7 Tips For First-Time Homebuyers in Erie, PA in 2023

While it’s true that the real estate market has cooled since 2023’s record-breaking spring, Erie, Pennsylvania, is still red hot. Houses are still selling within a few days, most offers are coming in over asking, and bidding wars continue to rage.

If the scorching sellers market wasn’t enough, there are also some unique challenges to buying a home in 2023. From high-interest rates to cash buyers coming out of the woodwork, first-time homebuyers are navigating some turbulent waters.

All that said, first-time homeownership is still completely attainable and a wise financial decision. And Maleno is here to help you do it. To help position you for a successful first-time home-buying experience, we highlighted seven tips you need to know about buying a home in 2023.

 Photo Credit: Zillow

1. Don’t Budge on Your Budget (Think Short and Long-term)

Since 2021, the housing market has experienced explosive growth, especially in Erie. When interest rates were in the two, three, and even four-percent range, buyers could afford to spend outside their budget if the home was right. But now, with rates well into the fives, sixes, and sevens, some buyers are having regrets.

To avoid buyer’s remorse, know your budget upfront and don’t budge on it. Remember, the sale price is only one of the expenses of buying and owning a home. During the home-buying process, make sure you have a little extra squirreled away in case you need to pay for:

• Closing costs
• A home appraisal and/or inspection
• Loan origination fees

Of course, once you own the home, you’ll need to pay for:

• Homeowner’s insurance
• Maintenance costs
• Mortgage payments (and potentially private mortgage insurance)
• Property taxes & school taxes
• Utilities

We know this list of expenses can seem intimidating, but it’s essential that you know what comes with homeownership in order to have a good home-buying experience. Many people during the pandemic panic purchased their homes and are now regretting it. Case in point, nearly half of homebuyers exceeded their budget, and 28 percent think they spent too much on what they got.

Best Practice: When it comes to your mortgage payments, keep them within 28 percent of your gross income.

2. Take Your Time

We know houses are selling fast, really fast. But it doesn’t mean you need to buy the first home you see. So far, in 2023, 30 percent of homebuyers believe they bought too quickly.

We recommend creating a house-hunting wish list that includes your must-haves, would-be-nices, and deal-breakers. This list will help you and your agent hone in on the right house for you.

During the creation of this list, it’s important that you’re realistic with your wants and needs. For instance, you’re probably not going to find a beachfront mansion for $200,000. Do some independent research and communicate with an agent to see what’s available in your price range.

Conversely, just because a home is in your price range doesn’t mean it’s the right fit. Never make concessions on your deal-breakers. Again, make sure you communicate with your agent to ensure they’re focusing on the right listings.

Best Practice: Look at least six homes that meet your criteria before making a decision.

3. Get Your Finances in Place

Don’t wait until you’re making an offer to have your finances sorted out. If you’re going to get a mortgage, start searching for one that best aligns with your buying strategy. We strongly recommend finding a lender that’ll help you choose the best terms for your financial position.

Being pre-approved will make your offer much more enticing to the seller. There are a handful of standard items you’ll need when filling out a mortgage application. Speed up the process by having the following documents ready for your lender:

• Bank Statements
• Credit Report
• Gift Letters
• Investment Account Statements
• List of Monthly Debts
• Pay Stubs
• Personal Identification
• Rental Information and Landlord References
• Social Security Card
• Tax Documents
• W-2 and 1099s

If you’re buying with cash, ensure you can show proof of funds (POF). In some cases, it’s as simple as providing a printed bank statement. Other times, you may need a letter from your bank or financial institution stating the exact amount of accessible or liquid funds. Any money in life insurance, stocks, bonds, and other investments does not count towards your available funds balance. The cash needs to be available in your account.

Best Practice: Start the process of getting pre-approved for a mortgage, not just pre-qualified, 30 to 60 days before house hunting.

4. Don’t Accept the First Pre-Approval

Did you know that the U.S. has more banks than anywhere on Earth? Use this fact to your advantage and shop around for the best rates, terms, and service. Pay close attention to loan origination fees, late fees, closing costs, and prepayment penalties.

At the end of the day, lenders are competing against each other. Therefore, many mortgage lenders will match or lower rates and change terms to compete for your business. In this hot market, the wheeling and dealing start far before making offers on homes.

5. Look for Assistance

As a first-time home buyer, you may have access to loans, programs, and grants that offer better interest rates, lower down payment requirements, and closing-cost assistance. If you’re a first-time homebuyer in Pennsylvania, we recommend looking into the following:

• PHFA Home Programs
• USDA Rural Development Loans
• First-time homebuyer grants and programs
• FHA Loans
• USDA Loans

Ask your lender to provide more information about new programs and grants specific to first-time home buyers. You may even get tax credits, reimbursements, or grant dollars for property renovations if you pick up a fixer-upper.

6. Love the Home, Not the Rate

There is an adage about stock trading, “It’s not about timing the market, but rather, time in the market.” A similar principle rings true for buying a home.

If you see the property of your dreams and it’s within your budget, it’s often better to buy it at a high interest rate and refinance later than miss the opportunity altogether. Furthermore, although today's interest rates might seem high, they’re far from record-breaking.

For most of the 1980s, the interest rate was well above 10 percent. At one point, it reached a staggering 18.63 percent. The reason this is important to consider is that, despite these rates, homeownership levels didn’t plummet during the 80s.

Once the rates drop, you can refinance your home. This option is especially smart if you plan on staying in the home long-term. Yes, there is a closing cost for a mortgage refinance (typically between 2 to 5 percent), but it’s often worth it.

7. Work with a Seasoned Agent

If you’re new to buying real estate, ensure you’re working with someone who knows the ropes. They’ll be able to advise you on market conditions, neighborhood specifics, and potential property issues and they’ll negotiate on your behalf.

In this red-hot market, many first-time homebuyers are making regrettable mistakes by waving inspections, foregoing any contingencies, and overpaying. While a real estate agent can’t give you legal advice, they can—and should—give you their honest opinion. They’ll also help you draw up a contract that allows you to walk away from the deal if needed, set deadlines, and draw up a purchase and sale agreement.

Working with Maleno

We understand the challenges of the current real estate market. It’s a challenging market for first-time homebuyers, but know that there are excellent options out there. Let us help you align your wants, needs, and budget and find you the perfect first home. Maleno’s experienced principal broker and realtors are always here to offer expert home-buying advice and guidance whenever you need it. Reach out today to learn more.