Buying a home is one of the most exciting milestones of your life. To prepare yourself for this moment, you need to know what to expect during the process. This step-by-step first time buyer’s guide created by our team will help reduce the stress of buying a home and help you enjoy the journey as much as possible.
Develop understanding of: the type of desired home, wants vs needs, time frames, affordability and expected financial commitment.
Now that you've found your desired home, its time to make an offer! The process is very strategic.
Congratulations! Settlement is quickly approaching. This is the prime time to touch up on a few things.
You are almost at the finish line! To make your home officially yours, you will complete minor steps throughout the post-settlement stage that will make your dream home a reality.
After signing the final paperwork to complete the purchase, you are now the owner of a new house. It may take a few days for your loan to be funded once the paperwork has been returned to the lender, but once that check is delivered to the seller, you’ll be all set to move into the home of your dreams.
As the buyer, you will have the opportunity to choose which loan best fits your situation. Some buyers may qualify for all types of loans, while others won't. Be mindful that not all loans can be used for all types of properties. Provided below is a list of common loans you can choose from. ​
Government Loans
Federal Housing Administration (FHA 203b) Loan
This type of loan requires 3.5% down. A buyer can qualify with at least a 580 FICO score. FHA Loans are insured by the Federal Housing Administration. Applicants are required to pay mortgage insurance for the life of the loan (unless refinanced) which only protects the lender should the buyer default on their loan. Buyers are eligible to purchase single family homes and/or up to a multi-unit home (up to 4 units/apartments).
Federal Housing Administration (FHA 203k) Loan
Very similar to the FHA 203b loan, the FHA 203k loan permits buyers the opportunity to renovate their newly purchased home. The loan includes the purchase price of the property plus the cost of renovations. Renovations must amount to at least $5000. Buyers must use a Licensed Contractor for all renovations.
Veteran's Affairs (VA) Loan
Active members of the military should be eligible after 6 months of service. Past members of the Military, National Guard, Veterans, or reservists are eligible to apply for this loan. In addition, spouses of military members who passed while on active duty, as a result of a service related death, or disability may also be eligible. VA Loans require 0% down, however, buyers are able to put additional money down if they choose to.
Fixed Rate Mortgages
In today's market, it is best for buyers to apply for a Fixed Rate Mortgage if the goal is to reside at the property long-term. Fixed Rate Mortgage promise the buyer a steady and consistent interest rate for the life of the loan. Below you will find a breakdown of the various Fixed Rate Mortgages.
15 Year Fixed Rate - Provide lower interest rates. Increased monthly payments compared to a 30 year Fixed Rate Mortgage. Potential to pay the loan off quicker.
20 Year Fixed Rate - Lower monthly payments when compared to a 15 year Fixed Rate Mortgage.
30 Year Fixed Rate - Lowest monthly payments when compared to a 15 to 20 year fixed rate mortgage. Most popular among buyers today. Provides flexibility in a buyer's finances. Typically provides the buyer with the advantage of purchasing a larger home (financially) when compared to a 15 year Fixed Rate Mortgage.
Conventional Loans
Conventional mortgages aren't typically insured by the Federal Government, but are regulated by either Fannie Mae or Freddie Mac. Eligibility for conventional loans varies per lender. However, the majority require a 620 FICO score. Most lenders will require either a 3% or 5% down payment. Mortgage insurance is still required for loans with a 80% LTV (loan to value). Conventional loans are typically used for buyers purchasing their second home, vacation home, or an investment property at 10% or 20% down.
In addition to closing costs, there are additional costs associated with purchasing a home. Buyers purchasing with a loan tend to pay for the following prior to closing:
Earnest Deposit - at least 1% of the sale price (no less than $500)
Home Inspection - ranges from $300-$600
Termite Inspection - ranges from $65-$100
Radon Inspection - ranges from $200-$315
Use of Occupancy Cert (typically paid for by the buyer if the property is being sold by a bank) $75-$100
Appraisal (depending upon the lender this may be added into closing costs) - ranges from $300-$400
Buyers purchasing with cash/hard money lender tend to pay for the following prior to closing:
Earnest Deposit - at least 1% of the sale price (no less than $500)
Use of Occupancy Cert (typically paid for by the buyer if the property is being sold by a bank) $75-$100
Philadelphia County:
Purchase Price Limits - $424,100
Income Limits for 1-2 Member Households - $99,800
Income Limits for 3 or More Member Households - $116,400
Delaware, Chester, Montgomery Counties:
Purchase Price Limits: $349,400
Income Limits for 1-2 Member Households - $83,200
Income Limits for 3 or More Member Households - $95,600
FIRST FRONT DOOR
Through First Front Door (FFD), FHLBank Pittsburgh (Bank) will work with one of our member financial institutions to assist with your closing costs and down payment. For every $1 of contribution you make, the Bank will provide $3 in grant assistance, up to a maximum of $5,000. Money is dispersed on a first come, first serve basis. Grant money is typically dispersed in March 2018 for PA residents.
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M&T BANK
For a limited time, M&T Bank is offering loan subsidies to home-buyers that can provide thousands of dollars in down payment, closing cost or interest rate assistance in certain areas. M&T has set aside $25 million in loan subsidy funding to assist home-buyers in eligible areas. Buyers can receive up to $5000 in closing cost. There's no income limit, however the suggested property must be located in a community that's populated with at least 50% minorities. Buyers interested in this program must also utilize M&T Bank as their lender.
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FULTON BANK
When purchasing a new home, eligible customers can receive up to $2,500 toward their closing costs through our Closing Cost Assistance Program. (CCAP). the CCAP program can be used in conjunction with First Front Door Grant Money. Learn more about eligibility and how to qualify for this valuable program by talking to your local loan officer.
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PHFA
PHFA’s Low Rate First Time Home-buyer Program: The Keystone Home Loan Program With or without the Advantage Closing Cost Assistance Second Loan Eligible as FHA 3½ % down, VA and USDA 100% Financing, or Conventional 20% down. The Keystone Advantage Assistance Loan is a second mortgage that can be used towards down payment and closing costs. It’s a 0% interest rate loan for 10 years. The Advantage loan amount is calculated at the lesser of 4% of the purchase price or $6,000. The first time home buyer requirement is waived if purchasing in Philadelphia. Home buyer counseling may be required depending on program and credit score.
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Choose Fowler & Co. Realty for a seamless and successful real estate experience. Our dedicated team prioritizes your needs, offering expert guidance and a client-first approach for buying, selling, or investing. Experience trusted service, transparency, and results that go beyond transactions. Let Fowler & Co. Realty help you achieve your real estate goals with confidence.
