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Buying your first home is an exciting milestone in life, but it can also feel overwhelming, especially in the current economic climate. However, with a history dating back to 1902, Citizens Savings Bank has helped first-time homebuyers navigate the mortgage application process to become new homeowners in good times and challenging ones, too. If you’re looking to buy a home in Northeast PA, we can help you, too! Keep reading for our comprehensive guide to the first-time home buying experience in Northeast PA. Have questions about your specific situation? Just reach out to one of our local mortgage experts. 

Assess Your Financial Situation

Buying a house is a big financial decision and commitment. You want to be in a strong financial position, with some margin for dealing with unexpected expenses, before starting the home buying process. Ask yourself these questions and write down the answers:

What is your monthly household income?

Use your net (take-home) pay to calculate this. A good rule of thumb is to stay within 28% of your monthly income for your mortgage payment amount.

How much can you put down?

While you don’t have to put a full 20% down to get approved for a mortgage, the more you can put down, the less you’ll need to borrow and the lower your monthly payment will be.

What are your other monthly expenses?

If you don’t already, you should have a monthly budget in place to plan for and track your spending. Budgeting is more important than ever once you become a homeowner. In addition to saving for repairs and maintenance, you may want to set aside money for “fun” improvements such as new paint, furniture, etc.

There are also certain expenses, in addition to the down payment, that you should budget for when buying a home:

• Inspection: It’s recommended that all buyers have a professional home inspection done after the offer is accepted. This will make you aware of any big issues with the house before you close on it. The average cost of a home inspection in Pennsylvania ranges from $300-$400 depending on square footage.
• Closing Costs: You can expect to pay about 2-5% of your total loan amount.
• Moving Costs: Depending on where you’re moving from, and how much stuff you need to move, you can expect to pay anywhere from several hundred dollars to a $1,000.

What is your debt-to-income (DTI) ratio?

Mortgage lenders use this number to determine how much you can afford to borrow. So, it’s worth understanding what DTI is and knowing your ratio before you start the home buying process.

To calculate your DTI, add your total monthly debt payments and divide that total by your gross monthly income. Your DTI should be no higher than 28%--if it’s more than that, consider taking the time to pay down some of your debt before you apply for a mortgage.

How much mortgage can I afford?

The estimated monthly payment you see on real estate websites doesn’t include insurance premiums and taxes. So, your actual mortgage payment (if you bundle those expenses with your mortgage payment) will be more. Use our loan calculator to establish your home buying budget.

Also, using the budget you created, consider your fixed monthly expenses (cell phone bill, cable/Internet, loans and credit cards, etc.). How will your mortgage payment, home insurance premium, taxes, HOA (if applicable), and utilities fit into your existing monthly expenses? Regardless of how much a lender or loan calculator tells you can afford to borrow, you should personally feel comfortable with your budget.

Getting pre-qualified or pre-approved for a mortgage will also help you figure out how much you can afford to borrow and spend on your first home. The pre-qualification process is quick and easy–you provide basic personal and financial information, and your lender writes a letter offering you a certain borrowing limit and interest rate, good for a certain period of time.

Check Your Credit Score

In addition to DTI, your credit score plays a large role in your ability to qualify for a mortgage. A good credit score generally ranges from 670-900. If your credit score is lower than this, you should work on raising it before you apply. Your score also impacts your mortgage interest rate–the better your score, the lower your rate will be.

Where can I find my credit score?

There are several credit score models, but the FICO® Score is the most commonly used. This three-digit number is based on certain factors in your credit history and report. It’s a good idea to review your credit report, as well, to check for any errors or signs of fraud. You can obtain a free credit report from each of the three major reporting bureaus here.

Many credit cards come with free access to your credit score as a benefit. If you don’t have this, you can purchase a credit score report from any of the credit bureaus.

How can I improve my credit score?

If you want to raise your score before applying for a mortgage, these are the primary considerations used to calculate credit scores. Look for the areas where you could make a change.

• On-Time Payment History: Do you have a habit of missing payment due dates? Set up automatic payments so you never miss a due date again. You can also pay bills through our online banking platform.
• Credit Utilization Ratio: Are you carrying a balance of more than 30% of your total credit limit on any of your credit card accounts? Paying off enough to get below 30% will help increase your score.
• Credit History: You can’t really control the length of your credit history, but one thing you can do is leave old credit card accounts open, even if you stop using them. This metric is measured by the length of your oldest account.
• Credit Mix: Variety counts when it comes to your credit mix. In addition to a credit card, do you have a personal or car loan? The point is to show you can handle different types of credit accounts.
• New Accounts: When you apply for and open a new credit account, your score may temporarily drop. So, space out new accounts and don’t apply for new credit while you’re getting ready to start the mortgage application process.

