Your Guide to Buying a Home in Pennsylvania

The Pennsylvania Buying Process: A Review

• In Pennsylvania, the law allows real estate closings to be completed by a closing agent, who can be an attorney or an official from a title company. 
• These people prepare the needed documents and complete the transaction at a specific closing date. 
• The buyer and the seller generally close the transaction at the same time. Both parties are usually present at the closing table. 
• There are features to Pennsylvania’s climate and environment that may require unique inspections or home insurance. 

Buying a Home in Pennsylvania, Phase 1: Negotiating Repairs and Updates

Once you are in contract with a seller to purchase a Pennsylvania home, there is a phase of inspections and negotiations to determine what repairs and upgrades should be made before selling. 

1. After a purchase contract is signed, a round of negotiations will occur. This may include negotiating a home warranty, which could pay for major appliances repair or replacement for a given period, such as two months. 
2. Earnest money, which is used to demonstrate the buyer’s serious intention, is deposited into an escrow account. This is paid to an escrow agent or representative and may be given to the seller if the buyer backs out. However, if the buyer backs out for legitimate reasons (inspection results, for example), they may have the money returned. 
3. The seller will also provide disclosures. These are simply known issues with the home, as well as past repairs and upgrades. It can also include potential environmental hazards. The disclosure form is usually provided as an addition to the contract, and the law in Pennsylvania says it must be signed by both the buyer and seller. 
4. Although the deal is far from final, an attorney or title professional will begin the process for transferring and changing the title. 
5. Assuming it’s agreed to in the contract, inspections will begin. (Most contracts allow for inspections.) The contract will designate a specific date for completing these inspections. A home inspector will complete their work, then other, more specific inspections can occur. In some contracts, there is additional time for special inspections, such as termite inspections. 
6. The inspection results are crucial. At this time, the buyer can request a reduction in sales price or ask the seller to repair any issues. The seller can agree to the request or respond with their own offer. Negotiations continue until an agreement is reached. If an agreement can’t be reached, the buyer may be able to walk away from the deal and recoup their earnest money. 

Buying a Home in Pennsylvania, Phase 2: The Mortgage 

Most buyers in Pennsylvania and the United States will need a home loan, called a “mortgage” to make their purchase. This phase can take a while, so it’s best to start early. In almost all cases, you can complete Phase 2 (the mortgage) at the same time as Phase 1 (negotiations). 

1. Once a purchase price is reached, the buyer will send their loan application. This can be done independently, although most people will prefer to use a lending agent or broker. 
2. The borrower will receive a “good faith estimate” from the lender. This is simply an estimate of the cost to close the deal. Final costs may be different, but it is usually fairly accurate. 
3. To finalize the loan, the lender will need a variety of documents that verify the borrower’s financial outlook. These may include: 

• Pay stubs: This will verify your income. The lender may also request employer contact information to support various information.
• Tax returns: Tax returns usually give an accurate description of your annual income and can form the basis for your mortgage application. 
• Bank statements: This helps verify cash holdings and other financial information, as well as income and outgoing expenses. 
• Loan documents: Any information on your current debt load will be requested. This can include car loans, student loans, credit cards, and consumer debts.
• Financial disclosures: Anything that impacts your financial situation should be included. This could mean child support, divorce decrees, alimony, legal judgements, and property liens. 
• Explanation on any credit inquiries. (Lenders want to know you are not taking out new lines of credit.)
• Information on any large deposits. If there is a large deposit in your account that is not part of your regular income, be prepared to document this cash. 
• Gift letters: If there is a large deposit that came as a gift from a friend or family member, be prepared to document this gift. Lenders may request a gift letter that highlights the nature of the deposit and officially states that the money does not need to be repaid. 
• The lender may also request information that verifies these documents. Essentially, they want as much information and documentation as possible, so don’t be surprised if they ask for repeat or verifying information on income, debts, and past credit issues. 

4. Using this information, the lender will create an approval decision. Once approved, you will receive a commitment letter, which officially states their intention to finance your home purchase.

5. The commitment letter may come with provisions, including an appraisal requirement. 

6. An appraisal will be requested and, assuming it’s not too low, the loan can move forward. However, if the appraisal is low, the lender may pull their loan approval. 

7. If the appraisal is low, the lender can pull their offer or they can request a change in the terms. A larger downpayment may be needed. Also, low appraisals could allow the buyer to pull their offer without penalty. 

8. The “mortgage contingency” is removed from the contract and a copy is sent to the seller or seller’s agent, letting them know that the loan is proceeding as planned. 

