How to Buy a House in Pennsylvania: 6 Steps

Buying a house is a big financial decision that requires long-term planning. Pennsylvania's average home value is $270,780, below the national average of $362,481. This difference makes homebuying more affordable in the state.

Understanding down payment assistance programs, mortgage types and state regulations can make homebuying smoother in the Keystone State. MoneyGeek offers tips to guide you, from saving for a down payment and picking the right location to finding the best loan for your needs and credit score.

Pennsylvania's homeowner vacancy rate in the second quarter of 2024 was 1%, according to the U.S. Census Bureau. This rate measures the percentage of vacant homes available for sale.

A rate of 1% indicates high demand and limited inventory. This can lead to increased buyer competition, driving up home prices and making it harder to find suitable housing. A stable homeowner vacancy rate of 2% offers buyers more choices and flexibility.

Review your financial and credit history before buying a home in Pennsylvania. A solid financial profile can boost your chances of approval when applying for a mortgage.

Your credit score impacts the mortgage loans and interest rates you qualify for. A higher score improves your chances of getting a better rate. In the third quarter of 2023, Pennsylvania’s average credit score was 723, according to Experian.

If you have bad credit (below 580 on the FICO scale), you can still buy a house, but it may be harder to get mortgage approval. Check the table below for options based on minimum credit score requirements.

Source: Experian

Your DTI ratio shows how much of your monthly income goes to debt payments, helping lenders decide how much mortgage debt you can handle. Pennsylvania's average mortgage debt was $170,773 in the third quarter of 2023, according to Experian, highlighting the added financial responsibility of owning a home in the state.

Monthly debt payments factored into your DTI include your mortgage, student loans, car loans, credit card payments and other debts. Use our debt-to-income ratio calculator below to find your front-end DTI (housing expenses) and back-end DTI (all debts). This tool also shows your total monthly debt payments.

Buying a house you can't afford can lead to financial strain. To avoid this pitfall, use the 28% rule, which suggests spending no more than 28% of your monthly income on your mortgage. This ensures you have enough funds for other expenses.

In April 2024, the median annual income in Pennsylvania was $47,430, according to the U.S. Bureau of Labor Statistics. That’s a gross monthly income of $3,953 before taxes. Applying the 28% rule, aim to spend no more than $1,107 monthly on your mortgage.

Use our mortgage calculator below to estimate your monthly payment in Pennsylvania.

A down payment is an upfront payment made when purchasing a house, typically 20% of the home's purchase price. This percentage is the standard but can be a big challenge for many homebuyers. In Pennsylvania, where the average home value is $270,780, a 20% down payment would be $54,156. For homes valued above average at $310,000, the down payment would rise to $62,000.

Fortunately, a 20% down payment isn't always required. For example, government-backed loans such as VA loans require no down payment, and FHA loans need just 3.5%.

If you put down less than 20%, your lender may require you to get private mortgage insurance. Use our PMI calculator to estimate your monthly PMI premium based on your credit score and down payment.

Pennsylvania offers several down payment assistance programs to help make homeownership more attainable. The Pennsylvania Housing Finance Agency (PHFA) provides information and support for these initiatives.

See the table below for details on the state's down payment assistance programs.

Finding the right location in Pennsylvania involves considering several factors. Start by looking at the average house price in different areas to ensure it fits your budget. Consider proximity to family, friends, work and school, as these can significantly impact your daily life. Also, evaluate access to public transportation, parks, restaurants and shopping centers to ensure convenience and lifestyle fit.

The cost of living is also crucial. According to the Missouri Economic Research and Information Center (MERIC), Pennsylvania's cost of living index for the first quarter of 2024 was 95.6, lower than the national average of 100.

Consider these expenses when choosing the right location:

• Food
• Health care
• Clothing
• Utilities
• Education
• Transportation
• Entertainment

Check the table below for average home values in some Pennsylvania cities. You can also use our cost of living calculator to estimate expenses in different areas.

Source: Zillow

Working with a real estate agent can speed up your house hunt in Pennsylvania. They give advice, handle paperwork and offer an expanded list of property options you wouldn't access alone. Real estate agents can also recommend other service providers, like title companies and inspectors, to help you buy a home.

When finding a real estate agent, do your due diligence and interview those with experience in the neighborhoods you're interested in. Consider these tips:

• Find someone who matches your needs and personality.
• Verify the agent's credentials, training and license.
• Ensure they have in-depth knowledge of the area.
• Shop around for agents and compare their rates.

To find or verify real estate agents in the state, you can also use the Pennsylvania Bureau of Professional and Occupational Affairs' license holder search tool.

