According to Zillow, the average cost of properties in Pennsylvania is $268,984. This value has increased by 10.1% within one year. The average price can significantly increase or decrease based on where you plan to buy a property. For example, Milesburg is one of the cheapest places to buy a house in Pennsylvania and properties cost $191,708.
Properties are cheaper in Pennsylvania compared to the national average of $357,810. Nevertheless, its affordability depends on your financial circumstances, needs and what you're looking for in a new home. To avoid debt due to mortgage loans, you need to be familiar with the homebuying process.
The average cost of homes in Pennsylvania is $268,984.
The qualifications to take out a mortgage depend on the loan you're applying for.
When buying a house in Pennsylvania, you need to look for a good location, apply for a loan, pay the down payment, conduct a home inspection and more.
Choose an Ideal Location
Location significantly influences the cost of real estate. That's why "location, location, location" is one of the most common mantras in real estate. The neighborhood culture, proximity to facilities, activities and other factors contribute to the cost of a house. It's best to pay attention to these details when checking different homes and locations.
You can get a lot of assistance from a real estate agent as you go through the process of buying a home. From showing your different houses to processing paperwork, real estate agents can save you time and effort in finding a home. These are the best qualities of a real estate agent:
- Honesty: They need to be honest with you regarding the affordability of the home, pros and cons and all the relevant details that can affect your quality of living in the house.
- Attention to detail: A real estate agent should pay excellent attention to detail because they need to respond to your needs and preferences.
- Experience: Being experienced shows professionalism, knowledge and skill in dealing with their clients.
Where you live in Pennsylvania affects the cost of living. The following are some household expenses that may influence your budget:
- Utility costs: Your electricity, gas, water, internet and other services add up to your cost of living.
- Transportation costs: Transportation may include gas, parking and commuting expenses. Your car insurance may also contribute to your transportation costs.
- Health care: Services and the cost of health care may vary depending on where you live. You can include doctor's visits and medicine under this category.
- Entertainment: Dining out, watching movies, concerts and other events fall under this category.
Costs differ in every city in Pennsylvania. MoneyGeek's cost of living calculator can estimate how much you could spend in your city.
If you believe your budget is enough for the cost of living in Pennsylvania, you can look for affordable areas in this state. Living in a cheaper area has its drawbacks but also some benefits.
Because items are often less expensive, you can save money on essentials such as groceries, utilities and transportation. These neighborhoods are typically located further away from amenities like malls, schools and hospitals.
Your chosen location ultimately depends on your needs and what you're looking for in a home. If you are okay with taking extra travel time to go to certain places, then an affordable neighborhood might fit you perfectly.
Calculate Mortgage Rates
Homebuyers have a variety of mortgage loan options to choose from. These loans vary in rates, terms, qualification requirements and many other factors. You can choose from conventional, VA, USDA and FHA home loans. When deciding which one to apply for, it's important to weigh their pros, cons and overall costs.
Rates are different for every loan since they depend on the borrower's profile and the lender's qualifications. For example, a homebuyer with a high credit score might be eligible for lower rates and higher loan amounts than one with a low credit score.
These are the average rates of home loans in Pennsylvania:
- Conventional home loans: 7.1%
- VA loans: 7.3%
- USDA loans: 3.3%
- FHA loans: 7.3%
Some of these loans are only available to borrowers who match certain criteria. For instance, VA loans are only open to veterans and active members of the military.
Knowing your mortgage rates, you can calculate how much money you will need to set aside to pay off your loan. As a long-term commitment, your mortgage will make up a significant portion of your monthly budget.
MoneyGeek's mortgage calculator can show you your possible monthly payments. Our FHA vs. conventional loan calculator also allows you to compare the costs of these two kinds of mortgages.
Consider developing your budget plan as soon as you have an idea of the cost of your loan. Some adjustments in your expenses may be needed so you can pay for your loan on time.
A borrower's profile determines the rates, loan terms and amount and other important aspects of the loan. As a result, loans vary with every person, and so do their costs. Lenders take into account the following things when approving loan applications:
- Credit score: Your financial responsibility reflects on your credit score. Factors like your payment history, frequency and outstanding debts determine your credit score.
- Debt-to-income (DTI) ratio: DTI ratio is the proportion between your monthly loan payments and your gross income. A low DTI ratio indicates that you can afford to pay off your debt.
- Down payment: A larger down payment translates into a lower interest rate. That means a lower total cost for your loan.
