Home Buying Basics from PNC

 

For most of us, buying a first home is a dream come true. However, it can also be a lengthy process where potential — and sometimes very costly — pitfalls trap the unprepared buyer. This guide will help prepare you as you begin the home buying process.

First Time
Home Buyer's Guide

Buying your first home can seem complicated. That’s why our guide helps you understand every step of the process, from budgeting to closing on your first mortgage.

Owning a Home

Homeownership means more responsibilities, but also
potential benefits for your family and your finances. 


Your home may appreciate in value.
 



You can build equity to use for home improvement loans, education and other expenses

 

Your home is your own – you can do what you like with it to reflect your lifestyle.

 

You may save money at tax time by deducting mortgage interest and property taxes.* 

Benefits & Costs of Home Ownership

Let's break down the costs and benefits of owning a home.

Costs of Home Ownership

  • Monthly mortgage payment
  • Your down payment – as low as 3% of the sale price
  • Closing costs – typically 3% to 5% of the loan
  • Taxes & insurance
  • Utilities
  • Repairs & maintenance
  • Homeowner association dues or assessments

While these costs will vary from home to home, you’ll want to know what they are before making a final purchase offer.

Benefits of Home Ownership

  •  A home offers a stable place to start or grow a family, stronger ties to a community, along with greater privacy
  • Your home is your own, and with that comes the ability to make changes as desired to reflect your personal lifestyle 
  • You can increase your net worth by building equity through:

        1) monthly principal reduction payments

        2) your home potentially increasing in value over time

You may be able to deduct your interest and property tax (consult a tax advisor to further discuss)

How much home can you afford?

Before you purchase your first home, there are important things to do and know.

Know how much you can afford

Depending on the amount you have saved for a down payment, your mortgage payment should typically be no more than 28% of your monthly income, and your total debt should be no more than 36%, although debt ratios have some flexibility, depending on the mortgage type you choose. 

You can calculate your monthly housing budget by taking your total income, then subtracting:

  • Fixed expenses (car payment)
  •  Variable expenses (credit cards or utilities)
  • Monthly savings

The result is the money you could have available to budget for housing.

Try out Home Insight Planner to find an affordable home»

Maximize Your Credit Score

Generally, a better credit score will help you get a better interest rate on your mortgage. And even a small improvement in your score can have an impact on your monthly payment and potentially save you thousands of dollars over the course of your loan.

Save for Extra Costs

Lastly, you’ll need to have some money tucked away for extra costs beyond your monthly mortgage payment. These costs include your down payment and closing costs.

PMI is a special insurance policy that allows borrowers the flexibility to make down payments smaller than 20%. It protects your lender in case of default on the payments. If your mortgage requires PMI, PNC gives you the option to pay the PMI premium in a single lump sum at closing or as part of your monthly mortgage payment.

  • A down payment of 20% or more helps you avoid PMI (Private Mortgage Insurance) and lowers your monthly payment.
  • Closing costs are typically 3% - 5% of the total home cost.

Calculate Your Mortgage Payments

Get an estimate on monthly mortgage payments.

Calculator: Calculate Your Mortgage Payments

Consider Mortgage Options

PNC provides a variety of mortgage options to fit your unique situation.

  • Fixed-Rate Mortgage: interest rate never changes 
  • Adjustable-Rate Mortgage (ARM)[1] : lower starting rate that may increase or decrease over time » PNC ARMs have rate adjustment caps 
  • FHA Loans for expanded eligibility and low down payments 
  • Veterans Affairs Mortgages for U.S. military service members 
  • Affordable lending products that offer low down payment options
  • PNC Community Mortgage
  • Government Loan Options (FHA and VA)
  • PNC Homeownership Grant

See the differences between a fixed-rate mortgage and an adjustable rate mortgage

Calculator: Fixed Rate vs. Adjustable Rate

Finding the Right Home

House hunting is a huge commitment. Here are some tips to help you out.

Finding the Right Home

Making a House Your Home

Use our House Hunters Checklist to help with your home search.

It’s important to find a real estate agent who will:

  • Help provide background information on properties of interest to you
  • Guide you through the buying process
  • Make it easier to work with the seller

You might also consider hiring a real estate attorney to:

  • Be your advocate during negotiations with the seller
  • Review contracts and research liens and encumbrances
  • Make sure there are no legal surprises ahead

Ready to Get Started?

Use Home Insight Planner to Find the Perfect Home

Home Insight Planner

Appraisals & Title Search

Found a Home You Like?

Get a Home Appraisal & Title Search

Once the seller accepts your offer, you may strongly consider hiring a certified home inspector who can verify there are no structural problems, code violations or other undisclosed concerns.   When your contract is final, your lender will have the property appraised by an independent, third-party appraiser who will confirm the fair market value of the home.

