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First-Time Home-Buyer Programs in PA

First time home buyersBecause a home is more than simply a house or condominium that you live in, buying a home is thrilling, stressful, and sometimes scary.

It's another step on the path of life.

Children are born in homes, and infants take their first steps across the living room floor.

Brides are brought over the threshold into their homes, and holidays are celebrated there.

It is said that "home is where the heart is". 

Homeownership has "social consequences," according to Robert D. Dietz, author of The Social Consequences of Homeownership.

1. Homeowners' children are more likely to do well on academic achievement exams and to complete high school. They are also less likely to get pregnant as teens and have fewer behavioral issues in school.

2. Homeowners are happier and more pleased with their life.
Homeownership has been linked to better physical, mental, and emotional wellbeing.

3. Homeowners engage in more political engagement (voting, civic involvement) than renters.
Property values rise when there is a high degree of homeownership in the area. NeighborWorks  is the source

The process of purchasing a house may be complicated. Escrow, tax prorations, deed transfer tax, and title insurance are just a few of the terms you may hear.
Here are some pointers to help your house buying go well.

1. Get your free credit report!

Get your free credit report before speaking with a real estate agent or a lender.

Experian, Equifax, and TransUnion are required by the Fair Credit Reporting Act (FCRA) to give you a free copy of your credit report every 12 months if you request it. Simply go to the FTC and get your free credit report from Equifax, Experian, and TransUnion.

"I pay my bills on time, so why should I bother?" you may think.

Any mortgage loan officer with years of experience will tell you that collection accounts and inaccurate information are often shown on a consumer's credit report. Incorrect information may lower your credit score, and a poor credit score might make it difficult to get a house loan. To say the least, dealing with an incorrect credit report after applying for a mortgage is a pain.

Negative information on your credit record is allowed to stay on your report for seven years, while bankruptcy information is allowed to stay on your report for ten years.

What should I do if I find incorrect information on my credit report?

If you see any incorrect information on your credit report, contact the creditor and try to work out an amicable solution.

If the creditor is uncooperative or refuses to update the credit record, contact the three credit agencies to file a dispute.

According to federal law, credit bureaus have 30 days to examine a dispute, and if they find that the credit entry is incorrect, the credit bureaus must delete the incorrect information. Directly contact each of the credit bureaus:

P.O. Box 740241
Atlanta, GA 30374-0241
(800) 685-1111
P.O. Box 2000
Chester, PA 19022
(800) 888-4213
P.O. Box 2002
Allen, TX 75013-0036
(888) 397-3742

Unless the loan officer says otherwise, don't cancel or pay off any credit cards, installment loans, or other credit obligations.

Available credit, the number of open accounts, the age of the accounts, and other variables are all taken into account when credit is scored.

When you cancel accounts, you risk lowering your credit score, which is something you don't want.

It's also a bad idea to open or apply for new credit.

2. Get your papers in order!

Vet holding a stack of paperwork.jpgYour pay stubs for the preceding 1-2 months will be requested by the loan officer during the mortgage application (or pre-approval).

Your bank, savings, and 401(k) account statements-all pages, including the final page for check reconciliation-will be required by the lender. There are additional requirements for child support, divorce judgments, and settlement agreements.

All of it is desired by underwriters.

All former employers' complete addresses, phone numbers, and employment dates will be required by the mortgage firm.

Do you have a compete copy of your income tax returns and W-2's for the previous two years?

Obtain copies of your W-2s from your employers if you've misplaced them. Expect the lender to request pay stubs and W-2s from your job. They are not going to do it.Your tax returns from the preceding two years may also be requested by the lender. If you don't have copies of your tax returns, contact the IRS at 1-800-829-1040 and ask for a transcript of your past two years' returns. You will most likely just need a transcript and not a complete copy.

Are you a member of a labor union?
If that's the case, make sure you have all of your pay stubs and paperwork from the previous two years, as well as your wages for the current year.

3. Get Pre Approved - Not Pre-Qualified

Loan approval stampAlthough the terms pre-qualification and pre-approval are often used interchangeably, they have two separate meanings.

Pre-qualification implies that a loan officer has looked through your finances (assets, debt, and monthly income) and determined that you are "likely" to be approved for a house loan in a certain price range.