Prepare Down Payment Requirements
A down payment plays a significant role in your home financing, besides it being the amount you pay out of your pocket before buying a house. The amount you put down on the house affects your loan's overall cost and interest rate. The typical down payment is 20%, but down payment requirements may differ depending on your mortgage arrangement.
How much you will put down depends on your mortgage loan. You typically need a 20% down payment for conventional loans. Some lenders may allow borrowers to pay smaller down payments. For example, qualifying borrowers for VA home loans don't need to pay any down payment.
Your credit profile also affects your down payment amount. Strong credit profiles could mean lesser down payments, but it still depends on the kind of mortgage loan you're getting.
Note that larger down payments may result in lower rates. Your monthly payments will be smaller and the overall cost of your loan will be less expensive when you have lower rates.
Mortgage insurance protects lenders if a borrower defaults on paying, dies or develops a financial inability to fulfill their loan obligations. It's part of your expenses as a borrower, but this type of insurance exists mainly for the lender.
It's often necessary for borrowers who have made a down payment of less than 20%. Mortgage insurance is typically needed for FHA and USDA loans because the down payments on these loans are much lower than 20%.
Private mortgage insurance (PMI) may also apply to conventional loans. Borrowers with good credit may receive cheap rates on the monthly payment compared to other mortgage insurance options. In some circumstances, it may also be canceled.
Governmental organizations could provide down payment assistance programs in the state to help you make your down payment. These first-time homebuyer programs in Pennysylvania include the following:
- Pennsylvania Housing Finance Agency (PHFA): The PHFA offers homebuyer programs to help alleviate the financial burden on potential homeowners. It has several programs, one of which is down payment assistance for homebuyers in Pennsylvania.
- U.S. Department of Agriculture Rural Housing: If you're buying a house in a rural community, the USDA Rural Development can help you get affordable housing through loans and grants.
- The Department of Housing and Urban Development (HUD): HUD helps you find homeownership assistance from local government units and statewide programs.
Get Pre-Approved for a Mortgage
Both prequalification and pre-approval allow borrowers to check their creditworthiness for a mortgage loan. You will need to provide your basic credit information in a prequalification, but it might not be as thorough as a pre-approval. A pre-approval analyzes your financial data more and then issues you a pre-approval letter after a few days. When buying a home, pre-approval may be necessary when you submit an offer.
Having your documentation ready will make the pre-approval process faster and easier. Lenders frequently need supporting documentation related to your identity, address and income. The following are some papers you need to submit:
- Application form: Applications typically request basic information, such as your name, address, phone number and Social Security number. Every lender has a different form and procedure.
- Identification: To confirm your identity, a lender may request further paperwork. Your passport, official IDs and birth certificate are a few examples.
- Proof of employment or income: Lenders may request your bank statements, pay stubs, tax returns and other employment-related papers as proof of your income or employment.
An essential part of the homebuying process is your pre-approval. It confirms your creditworthiness, letting lenders and sellers know you will likely get loan approval. It also helps you set an offer on the house and plan your budget.
You must submit documents attesting to your identity and creditworthiness as part of this process. Your pre-approval letter could be released within 10 business days of submitting these papers. This letter is valid for a period of 30 to 60 days. Note that a pre-approval letter does not ensure that your loan will be approved.
A pre-approval letter states your maximum loan amount. Sellers can use this as a reference for your creditworthiness and assurance that there's a reasonable probability you will be approved for a loan. It also means that a lender has examined your credit report and that you can proceed with your loan application.
The pre-approval letter's validity limits your window for shopping for houses. You can only use the letter for a maximum of 60 days. You can extend its validity if you need more time to find a suitable home. You can also have several pre-approvals from lenders, but a lender may conduct a hard inquiry that affects your credit score.
Conduct a Home Inspection
You should ensure you'll be completely safe in a house before buying it. A home inspection allows you to carefully examine the building's design, electrical systems, plumbing and other features. By doing this, you can ensure that there won't be any issues with the house.
A typical person might overlook some problems, but a licensed expert can perform an exhaustive inspection of the entire structure. They can explore everything around the house to look for any potential flaws.
The inspector must assess the following areas:
- Heating, ventilation and air conditioning (HVAC)
- Fire safety
- Bedrooms, bathrooms and kitchen
Home inspections are typically not one of the prerequisites for purchasing a home. Before buying a home in Pennsylvania, it's better to have a home inspection. Some lenders could demand a home inspection before approving your application for a mortgage loan.
It's also not highly regulated in Pennsylvania, although hiring a licensed home inspector is advisable. Doing so will guarantee that your home inspector has passed specific standards and is a national home inspection association member. These inspectors must take education courses and exams and uphold their code of ethics.
