify for. With this figure in-hand, you'll be able to narrow down your property search to the homes that can fit your budget.
Earnest Money Deposit
You've found a property that you love and you're ready to make an offer. After you have come up with an offer price, the next step is to determine how large a deposit you want to make with your offer. You want the "earnest money deposit" to be large enough to show the seller you are serious, but not so large you are placing significant funds at risk. Keep in mind that this money will be tied up throughout the entire purchasing process, so the less you offer means the less you have at risk. On the other hand, a larger earnest money deposit will often attract a seller over a similar offer that includes a smaller deposit. It's important that you balance the risk and the strength of the deposit and make the choice that's right for you.
The down payment is the portion of the purchase price that you will pay in cash instead of including it in your mortgage. On some programs, Peoples State Bank will allow down payments as small as 0% of the purchase price, but USDA Annual Fees and/or Private Mortgage Insurance (PMI) may be required. Speak with a Peoples State Bank Lender today to better understand USDA Annual Fees and PMI and how it will affect your mortgage payments.
There are expenses associated with your mortgage transaction known as "closing costs." These closing costs may include appraisal fees, title search service fees, closing fees, escrow fees, homeowner's insurance, USDA Annual Fees and/or Private Mortgage Insurance (PMI), and mortgage origination charges. When you apply for a Peoples State Bank mortgage, you will receive a Loan Estimate that will give you an estimate of all the closing costs attached to your mortgage. The final closing costs and amount due at closing will be issued on the closing disclosure.