Frequently Asked Questions For Pennsylvania Home Buyers

If you're like most home buyers in Pennsylvania, you have questions about mortgage financing. Here are some frequently asked questions:

How do I buy a house?

1. Get your free credit report!
The Fair Credit Reporting Act (FCRA) requires each of the nationwide consumer reporting companies — Equifax, Experian, and TransUnion — to provide you with a free copy of your credit report, at your request, once every 12 months.

2. Get your papers in order!
At mortgage application you will provide the lender with your pay stubs for the previous 1 - 2 months, your checking, savings, 401K account(s) statements - all pages, even the last page for check reconciliation, divorce decrees, child support, and settlement agreements.

3. Get PRE-APPROVED - not PRE-QUALIFIED
There is a difference. In short, only an underwriter or Fannie Mae or Freddie Mac's automated underwriting system can PRE-APPROVE you. Anything less is pre-qualification. Pre-qualification is when the loan officer gives you his or her opinion that you're likely to obtain a mortgage - not that you will. Is that what you want, an opinion? Or do you want someone in authority who approves your paperwork to render an opinion? That's PRE-APPROVAL.
4. Get a good faith estimate (with an APR disclosure) and compare
Ask the lender or lenders to provide you and your real estate agent a good faith estimate at prequalification and PRIOR to making an offer on the home. Read more

• Estimate your "ideal" mortgage payment - Debt to Income Calculator
• What are "closing costs" - PA Closing Costs Explanation
• Questions & answers on home buying - FAQ on Home Buying
• Are you eligible for special financing? - First Time Home Buyer Programs
• What's a Seller Assist? - Seller Assist
• Here's a few comments to make you an informed home buyer - House Buying Tips
• What are points? - Mortgage Points
• What's a deed transfer tax & how much is it? - Explanation of PA Tax

I'm a first time home buyer in Pennsylvania, what programs are available?

The State of Pennsylvania provides low interest mortgages to first time homebuyers and buyers who are not first time homebuyers who purchase in targeted counties and certain census tracts. Read more.

How much does it cost to buy a home?

I have created a variety of mortgage calculators to help you estimate your monthly mortgage payment and required cash at closing. I invite you to use these CALCULATORS to gain an understanding of the down payment and closing costs. These calculators will estimate FHA, VA and conventional mortgages. Needless to say, these calculators are intended for illustrative purposes only. Consult a mortgage professional for accurate costs.

What's a seller assist?

The Federal Housing Administration (FHA), the Veteran's Administration (VA loans) and conventional mortgages (loans underwritten to Fannie Mae and Freddie Mac guidelines) permit the seller to pay a percentage of your closing and escrow costs . . . however, the seller is NOT required to pay your closing costs. Your cash at closing consists of three components |down payment | closing costs |escrow and prepaid costs|.

The seller assist limit is based on the type of mortgage.

FHA MORTGAGE

FHA mortgage limits the seller assist to 6% of the sales price for "allowable" closing costs.

VA  MORTGAGE

The VA permits the seller to pay all closing costs and the escrow and prepaids up to 4% of the sales price.

CONVENTIONAL MORTGAGE

For a conventional loan, the seller is permitted to pay 3% of the sales price when your down payment is less than 10%. For down payments of 10% - 24%, the seller can pay up to 6% of the sales price. For down payments of 25% or more, the seller can pay up to 9% of the sales price. Consult with a mortgage professional concerning limits and allowable costs paid under these mortgage programs. More information on seller assistance can be found here - Seller Assist

Which is better, asking the seller to pay a seller assist or making a lower offer?

Let's run a scenario and you decide.

The following example assumes that the house is listed at $100,000 and the seller desires to net $94,000. The seller doesn't care if they sell the house for $94,000 or $100,000 less $6,000 (seller assist - Sales price X 6%).

Column 1 - Sales price of $100,000 with a 6% seller assist ($6,000) - FHA mortgage
Column 2 - Sales price of $94,000 no seller assist - FHA mortgage

As you will see, your total cash to purchase this home is less in Column 1, because the seller is paying $6,000 (6% X sales price) toward your closing costs. However, the payment is higher than in column 2 because the mortgage amount is higher.