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Steps to Buying a Home in Philadelphia

Elfreths Alley is the Oldest Residential Street in the United States Philadelphia Pennsylvania
30
Sep

Philadelphia Real Estate Key Takeaways to Getting Your New Home in No Time!

You have made the decision to buy a home – congratulations! When buying a home in Philadelphia, the task of collecting and discriminating can be overwhelming and daunting. Rittenhouse square realtor Maxwell Realty Company, Inc. is delighted to share steps that will make your process reliable, to the point, and have your home’s keys in the palm of your hand!

Step 1: Observation Phase

Look, listen, decipher, and discriminate. Look for Philadelphia real estate listings in newspapers, websites, and magazines. Create a system to save your favorite listings (saving on a realtor’s site, taking detailed notes…) and watch for changes often. Consistency with this process will offer you information about market trends (prices decreasing and increasing).

Where to start? How? You can start by searching Philly neighborhoods by zip code to narrow down your areas of interest and help to organize your favorites. Here are a few of our favorite neighborhoods:

  • RITTENHOUSE SQUARE (19103): Market Street to South St (north to south) and 21st St to Broad Street (west to east).
  • FITLER SQUARE(19103 and 19146): Spruce St to Bainbridge St (north to south) and Schuylkill’s East Bank to 25th St (west to east).
  • GRAYS FERRY (19103): Grays Ferry Ave to Vare Ave (north to south) and the Schuylkill River and 25th St (west to east).
  • GRADUATE HOSPITAL, also known as SOUTHWEST CENTER CITY (19146): South St to Washington Ave (north to south) and the Schuylkill River and Broad St (west to east).
  • OLD CITY (19106 and 19107): Vine St to Walnut St (north to south) and 7th St to Christopher Columbus Blvd (west to east).
  • WASHINGTON SQUARE WEST (19107): Chestnut St to South St (north to south) and 7th St to Broad Street (west to east).
  • CENTER CITY EAST (19107): Arch Street to Chestnut St (north to south) and Juniper St to 6th St (north to south).
  • SOCIETY HILL (19106 and 19107): Walnut St to South St (north to south) and 7th St to Front St (west to east).
  • BELLA VISTA (19147): South St to Washington Ave (north to south) and 11th St to 6th St (west to east).
  • QUEEN VILLAGE (19147): Lombard Street to Washington Avenue (north to south) and 6th St to Christopher Columbus Blvd (west to east). It shares borders with Society Hill, Bella Vista and Pennsport neighborhoods.
  • PENNSPORT (19147 and 19148): Washington Ave to Snyder Ave (north to south) and 4th St to the Delaware River.
  • EAST PASSAYUNK CROSSING (19148): Tasker St to Snyder St (north to south) and Broad St to 6th St (west to east).
  • CALLOWHILL (19107 and 19123): Spring Garden St to Vine St (north to south) and Broad St to 8th St (west to east).
  • SPRING GARDEN (19130): Fairmount Avenue to Vine St (north to south) and from Pennsylvania Ave/Fairmount Park to Broad Street (west to east).
  • FAIRMOUNT, also known as THE ART MUSEUM AREA (19130): Combines the Spring Garden and Art Museum neighborhoods: Girard Ave to Spring Garden St (north to south) and the Schuylkill River’s east bank to Broad St (west to east).
  • FRANCISVILLE (19121 and 19130): Part of the Fairmount community at certain neighboring points.  Its boundaries are Girard Avenue to Fairmount Ave (north to south) and Corinthian Ave to Broad St (west to east).
  • BREWERYTOWN (19121): Is between Cecil B. Moore Avenue to Parrish Street (north to south) and the Schuylkill River’s east bank and 25th Street (west to east).
  • LOGAN SQUARE (19103): Is between the Schuylkill River and Broad St (west to east) and Spring Garden St and Market St (north to south).
  • NORTHERN LIBERTIES (19123): Girard Ave to Callowhill St (north to south) and 6th St to the Delaware River (west to east).
  • FISHTOWN (19122, 19123, and 19125): East York St to East Laurel Street (north to south) and Front St to Columbus Blvd.