9. Homeowner’s insurance in ordered by the borrower. This is almost always required by the lender. 

Remember, this process is long and includes many different steps. For this reason, it’s best to start early and prepare all of the documents well before you finalize a contact agreement. You should also avoid new debts at this time, as it can harm your chances of mortgage approval.

Buying a Home in Pennsylvania, Phase 3: Final Closing

1. At some point in the process (usually after the contract is signed), a title search will be completed by the attorney overseeing the transaction. This will determine if there are any liens or title disputes. Assuming the title is clear, the closing can continue as planned with a title commitment.
2. All of the paperwork for finalizing the transaction will need to be completed.
3. A date is set for final closing.
4. For most transactions, a final walkthrough will be completed. This is to ensure that the property is still in good condition. 
5. Final loan documents can now be signed at the closing. 
6. The buyer will pay the final downpayment for the purchase. This will go to the attorney or title representative who is overseeing the transaction. 
7. The transaction will be recorded with the city or county where the property is located. 
8. Now the buyer gets their keys and can move into their new home!

Conforming Loan Limits in Pennsylvania

Loan limits for a variety of different mortgage products are set by the FHFA. These limits are determined on a county-by-county basis, taking into account the median home prices in each area. 

In all areas, there is a base loan limit. However, in certain areas with higher home prices, this base limit can be increased, allowing the purchase of more expensive homes while still using government-backed conforming loans. 

Currently, the base limit for a single-family home is $548,250. In Pennsylvania, this is the limit for the entire state except for Pike County. In this county, on the far eastern end of the state bordering New York and New Jersey, the limit for single family homes has been lifted to $822,375. 

There are also conforming loans for properties up to four units. For most of the state, conforming loan limits for a two-unit property is $702,000, while a three-unit property comes with a limit of $848,500. A four-unit property can use a conforming loan up to $1,054,500. 

In Pike County, these limits are also increased. A two-unit property in this county comes with a loan limit of $1,053,000. For three-unit properties, the limit is $1,272,750, and four-unit properties in Pike County have a loan limit of $1,581,750.

Downpayment Assistance Programs in Pennsylvania

Even a small downpayment can represent tens of thousands of dollars. For this reason, many people struggle to create the downpayment they need for a home purchase. Fortunately, there are government agencies and non-profit groups that provide support throughout Pennsylvania.

Statewide DPA Assistance Programs

Pennsylvania buyers have access to some of the most comprehensive downpayment assistance programs in the country. Through the Pennsylvania Housing Finance Agency (PHFA), buyers in the Keystone State can access numerous programs that serve a wide variety of people.

As of writing this article, there were at least six different PHFA programs that, in some form, offer downpayment support to buyers.

Here are a few examples…

PHFA Grant
Although smaller in total size, this program provides grant assistance of $500, which does not need to be repaid. This $500 can also be combined with other DPA programs.

Keystone Advantage Assistance Loan
Through this option, buyers in Pennsylvania can secure up to $6,000, which comes as a second loan. The loan has no interest, making it even more affordable.

Keystone Forgivable in Ten Years Loan
Although the qualification standards can be a little tighter, this program allows buyers to utilize a benefit that is completely forgivable after ten years. With this program, buyers can secure as much as 5% of the purchase price.

Other options created by the PHFA include a program for people with disabilities, and a program that encourages employers to offer homeownership benefits.

Major Local Programs in Pennsylvania

Philly First Home
Residents of Philadelphia can find support through the Philly First Home program, which offers as much as $10,000 in funding. This is a grant (no repayment required), which makes it one of the most attractive options in the state.

Pittsburgh Housing Opportunity Fund
The city of Pittsburgh offers homebuyers downpayment assistance, and support is available to numerous people, including buyers with incomes over the area’s median salary.

Common Requirements for Downpayment Support

There are many different requirements for downpayment support, but the most common is an income limitation. These programs are usually for people with low or moderate incomes; often the limit is somewhere around the area’s median income.

You may also find limitations on the purchase price, and many programs will have credit-score requirements, which are usually around 620 to 640. Another common requirement is that users are first-time homebuyers, although many programs will waive this requirement if you have not owned a property in the past three years.

Buying a home is complicated and expensive. If you need help finding the right Pennsylvania downpayment assistance for your specific needs, give us a call today!

Note: This article is for general information and research only, and should not be taken as legal, financial, or real estate advice. Pennsylvania law, as well as federal law, is constantly changing so always talk with a qualified professional to ensure you have the best information available.