Pennsylvania Mortgage Rates

Living in Pennsylvania

Pennsylvania is a commonwealth with big cities and small towns, farmland and state parks like those in the Alleghenies and Pocono Mountains. As one of the original thirteen colonies, the Keystone State is also rich in history. Philadelphia is where both the Declaration of Independence and the U.S. Constitution were signed, and Gettysburg was where Abrahama Lincoln delivered an iconic speech to a nation at war.

Pennsylvania can also be an affordable place to buy a home. For example, in 2018, the median sales price for an existing single family home was $173,700 in the Harrisburg-Carlisle metro area, and $163,600 in the Reading area, versus $261,600 for all metro areas nationwide, according to the National Association of Realtors.

Even Philadelphia County — home to Pennsylvania’s largest city — remains affordable relative to the rest of the U.S. Last October, the median price for a home in the county was $190,000, according to TREND, a multiple listing service based in King of Prussia, Pa.

Lately, home sales nationwide have cooled, but the market in the city of Philadelphia remains strong. According to a recent report from the Pew Charitable Trusts, in 2018 more homes were sold in Philadelphia than in any other year since 2006, due to a low level of homes on the market.

The rules and costs of buying a home in Pennsylvania

If you’re looking to buy in Pennsylvania, read on to learn about the regulations and tax laws specific to the state. We’ve summed up what you need to know below:

Home seller and buyer laws

In Pennsylvania, sellers are to disclose, in a seller’s property disclosure form, any known defects that might have a significant effect on the value of the home or the safety of inhabitants. This includes informing buyers about roof issues, structural problems, pest problems, and problems with the home’s plumbing, electrical, sewage and water systems. It also includes disclosing the presence of hazardous materials, as well as any outstanding legal issues. To see a copy of the form issued by the Pennsylvania Real Estate Commission, go here.

As a borrower, you should know that Pennsylvania is a judicial foreclosure state. This means that if you were to default on your mortgage, a lender would be required to go to court rather than working without court oversight. Under Pennsylvania law, a lender also has the right to a deficiency judgment, or the right to take you to court to collect any balance due if your foreclosed home sells for less than your mortgage.

Pennsylvania homeowners in danger of foreclosure may be able to receive a loan to pay their mortgages through the Homeowner’s Emergency Mortgage Assistance Program (HEMAP), which is administered by the Pennsylvania Housing Finance Agency (PHFA). According to state law, lenders are required to send a notice about HEMAP to homeowners facing foreclosure. To learn more about the program, see this fact sheet.

Divorce is never easy, and it can be challenging dividing assets jointly owned. For that reason, it’s important to know that Pennsylvania is also an equitable distribution, rather than a community property state. This means a court will attempt to divide a divorcing couple’s assets and debts as fairly as possible (rather than with a 50/50 split), considering factors like the length of the marriage, and individual differences in income and assets.

Closings in Pennsylvania are typically handled by either a licensed attorney or a title company.

Taxes

If you are transferring ownership of property of any kind, most likely you’ll need to pay transfer tax. Once you’ve honed in a home you’d like to buy, your lender is responsible for disclosing exactly how much tax you’ll owe.

In Pennsylvania, the transfer tax is based on 1% on the value of the real estate, and both the seller and buyer are responsible for seeing that it gets paid. In addition to paying a state transfer tax, you may also have to pay a local transfer tax. Philadelphia, for example, currently has a 3.278% transfer tax.

According to tax.rates.org, the median annual property tax bill for Pennsylvania homeowners is now $2,223 per year, based on a tax rate of 1.35%. Still, some counties charge considerably more — or less. Chester County, for example, now collects the highest property taxes in the state, an average of $4,192 annually. By contrast, Forest County charges just $860 per year.

In Pennsylvania, certain homeowners may qualify for a reduction in the amount of property tax they pay. For example, disabled veterans may qualify for a property tax exemption that reduces the taxable value of their homes and lets them pay less taxes in the end. The state also offers a property tax rebate (up to $650) for low income seniors, widows and widowers, and people with disabilities.

Conforming loan limits

Most counties in Pennsylvania have a maximum conforming loan limit of $484,350 for single-family homes, and only Pike County now has a higher limit, $726,525.

