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First Time Home Buyer Programs in PA

First time home buyersBuying a home is exciting, overwhelming, and possibly frightening, because a home is more than just a house or condominium that you live in. It's one more step in life's journey. Homes are special places where children are born and babies take their first steps across the living room floor. Homes are where brides are carried across the threshold, and holidays are celebrated. Home is where the heart is".

Buying a home is called the American dream, and rightfully so. There are other benefits of homeownership.

According to Robert D. Dietz, author of The Social Consequences of Homeownership

1. Children of homeowners are likely to perform higher on academic achievement test and are more likely to finish high school. They also have fewer behavioral problems in school and are less likely to become pregnant as teenagers.

2. Homeowners are more satisfied with their lives and are happier. Homeownership is positively associated with physical, mental, and emotional health.

3. Political activity (voting, civic participation) is higher among homeowners than renters are. High level of neighborhood homeownership enhances property values. Source- NeighborWorks

The home buying process can be confusing. You hear words like, escrow, tax prorations, deed transfer tax, and title insurance to name a few. Here are a few tips to make your home purchase uneventful.

1. Get your free credit report!

Before you speak to a real estate agent or a lender, get your free credit report. The Fair Credit Reporting Act (FCRA) requires the three largest credit agencies, Experian, Equifax, and TransUnion to provide you with a free copy of your credit report every 12 months at your request. Simply go to the Federal Trade Commission and obtain your free credit report from Equifax, Experian and TransUnion.

You might be thinking, "I pay my bills on time, why should I bother". Talk to any mortgage loan officer with years of experience and he or she will tell you that it's common for collection accounts and erroneous information to appear on a consumer's credit report. Inaccurate information can devalue your credit score; and a low credit score can jeopardize your ability to obtain a home loan. Working through an inaccurate credit report. . after you applied for a mortgage is to say the least - is aggravating. Credit agencies are permitted to include negative information on your credit report for seven years and bankruptcy information for 10 years.

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

If you discover any inaccurate information on your credit report, contact the creditor and attempt to resolve the error amicably. If the creditor is unresponsive or refuses to correct the credit report, dispute it immediately with the three credit bureaus. By federal law, the credit agencies have 30 days to investigate a dispute and if they determine that the credit entry is in error, the credit bureaus are required by the Federal government to remove the erroneous information. Contact each of the credit bureaus directly:

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

Don't close or payoff any credit cards, installment loans or any other credit obligation unless advised by the loan officer. Credit scoring take into consideration available credit, the number of open accounts, the age of the accounts and other factors. When you close out accounts, you may actually lower your credit score, and you don't want that. Don't open or apply for new credit, that can hurt too.

2. Get your papers in order!

Vet holding a stack of paperwork.jpgAt mortgage application (or pre-approval) the loan officer will request your pay stubs for the previous 1 - 2 months. The lender will want copies of your checking, savings, and 401K account(s) statements - all pages, even the last page for check reconciliation. Child support, divorce decrees, and settlement agreements are also required. Underwriters want it all.

The mortgage company will need the full address, phone numbers and employment dates for all employers for the previous 2 years.

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

If you lost your W-2's, obtain copies from your employers. Don't expect the lender to call your employer for paystubs and W-2's. They won't. The lender may also want your tax return for the previous two years. If you do not have copies of your income tax returns, call the IRS at 1-800-829-1040 and request a transcript of your income tax return for the previous 2 years. Most likely, you will only need a transcript, not a full copy. Are you a union tradesman? If so, make sure you have ALL of your pay stubs and documentation for the previous two years and year to date earnings. Loan Application.pdf

3. Get Pre Approved - Not Pre-Qualified

Loan approval stampThe words pre-qualification and pre-approval are often used interchangeably, but have two distinctively different meanings. Pre-qualification means that the loan officer has reviewed your finances (i.e. assets, debt, and monthly income); and based upon his or her opinion, you are "likely" to obtain a home loan in a specific price range. Pre-qualification is nothing more than a "personal opinion" that you will receive a mortgage.

A pre-approval goes beyond pre-qualification and includes a verification of your income, debt, income and credit score. The lender will review your pay stubs, W-2s, bank statements, and credit report. The pre-approval imitates an actual mortgage application.

Preapproval requires an examination of your credit report and credit score. Even if you have credit blemishes, lenders can sometimes boost a credit score by instructing you to pay down or payoff some monthly bills.

Once approved, the lender can accurately determine the amount you will be able to borrow and determine the "best" loan program based on your finances. The lender will usually provide you with a pre-approval letter that states your financial qualifications. The pre-approval letter is usually valid for 60 days. After 60 days, the lender may want you to update the bank statements and paystubs. A pre-approval puts you in a strong position with the seller when you make an offer. Pre-approval means you are practically guaranteed for a mortgage.

Pennsylvania Housing Finance Agency - PHFA

PHFA logoPHFA is a state-affiliated agency that provides home purchase loans with competitive interest rates and lower fees. PHFA also offers a down payment and/or closing cost assistance through the Keystone Advantage Assistance Loan or the HOMEstead Program. PHFA does not provide loans directly to prospective home buyers, but works through approved lenders to provide mortgage financing. The FHA, USDA and VA loan programs do not require applicants to be first time home buyers. Read more

Here are the mortgage programs available through PHFA:

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

USDA logo Veteran's Administration logo

The FHA home loan only requires a 3.5% down payment and the seller is permitted to pay a large percentage of the closing costs. The FHA program is also a good choice for credit challenged home buyers.
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The conventional (PHFA) home loans require a 3% minimum down payment. The conventional home loan is an ideal choice for home buyers with a good down payment and desire fewer loan fees.
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You don't need to be a farmer to take advantage of the USDA home loan. The USDA loan does not require a down payment. That's right "0" down. !00% financing. And like the FHA loan, the home seller is permitted to pay some of the buyer's closing costs.
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Are you a veteran? The VA home loan is a zero down payment mortgage for eligible veterans. The home seller is permitted to pay most, and in some cases all of the home buyer's closing costs!
Read more

Keystone Advantage Assistance Loan

Emoticon with help wanted signPHFA understands that the down payment and closing costs are the biggest barriers to homeownership. Because of the financial constraints, PHFA is pleased to offer a down payment and/or closing cost assistance program. Qualified borrowers can receive up to four percent (4%) of the purchase price or market value or $6,000 (whichever is less) in downpayment and closing cost assistance to be repaid monthly. The assistance loan will be amortized over a ten year term at zero percent (0%) interest. Read more

Free credit counseling and home buying classes.

You can learn about home buying and obtain credit counseling through one of the PHFA approved counseling companies . . . and it's 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 for a down payment is a big no, no. You can obtain a down payment gift from a relative or closely defined friend or use an assistance grant. If you intend to use gift money for the down payment, inform the lender that gift money will be used for the down payment. Gift money must be documented and transfered properly.

Q. Can low income families buy a house?
A. Low income families can purchase a home. In PA, the PHFA program with the assistance loan can reduce the buyer's out of pocket cash. The FHA program also allows home buyers to use a co-borrower to strengthen the application and boost the purchase amount.

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.