Once you organize your findings, navigating and decision-making are going to be much more exciting and fun! Taking the time to show your own system lays the groundwork for finding your true match.

Step 2: Be Honest About What You Can and Cannot Afford

Buying a home is a humbling process: Reviewing your equity, profitability, debits, future expenses, goals…be specific.

This is the time to start writing down hard facts, to decide if your “honest” situation includes buying a home now, or in the foreseeable future. Here are some tools that will help to create a solid baseline to work from:

Analyze your income and debt

  • Define your monthly income. If you have a commission-based job, estimate your yearly income and divide it by 12, to have a monthly value.
  • Calculate your accumulated debt. Include credit card debts, medical debts, loans, and liens.
  • Estimate your mortgage breakdown. Principal, interest, property taxes, and homeowners’ insurance. Investopedia cites the 28/36 rule.
  • Access an online mortgage calculator

Understand Your “Footprint” On Your Credit Score

Your credit score reflects the timeliness of your payments for past debts.  This generates a score that reflects your creditworthiness to lenders; the better your score, the better your rate.  Scores range from 300-850.

An annual free report is available that reflects all three credit reporting agencies (Equifax, Transunion, and Experian). High credit card balances, late payments, medical balances, and excessive applications for new credit cards can lower your score.  Errors may be present and can be reversed.

“Financial Samurai” Sam Dogen’s rule is a valuable tool to ensure you have enough equity, known as the 30/30/3 Rule:

  • Spend no more than 30% of your total income on monthly mortgage payments
  • Save 30% of your desired home’s value in liquid savings (for down payment, closing costs, and origination costs)
  • Buy a home no more than 3x your total house income.

The “5-Year Rule”

Purchase a home only if you do not intend to sell for 5-plus years. To offset the high start-up fees, any gains will not be realized until approximately the 5-year marker; seeking prematurely can result in monetary losses.

Buy for the long-term; alternatively, renting an apartment or condo may be more appealing if you do not think you can purchase a home in Philadelphia at this time.

Consider the size of the space and amenities that you can afford.  Less may be more for you; being “house poor” can keep you from living a life with simple joys (dining out, traveling, entertainment).  Choose within a budget that affords flexibility!

Step 3: Pre-Qualification and Pre-Approval for Mortgage

Pre-qualification is the first step used to help assess and decide the mortgage range that will be needed. This is informal and an estimate; information is supplied, but formal credits are not made.

Pre-approval is the second step: a formal credit inquiry is made by the designated lender. This is a formal process; credit and debit ratios are reviewed, and employer/work information is supplied. Having a pre-approval shows the seller that you are serious about your offer, makes you stand out against the competition, can hasten a sale, and can be the deal-breaker!  Once received, it is good for 60-90 days (about 3 months).

Step 4: Seek out a Real Estate Agent You Can Trust

Finding a competent Philadelphia real estate agent can be a task, but once you have secured one, it can make all the difference.  Inside knowledge about neighborhoods, local building plans, and businesses can be invaluable. A realtor and lender you can trust make your mortgage securing process a no-brainer.

How do realtors get paid? They receive a commission upon the sale of the home. Remember, they are working to help you up until the victory of a home purchase.

Step 5: Shop for Your Home and Make an Offer!

You have revisited your earlier research and have considered what may be some key deciding factors:

  • What neighborhood do you want to live in?
  • Is transportation important? Commute to work or school?
  • Is local shopping and are nearby restaurants desirable?
  • Local schools nearby?
  • Parking for vehicles?
  • The number of bedrooms and bathrooms needed?
  • Is there room for an office or gym?
  • Cost to debt ratio – the affordability of home?
  • Recreational parks or running trails nearby? Dog parks?