Conforming loan limits are the maximum loan amounts borrows can take on for the conforming loans backed and ensured by two government-sponsored entities, Fannie Mae and Freddie Mac. If your mortgage qualifies as a conforming loan, you are more likely to receive a better interest rate and more flexible loan terms that you would with a jumbo loan that exceeds the conforming loan limit in your area.

Programs for homebuyers in Pennsylvania

If you could use help buying a home in Pennsylvania, consider looking into the mortgage loans and purchase assistance offered through the Pennsylvania Housing Finance Agency (PHFA). The mortgage loans come with lower fees and more competitive rates than what you might find on your own. If you qualify for a primary mortgage through PHFA, you may also be able to receive help paying down payment and closing costs.

Here are details on some of the homebuyer help the agency offers:

Keystone Advantage Assistance Loan

This loan program provides down payment and closing cost help in the form of a second loan that comes with 0% interest and is repaid over 10 years. Eligible borrowers can receive up to 4% of the purchase price of their home, or $6,000, whichever is less.

Who qualifies:

  • Borrower must already be eligible for a PHFA primary mortgage
  • Requires a minimum credit score of 660
  • Borrowers can have no more than $50,000 in liquid assets (e.g. cash in checking and savings accounts, stocks, bonds, and CDs) after deducting funds needed to close the loan
  • May be used with conventional, FHA, VA or USDA loans.

HFA Preferred (Lo MI)

PHFA offers these 30-year, fixed-rate conventional home loans through a network of participating lenders; they allow you put down less than 20% of the purchase price of your home and pay less mortgage insurance than you would with an FHA loan or similar low-down-payment loan. Your lender can help determine exactly what your mortgage insurance premiums might be.

Who qualifies:

  • Household income cannot exceed income limits, established by county.
  • Borrowers must use personal funds to put down at least $1,000
  • Acceptable credit history and the ability to make monthly payments are required
  • At least one buyer must complete a homebuyer education course. For borrowers with credit scores above 680, this can be done online
  • Buyers with FICO scores below 680 must complete an in-person homebuyer education course

Keystone Home Loan

This home loan program may be able to provide you with a more affordable mortgage requiring no more than 0% to 5% down.

Who qualifies:

  • First-time homebuyers, previous buyers who are purchasing in a federally-designated targeted area, and discharged veterans of the U.S. Armed Forces
  • Both income and purchase price limits apply, established by county
  • Borrower must have acceptable credit history and be able to make monthly payments
  • Borrower must also have enough funds for a down payment, and to pay application fees and closing costs
  • If you plan to put down less than 20%, you’ll need to buy mortgage insurance

Mortgage Credit Certificate

For borrowers already been approved for a PHFA home loan, the agency also offers a mortgage credit certificate (MCC). If you qualify, you may be able to receive a federal tax credit for 20% to 50% of the mortgage interest paid in any given year. The tax credit is capped at $2,000 a year.

Who qualifies:

  • First-time homebuyers, veterans, and non-first-time homebuyers purchasing a home in a targeted area
  • Both income and purchase price limits apply, and are the same as for a Keystone Home Loan

Rate shopping tips

To get the best rate on your mortgage, follow these tips:

Contact at least three lenders on the same day

Mortgage rates change constantly and also vary depending on the type of lender. If you’re shopping for a mortgage, get quotes from lenders on the same day to make the best possible comparison.

Give each lender the same information

Make sure you provide the same information to each lender. This includes information about your income, assets and debts. Also, let your lender know what type of loan you are interested in. You’ll have a hard time comparing a quote for say, a 30-year, fixed-rate loan to a 7/1 ARM, a type of adjustable-rate mortgage where the interest rate is fixed for the first seven years.

Add up all the lender fees to confirm the costs

Getting a mortgage involves many fees, including loan origination and underwriting fees, broker fees, and other closing costs. Potential lenders should provide you with an estimate of the fees you’ll pay with your loan. Some of these are negotiable, while others are set by state or local statute. Add up the fees to compare costs for each lender. If you don’t understand some of the fees on the estimate, ask your lender to explain.

Know when to lock in the rate

Once you have loan terms that work for you, you may want to lock the interest rate with your lender. Locking a rate holds the interest rate for a set period, usually 30 to 60 days, and also prevents your loan from being affected by rising interest rates while it is being processed. If your closing extends beyond that date, your lender may charge a fee to extend your rate. Check to see whether your lender also offers a “float-down” option so you might benefit if mortgage rates drop instead.

The information in this article is accurate as of the date of publishing.