Pre-qualification is just a "personal opinion" that you will be approved for a loan.

A pre-approval involves verification of your income, debt, income, and credit score, in addition to pre-qualification. Your pay stubs, W-2s, bank statements, and credit reports will be examined by the lender. The pre-approval is designed to seem like a real mortgage application. Preapproval requires a review of your credit record and score.

Lenders may occasionally improve your credit score by directing you to pay down or repay certain monthly payments, even if you have credit blemishes.

Once you've been accepted, the lender can figure out how much you may borrow and which loan program is "optimal" for you depending on your financial situation. A pre-approval letter from the lender stating your financial eligibility is typically provided.Typically, a pre-approval letter is good for 60 days.

The lender may require you to update your bank accounts and pay stubs after 60 days. When you make an offer, having a pre-approval gives you an advantage over the seller. Pre-approval indicates you have a good chance of getting a loan.

Pennsylvania Housing Finance Agency - PHFA

PHFA logoPHFA is a state-affiliated organization that offers low-interest home-purchase loans with minimal costs. Through the Keystone Advantage Assistance Loan or the HOMEstead Program, PHFA may help with a down payment and/or closing costs.

The PHFA does not provide loans directly to homebuyers; instead, it works with authorized lenders to help them get mortgage financing. Applicants for the FHA, USDA, and VA loan programs are not required to be first-time homebuyers.

The following are the mortgage programs offered by the PHFA:

FHA Loan Conventional USDA Loan VA Loan
FHA logo Fannie Mae aqnd Freddie Mac logo

USDA logo Veteran's Administration logo

The FHA mortgage only needs a 3.5 percent down payment, and the seller may cover a significant portion of the closing expenses.

For credit-challenged home buyers, the FHA program is a good choice.
Read more

A 3 percent down payment is required for conventional (PHFA) home loans.

The traditional home loan is an excellent option for home buyers who have a large down payment and want to spend as little as possible in loan costs.
Read more

You don't have to be a farmer to benefit from the USDA home loan program.

A down payment is not required with the USDA loan.

That's correct, "zero" down, 0% financing.

In addition, similar to the FHA loan, the home seller is allowed to pay a portion of the buyer's closing expenses.
Read more
Have you served in the military?

For qualified veterans, the VA home loan requires no down payment.

The home seller is allowed to cover the majority, if not all, of the closing expenses incurred by the veteran.
Read more

Keystone Advantage Assistance Loan

Emoticon with help wanted signThe greatest obstacles to homeownership, according to PHFA, are the down payment and closing fees. PHFA is delighted to provide a down payment and/or closing-cost assistance program due to financial limitations.

Qualified borrowers may receive up to 4% (4%) of the purchase price or market value, or $6,000 (whichever is less), in monthly downpayment and closing-cost assistance. The assistance loan will be paid back over a ten-year period at a rate of 0% interest. Read more

Free credit counseling and home-buying classes.

You may obtain credit counseling and learn about house purchasing from one of the PHFA-approved counseling firms... and it's all free!  See PHFA counseling companies

Rotating question mark Frequently asked questions about home buying

Q. Can I borrow for a down payment?
A. No. Borrowing money for a down payment is not a good idea.You may get a down payment gift from a family or a close friend, or you can apply for a grant.
If you want to utilize gift money for the down payment, let the lender know ahead of time. Gift money must be properly documented and transferred.

Q. Can low-income families buy a house?
A.Families with low incomes may buy a house. In Pennsylvania, the PHFA program, which includes an aid loan, may help buyers reduce their out-of-pocket expenses. Home buyers may also employ a co-borrower to improve their application and increase their purchase amount under the FHA program.

Q. How can I quickly raise my credit score?
A. The Rapid rescore service can raise credit scores quickly. Ask the lender if his or her company participates in the Rapid rescore program.

Q. How can I get approved for a home-loan?
A. The best place to get pre-approved is your bank and speak to a housing counselor.

Q. How do I get a mortgage with no credit?
A. The FHA loan program is quite lenient with no credit home-buyers. The lender will attempt to establish creditworthiness with rent receipts, insurance payments etc.

Q. Who is a first-time home-buyer?
A. First-time home-buyers are buyers who have not owned a home during the previous three years. There are a few exceptions.