In addition, a title search will typically be conducted to:

  • Discover any record claims on the property
  • Make sure you can get a clear title to your new home

Home Affordability

Buying your first home is a big financial step. You’ll want to consider the added financial responsibilities, including things like moving costs, home repairs, landscaping, property taxes and insurance. You should have a steady income, manageable debt and feel confident you will stay in one place for awhile.

Start by assessing your income. Then consider liabilities like student loans, credit card balances and auto loans. Ideally, the amount of your monthly debt payments, including your proposed mortgage payment, should be equal to or less than 36% of your gross monthly income. And remember to budget for a down payment (typically 5% to 20% of the purchase price) and closing costs (usually estimated at 2% to 3% of the purchase price).

Closing the Sale

Closing the Sale

Closing the Sale

At last – you’re ready to finalize the sale.

During the closing, you’ll meet with all parties involved in the sale to make it official by signing documents, receiving the deed and paying your closing costs, which may include:

  • Attorney, broker, credit report and/or lender fees
  • Title search and insurance
  • Appraisal and inspection fees
  • Points – a predetermined fee similar to prepaid interest
    • Paid to the lender to receive a particular interest rate
    • 1 point equals 1% of the loan amount
  • Other costs depending on your particular loan

Property insurance: Also called homeowner's insurance, property insurance protects the homeowner from losses to the property, as well as potential liability from events that occur on the property and elsewhere. Lenders require homeowner's insurance coverage to protect the collateral that secures their loan. Some homeowner's insurance policies do not cover catastrophic events such as tornadoes, hurricanes or floods. These kinds of events generally require a separate insurance policy. Sometimes additional insurance may be required for your loan.

Property Taxes and Homeowner's Insurance: A typical monthly mortgage payment consists of amounts for loan principal, interest, taxes and homeowner's insurance. Taxes and insurance are usually paid from an escrow, or impound, account.

 

 

Insurance & Tax Information

Insurance 101

Homeowner’s Insurance

Homeowner’s insurance provides financial coverage in the event of a covered loss to your home, other structures or contents. In addition, homeowners insurance provides personal liability coverage for third-party claims.

Disaster Insurance

Insurance designed to protect your home in the event a natural disaster such as fire, flood, earthquake, hurricane or tornado were to strike and cause your home to become unlivable.

Mortgage Life Insurance & Mortgage Accidental Death Insurance

Mortgage life insurance pays off or reduces your mortgage loan balance (up to the policy maximum) in the event of death before the debt is paid, enabling surviving family members to retain their home. Mortgage accidental death insurance pays off or reduces your mortgage loan balance (up to the policy maximum) if your death is the result of a covered accident.

Private Mortgage Insurance

Insurance written by a private company to protect the mortgage lender against financial loss if a borrower defaults on the mortgage.

FHA Mortgage Insurance

An undertaking by the Federal Housing Administration (FHA) to insure the lender against loss if the borrower defaults on the mortgage.

VA Funding Fee

This fee is paid by the Veteran and/or third party, directly to the Veterans Administration, to guarantee a specified portion of the loan, should the borrower go into default.

Flood Insurance

Protection against flood loss through the 1973 Flood Disaster Protection Act.

Still have questions? Check out our Insurance FAQs, calculate the cost of insurance, or reach out to us for more information.

Working with a MLO

Working with a MLO

Throughout the mortgage process you'll be working with a Mortgage Loan Office (MLO). A MLO will keep you abreast of your loan status, make sure that you are submitting the proper paperwork, and guide you through the application process.

If you have a MLO in mind, you can search for them in our database below. Or, you can find a MLO in your area to work with.

Ready to Get Started?

Take the Next Steps

Check rates & calculate your savings, learn more or get started

 Set Your Budget.
Search for Homes

Find the home that fits you and your budget. Determine a mortgage payment that you can afford, based on your actual budget and lifestyle. Or start shopping for homes with real­‐time rates and loan products.

Learn More About Home Insight® Planner» 

 

 Get Product Details

Read about the different mortgage products to better understand which type of mortgage fits your unique situation.

Learn About the Different Mortgage Types »

 Get Started Today

Whether you are just starting your search or have a home in mind, PNC can help you get started.

Get Started

Important Legal Disclosures and Information

  1. For Adjustable Rate Mortgages loans ("ARMs"), rates may increase after settlement.

Preliminary preapproval is not a commitment to lend, a condition of loan approval or an application for credit.

*Consult a tax advisor regarding the deductibility of interest

PNC, PNC HomeHQ, PNC Home Insight and Home Insight are registered service marks of The PNC Financial Services Group, Inc. ("PNC"). PNC has a pending patent application directed at various features and functions of Home Insight® and Home Insight® Planner. All loans are provided by PNC Bank, National Association, a subsidiary of PNC, and are subject to credit approval and property appraisal.

Equal Housing Lender ©2022 The PNC Financial Services Group, Inc. All rights reserved.

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