The homebuying process involves finding a mortgage that fits your budget. Options in Pennsylvania include conventional, jumbo, FHA, VA and USDA loans. You can select from from 10-year, 15-year, 20-year or 30-year terms and decide between a fixed-rate mortgage and an adjustable-rate mortgage (ARM). Choosing the best financing option can improve your approval chances and save you money over time.

Mortgage interest rates can change daily due to factors like the type of mortgage, the lender and the economy. While the interest rate is the percentage charged on the loan amount, the annual percentage rate (APR) reflects the actual cost of borrowing by including additional fees and costs associated with the loan.

As of October 2024, the APR for a 30-year fixed conforming loan in Pennsylvania is 5.95%, and for a 30-year fixed rate FHA loan, it's 7.57%. Check the table below to see the current rates in Pennsylvania by mortgage type.

Getting pre-approved for a mortgage in Pennsylvania is crucial in the homebuying process. It involves a comprehensive evaluation of your financial status, clearly indicating how much you can borrow. It also helps you understand your budget and enhances your credibility with sellers. Lenders typically issue a mortgage pre-approval letter that proves your borrowing capacity. This letter is usually valid for 60 to 90 days, allowing you time to find the right property.

For a mortgage pre-approval, you need to submit several documents, including:

• Proof of income, such as pay stubs or tax returns
• Employment verification
• Credit history and score
• Bank statements
• Identification documents

Understanding the distinction between mortgage pre-approval and prequalification is essential. Pre-approval is more rigorous, involving a detailed review of your financial documents and credit history. It's a more reliable indicator of your borrowing capacity. Prequalification is a preliminary step that gives you a general idea of how much you can borrow based on self-reported information.

Home inspections are crucial in Pennsylvania's homebuying process. Inspectors assess the property’s structure, roof, electrical systems, plumbing and HVAC. Their report highlights issues and suggests repairs.

If the inspection uncovers a failing roof or outdated wiring, it can affect the home's appraisal and lower its value. These findings might lead the buyer to reconsider or even rescind the offer if repair costs outweigh the home's worth, preventing a financially risky purchase.

Pennsylvania doesn’t require home inspectors to be licensed or regulated. However, many inspectors voluntarily get certified by organizations like the American Society of Home Inspectors (ASHI) or the International Association of Certified Home Inspectors (InterNACHI), ensuring they meet certain standards.

When hiring a home inspector in Pennsylvania, confirm their certification. Check reviews from past clients and ask for references to gauge their reliability and expertise.

Home appraisals determine a property's fair market value, helping buyers and lenders ensure the agreed-upon price reflects the property's worth. The median appraisal cost in 2023 was $500, according to the Appraisal Survey from the National Association of Realtors (NAR).

Inspections and appraisals are necessary when buying a home but serve different purposes. An inspection evaluates the property’s condition and identifies any potential problems. An appraisal determines the property’s value, which helps lenders ensure the loan amount doesn’t exceed that value. Lenders require appraisals to protect their investment by confirming the property can cover the mortgage amount.

Closing is the final step in buying a house in Pennsylvania, marking the official ownership transfer when you receive the keys. Your lender must provide you with a closing disclosure document three days before the closing. This document outlines your loan terms, projected monthly payments and closing costs. Plan a final walk-through with your real estate agent near the closing day to ensure the property remains in the expected condition.

Closing day involves reviewing and completing several documents to finalize your home purchase. Here are some documents you need to sign:

• Final loan application: Confirms your mortgage terms, including the interest rate and payment schedule. It ensures that you and the lender agree before the loan is finalized.
• Deed transfer: Transfers property ownership from the seller to you. It's recorded publicly to officially recognize you as the new owner.
• Promissory mortgage note: A legal promise to repay the loan according to the agreed terms. It outlines the loan amount, interest rate and repayment schedule and is a binding agreement between you and the lender.
• Homeowners insurance: Covers repair costs or replacement if your property is damaged. Homeowners insurance in Pennsylvania will financially protect you against fire, theft and natural disasters.

Closing costs are the fees and expenses you pay when finalizing a real estate transaction. The average closing costs in Pennsylvania are $3,963, according to NAR. These costs include:

• Appraisal fee: Covers the cost of a professional appraiser determining the property value.
• Title search and insurance fee: Ensures the property's title is clear of liens or disputes.
• Escrow deposit: Funds held in escrow for property taxes and insurance premiums.
• Prepaid costs: Upfront payments for homeowner's insurance and property taxes.
• Other closing costs: Include various administrative and processing fees associated with the loan.

Learning about the different first-time homebuyer programs in Pennsylvania can help you own a home faster.

Buying a house is a financial commitment that lasts for years. To help you kickstart your homebuyer journey, we answered frequently asked questions about buying a house in Pennsylvania.