Step 6: Home Inspection

You are almost ready to seal the deal but first, your offer may be adjusted because of pre-existing wear and tear of what may need to be tended to, should you complete the deal. A home inspection is typically arranged in the immediacy of your offer to ensure that necessary negotiations can take place. When negotiating, repairs can be requested to be made by the seller, or price adjustments can be negotiated.  Some of the typical areas of question are:

  • Chimney lining and crowns
  • Roof leakages and age
  • Water heater age and condition
  • Air conditioning unit age and condition
  • Brick/exterior walls condition
  • Plumbing and piping condition

Step 7: Time to Apply for Your Mortgage!

There are four different types of lenders that can help ease your mortgage: banks, credit unions, mortgage brokers, and non-bank lending entities. According to home financial expert Elena Loutskina (Investopedia), the most important factors to consider are the size of the loan compared to the property value, the interest rate, and the points that the loan origination costs.

If you pay the points up front, a lower interest rate can typically be achieved; alternatively, if you cannot afford to pay the points upfront, the interest rate will be higher throughout the course of the loan.

Compare at least six personalized mortgage rates from different lenders to ensure you are aware of what is available to you, and to get the best deal. Often, a seasoned realtor can offer suggestions and has contacts to offer.

Contact a professional mortgage advisor to determine what type of loan suits your needs, and what works best with your financial profile. For more information about the mortgage process, the PA Housing Financial Agency offers homebuyer counseling and education to help you with the process.

Step 8 – Appraisal of Your Potential Home

This appraisal ensures the mortgage lender that the financed monies are being put against a property worth equal value.  Additionally, you get to make sure you are getting what you are paying for!

Square footage is accounted for, structural integrity, kitchen and bathroom fixtures, cabinets, electrical and plumbing, windows, chimney lining, and exterior conditions. If there are sub-standard conditions, the seller may have to decrease their asking price to account for the discrepancies. Alternatively, some lenders require repairs to be made before granting the mortgage.

Step 9: Title Company Verification

You want to be sure that there are no claims or liens against the current owners’ title on the property that you wish to purchase/title that you are going to assume. Title verification typically takes 24 to 72 hours in Pennsylvania.

Step 10: Homeowner’s Insurance

Acquire to ensure that you protect your new home in the event of a fire or unforeseen damage.  It is important to examine the insurance carefully and thoroughly, to see what is and is not included. This is typically required by the mortgage lender and is often tied into the mortgage payments.<

Step 11: Finalizing Your Purchase

The purchase agreement is accepted! Your realtor has received the seller’s signature on the purchase agreement, with possible modifications/contingencies requested. A closing date that has mutually been agreed upon is indicated.

Once all signatures are obtained, the buyers’ escrowed monies are released, with an option to put towards a down payment.

A home inspection may be made before the closing. This is optional at times but often required by the lender. You or someone you trust should be present to make certain there is nothing left under the radar.

Loan origination is when your mortgage is initiated.  The lender will collect your proof of income and equity; your loan estimate is produced. If agreeable, all is approved and this is a time you may lock in a mortgage rate if you chose to do so (good at volatile times, like these!).

Home appraisal and underwriting are initiated. The lender requires the appraisal to ensure that the loan is properly secured by a property of equal value. The assigned underwriter reviews the loan to be approved.  Finally, the lender reviews to make sure the integrity of paperwork and all agreed upon is aligned.

Homeowners’ and title insurances are required to be filed. Exception: Title insurance is not needed for cash payments.

The closing date and meeting are communicated, along with closing costs and final loan agreement, and/or may be brought with you; this includes closing costs.

Once all is signed, the keys are yours! Congratulations!!!

Our Philadelphia Realtor Can Help You Achieve Your Real Estate Goals

Rittenhouse Square Realtor Maxwell Realty, Inc. Is thrilled that you are contemplating this exciting journey! Please do not hesitate to contact us with any questions, should you need steering and some suggestions. The Federal Reserve’s 2020 Survey of Consumer Finances revealed that “buyers’ net worth is 40x greater than their Rental counterparts” — when it is your time to buy, we are here for you – and what an amazing and exciting achievement it will be!  Here’s to your keys being in your hand sooner than later!  Philadelphia Realtor Maxwell Realty wishes you and yours health, fortune, and happiness!