A house inspection is distinct from an appraisal. A home appraisal doesn't get into the specifics of the house, but a home inspection examines the home more thoroughly. In a home appraisal, the appraiser considers the property's conditions, including any apparent issues and home upgrades.
Home appraisals focus more on the house's worth in relation to its current state and the prices of other houses on the local market. An appraisal may also consider the probable cost of building the home in the present times. Therefore, home appraisals offer more insight into the house's market value than its safety.
Close Your Mortgage Loan
The final step of the process is to close your mortgage loan. There may be several documents required to close your mortgage. Review the terms and go over the specifics before signing any paperwork. Remember to include closing costs in your budget since these can accumulate as you seal the deal with your lender.
Closing your mortgage loan entails preparing more documents and signing more paperwork. Prepare these crucial documents when closing your loan:
- Closing Disclosure
- Mortgage, security instrument or deed of trust
- Deed of purchase
- Promissory note
- Proof of wire transfer or a cashier's check
It's best to prepare these documents to ensure that they're complete and that you have thoroughly reviewed them. Read the fine print before signing any paperwork or contracts. Review the terms and conditions of your loan as best as possible to avoid facing any problems while repaying your loan.
Closing expenses typically range from 2% to 6% of the cost of your house. Closing costs usually include these fees, though your lender may charge different rates:
- Attorney's fees: Your real estate lawyer determines this sum.
- Credit report fee: It may cost $15 to $30. Lenders require a copy of your credit report from the three major credit agencies. This helps lenders assess your creditworthiness.
- Insurance: You may need a variety of insurance policies. That includes homeowners, lenders, owners and private mortgage insurance policies.
- Property tax: The taxes charged to you are pro rata based on the closing date up to the last day of the tax year.
You need to close your mortgage loan before moving into your new house. Necessary paperwork must be prepared and signed. Closing costs also need to be paid. These costs account for your taxes, insurance premiums and the rate your lender charges.
Once you have the money, contact the house's seller or agent. Then, you can arrange for the house to be in your possession.
A mortgage loan is a long-term commitment, and receiving the funds is only the beginning of your responsibilities. You must make a monthly payment toward your obligations during the loan term. Therefore, it's best to control your spending during this time.
Pennsylvania Homebuying Details
The homebuying process can be relatively similar across different states. However, there are nuances and specific guidelines for each state.
Some details in Pennsylvania are unique and involve homeowner assistance programs and requirements. Consider looking into these details to avoid overlooking them and missing some crucial points during the process.
One real estate agent can represent both the seller and the buyer of the property. It's legal in Pennsylvania as long as the seller and the buyer give written consent.
This is one requirement provided by law. A seller needs to give a property disclosure statement containing the problems around the house, information about the structure and other improvements added to the house.
Homeowner assistance programs
There are several homeowner assistance programs in Pennsylvania. You can look into the Pennsylvania Housing Finance Agency (PHFA) for different kinds of financial assistance in the state. Homebuyers in rural communities can also apply for U.S. Department of Agriculture Rural Housing programs. The Department of Housing and Urban Development (HUD) has also put together multiple programs, especially in the local government units for counties in Pennsylvania.
Frequently Asked Questions About Buying a Home in Pennsylvania
MoneyGeek answered frequently asked questions on how to buy a home in Pennsylvania. These can give you more insight into property costs in the state and how this purchase can affect your budget.
- American Society of Home Inspectors. "Home Inspection Requirements for Pennsylvania." Accessed October 23, 2022.
- Consumer Financial Protection Bureau. "Get a Prequalification or Preapproval Letter." Accessed October 23, 2022.
- Consumer Financial Protection Bureau. "Mortgage Closing Checklist." Accessed October 23, 2022.
- Pennsylvania Housing Finance Agency. "Mortgage Housing – Foreclosure Options." Accessed October 23, 2022.
- Tax Foundation. "Taxes In Pennsylvania." Accessed October 23, 2022.
- U.S. Department of Housing and Urban Development. "Homeownership Assistance: Pennsylvania." Accessed October 23, 2022.
- USDA Rural Development. "Pennsylvania." Accessed October 23, 2022.
- USDA Rural Development. "Single Family Housing Direct Home Loans in Pennsylvania." Accessed October 23, 2022.
- Zillow. "Pennsylvania Home Values." Accessed October 23, 2022.
- Zillow. "United States Home Values." Accessed October 23, 2022.