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.

Key Takeaways

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The average home value in Pennsylvania is $270,780, lower than the national average of $362,481.

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To buy a home in Pennsylvania, choose an ideal location, explore mortgage options, prepare the lenders' requirements and close the loan.

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The Pennsylvania Housing Finance Agency offers down payment assistance programs like the Keystone Advantage Assistance Loan and PHFA Grant to help Pennsylvanians own a home faster.

Step 1: Prepare to Buy a House in Pennsylvania

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.

Check Your Credit Score

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.

Mortgage Type
Description
Minimum Credit Score

Conventional Loan

Conventional loans are standard loans not insured by the government, typically offering competitive rates.

620

Jumbo Loan

Jumbo loans exceed conforming loan limits, making them suitable for high-value properties.

700

FHA Loan

FHA loans are for low-to-moderate income borrowers, often with lower down payment requirements.

500–580, depending on the down payment

VA Loan

VA loans offer veterans and active military members favorable terms and no down payment options.

None given, but may require at least 620

USDA Loan

USDA loans cater to rural property buyers, often with no down payment required.

580

Source: Experian

Review Your Debt-to-Income (DTI) Ratio

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.

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Debt-to-Income Ratio Calculator

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Determine How Much You Can Afford

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.

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Updated: Nov 13, 2024

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BUDGET FOR ADDITIONAL HOMEOWNERSHIP COSTS

When buying a house, plan for more than just the mortgage payment. Property taxes and homeowners insurance can greatly impact your budget, and these costs vary by location and property value.

Pennsylvania residents pay a property tax rate of 1.49% on owner-occupied homes, based on the Tax Foundation data. The average cost of homeowners insurance in Pennsylvania is $1,575 annually. Factor these costs into your budget to financially prepare for homeownership.

Step 2: Save for a Down 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.

Private Mortgage Insurance Calculator

Calculate your monthly private mortgage insurance (PMI) premium in Pennsylvania based on your credit score and down payment.

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Explore Down Payment Assistance Programs

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.

Program
What It Offers

Keystone Advantage Assistance Loan

This program offers a second mortgage loan up to $6,000 or 4% of the purchase price, whichever is less. The loan has a 0% interest rate and is repayable over 10 years.

PHFA Grant

This program provides a $500 grant to assist with down payment and closing costs, designed to be paired with the HFA PreferredTM (Lo MI) loan.

HOMEstead Downpayment and Closing Cost Assistance Loan

Providing up to $10,000 in down payment and closing cost assistance, this grant is available in certain counties and doesn't need to be repaid if the homeowner remains in the home for five years.

Step 3: Find the Right Location in Pennsylvania

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.

City
Average Home Value

Allentown, PA

$286,421

Erie, PA

$182,858

Philadelphia, PA

$226,995

Pittsburgh, PA

$240,443

Scranton, PA

$176,577

Source: Zillow

Work With a Real Estate Agent

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.

Step 4: Shop for the Best Financing Options in Pennsylvania

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.

Know the Current Mortgage Rates

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.

Data filtered by:Results filtered by:
Loan Type:
Loan Type:30-Year Fixed
5.87%5.95%
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FHA LOAN VS. CONVENTIONAL LOAN

When shopping for a mortgage in Pennsylvania, you typically choose between government and conventional mortgage programs. FHA loans, backed by the government, usually require lower down payments and credit scores. Conventional loans aren't government-backed and may require a higher credit score and a larger down payment, but they offer more flexibility in loan amounts and property types.

Use our FHA loan vs. conventional loan calculator to compare these options. Enter details like your home price, down payment, term length, credit score and interest rate to find the loan that best fits your financial situation.

Get Pre-Approved

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.

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HOW TO CHOOSE THE RIGHT LENDER

Many lenders are in the market, each with varying eligibility requirements, interest rates and fees. Conduct thorough research to find the right fit. Banks and credit unions are common mortgage lenders. Banks typically offer a wider range of loan products but may have stricter eligibility criteria. Credit unions often provide lower interest rates but require membership.

Consider these tips when choosing the right lender for your mortgage application:

  • Ensure the lender offers your preferred loan type. For example, if you seek an FHA loan, verify that the lender is FHA-approved.
  • Compare the lender's sample rates with today's mortgage rates in Pennsylvania.
  • Understand the lender's underwriting process and see if you can apply online, by mail or in person.
  • Check reviews to evaluate the lender's customer service quality.

Step 5: Conduct a Home Inspection in Pennsylvania

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.

State-Specific Inspections

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.

Go Through Appraisal

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.

Step 6: Close on Your House in Pennsylvania

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.

Sign All Documents

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.
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CONSIDER HIRING A REAL ESTATE LAWYER

Hiring a real estate lawyer is common when buying a house, even if it's not mandatory in Pennsylvania. This attorney reviews contracts, handles legal documentation and ensures a smooth closing process. Their expertise can prevent costly legal issues.

Typically, hiring a real estate lawyer costs between $700 and $1,250. The price varies depending on the complexity of the sale, location, property type and buyer needs.

Pay Closing Costs

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.

Pennsylvania Homebuying Details: What You Should Know

While we've covered basic homebuying steps, Pennsylvania has some unique practices. Understanding these details is key to a smooth homebuying experience.

1
Seller disclosure is required

Pennsylvania requires sellers to provide potential buyers with a Property Disclosure Statement. This document includes information about the property's condition, including the roof, foundation, plumbing, electrical systems and any known material defects.

2
Dual agency is legal

Pennsylvania allows the dual agency, where a single real estate agent or brokerage represents the buyer and the seller in the same transaction. However, the agent must disclose this relationship and get written consent from both parties.

3
Real estate attorneys aren't required

Pennsylvania doesn't require buyers to hire a real estate attorney for homebuying. However, some buyers do so to ensure all legal aspects of the transaction are properly handled, especially in complex deals.

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

FAQ About Buying a House in Pennsylvania

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.

How much does it cost to buy a house in Pennsylvania?
What are the requirements to buy a house in Pennsylvania?
What credit score do I need to buy a house in Pennsylvania?
How much income do I need to buy a house in Pennsylvania?
Is buying a house in Pennsylvania a good idea?
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About Zachary Romeo, CBCA


Zachary Romeo, CBCA headshot

Zachary Romeo is a certified Commercial Banking and Credit Analyst (CBCA), and the Head of Loans and Banking at MoneyGeek. Previously, he led production teams for some of the largest online informational resources in higher education, with over 13 years of experience in editorial production.

Romeo has a bachelor's degree in biological engineering from Cornell University. He geeks out on minimizing personal debt and helping others do the same through people-first content.


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