Free apps like Credit Karma and Credit Sesame can also help you track and improve your credit score.

Have questions about your credit score and chances of qualifying for a mortgage? Contact any of our mortgage experts and we’ll be happy to help!

Determine where you want to live

You may already know where you want to buy a home, down to the exact neighborhood. Or you may still be deciding. Sometimes you have to pivot during the home buying process and choose a different location to stay within your price range or get everything on your checklist. Consider the following:

• Neighborhoods
• Walkability
• Public transit
• Infrastructure (highways, proximity to an airport, etc.)
• Public schools
• Shopping, restaurants, entertainment, etc.
• Hospital and healthcare facilities

What’s on your home Wishlist?

• Number of bedrooms and bathrooms
• Spare bedroom, home office, or gym space
• Driveway and garage
• Basement
• Backyard
• Porch or deck
• Kitchen size and layout
• Mudroom
• Fireplace
• Condition (fully renovated or needs updating)

Understand the Housing Market

As you prepare to go house hunting, think about the area of Northeast PA you want to live in, as well as the type and size of house you’re looking for.

Since 2020, housing prices have risen nationwide and a lack of supply to meet the demand has made it challenging for buyers, especially first-time buyers, to find a home. However, real estate is also a very local business. Your real estate agent can help you get a feel for home prices. If you find that there aren’t many homes for sale in the area you prefer, consider a different type of home or expand the location you’re looking in. You may even decide you want to wait longer and save up more for your down payment. If you have free time and handyman skills, consider a fixer-upper.

Average home prices in Northeast PA

• Scranton: The median sale price is $125,550, up 24.4% year-over-year.
• Honesdale: The median home price is $364,450.
• Taylor: The median sale price is $185,000, down 7.2% year-over-year.
• Mt. Pocono: The median sale price is $230,000, flat year-over-year.
• Clarks Summit: The median sale price is $282,000, up 15.6% year-over-year.

Hire A Real Estate Agent

Take your time when choosing a buyer’s agent. This person will not only help you find the right home, but also negotiate to get you the best possible price. Ask for referrals from family and friends, but don’t feel like you have to choose the first person you meet. It’s best to talk to several real estate agents before making a decision. You want someone you personally “click” with, but who also has experience as a buyer’s agent in your real estate market.

Remember that reputable real estate agents will never ask you for money upfront to show you houses, etc. They earn a commission for each home sale and that commission, paid by the seller at closing, is split by the buyer’s and seller’s agents.

Choose The Right Mortgage

Of course, our mortgage lenders can discuss options with you and help you choose the right home loan. Here is an overview of the most popular types of mortgage loans for first-time buyers.

• Conventional Fixed-Rate: Historically, the most common type of mortgage. Usually requires 20% down, but there may be exceptions.
• Variable Rate: Comes with an introductory, fixed-rate period. After that, your rate will adjust up or down periodically depending on the benchmark rate it’s tied to.
• FHA Loan: Popular among first-time buyers because lower credit scores and down payments are permitted.
• VA Loan: If you are a veteran or servicemember, you could be eligible for up to 100% financing with no mortgage insurance requirement.
• USDA Loan: Can be used in qualified rural and suburban areas.

Additionally, we are a participating lender in a number of first-time homebuyer programs.

What Do You Need To Apply For A Mortgage?

Ready to start the mortgage application process? Here’s what you’ll need to apply:

Personal Information

• Drivers License
• Social Security Number
• Contact information
• Employer information,

Financial Information

• Paystubs
• Bank/Financial Statements
• Tax Returns (Last 2 years)
• Investment Information
• Debts
• Assets
• Rental History
• Source of down payment

Additional information may be required depending on your situation.

Understanding The Home Buying Process

Familiarize yourself with the steps in the home buying process so you know what to expect.

• Make an offer
•  Apply for a mortgage
• Schedule a home inspection
• Set a date for closing
• Title company conducts a title search
• Close on the loan–congrats on your new home!

Start Your Homebuying Journey Today!

Let Citizens Savings Bank help you get started with your homebuying journey in Northeast PA! Contact our mortgage experts with questions, get pre-qualified, or apply for a mortgage. You can also read more about the mortgage process in our FAQs! Keep in mind, all loans are subject to credit approval. For more tips about buying your first home, check out our First Time Home Buyer Do's and Don'ts.

Learn More

Citizens Savings Bank has multiple locations throughout Lackawanna, Wayne, and Monroe Counties. For branch locations and hours, visit our website. We also have a Customer Support Team ready to answer any questions you may have. Call us today at 1.800.692.6279 or email [email protected]. Member FDIC. Equal Housing Lender.