Pennsylvania First-Time Homebuyer Programs

If you’re a first-time homebuyer and you’re looking to purchase a home in Pennsylvania, there are several programs available to help assist.

Pennsylvania first–time homebuyer programs

There are several mortgage options offered through the Pennsylvania Housing Finance Agency (PHFA) that were created to make homeownership in Pennsylvania a more accessible option.

PHFA loan programs for first-time homebuyers include:

Keystone Home Loan Program

Eligible borrowers who are accepted into the Keystone Home Loan Program may qualify for a mortgage with lower fees and more competitive rates. This program is intended for first-time homeowners only; in fact, all adults who plan to live in the home within one year of closing must all be first-time homebuyers. Exceptions to this include discharged veterans of the United States Armed Forces, or borrowers who plan to purchase their home in a targeted location. To check if the location(s) you’re considering is categorized as a targeted area, you can go to www.ffiec.gov, and choose Geocoding/Mapping System in the Consumer Compliance column.

To qualify for the Keystone Home Loan Program, the purchase price of the home you want to buy cannot exceed the program’s limits. This will vary by county and region, but is typically somewhere in the $300,000 range. The location you’re selecting will also dictate the income limits for eligibility. There are also general requirements that are comparable to the majority of mortgages, such as minimum credit score requirements, and sufficient funds to cover the cost of the home purchase. Although the Keystone Home Loan Program can help borrowers save money with lower fees and more favorable rates, they still typically need to have enough to cover title fees, appraisals, their down payment, and so on. For borrowers putting less than 20 percent down, mortgage insurance will be required.

Mortgage Tax Credit Certificate

With a Mortgage Credit Certificate (MCC) from the PHFA, qualified borrowers in Pennsylvania can claim 20-50 percent of mortgage interest that they pay each year as a tax credit, which has a yearly $2,000 limit. This credit is available to borrowers who are also participating in the Keystone Government Loan program or the HFA Preferred™(Lo MI) program, which may also be used in conjunction with the Keystone Advantage Assistance loan. For those who are eligible, this is a dollar-for-dollar reduction against their federal tax liability.

Aside from the requirement of being a first-time homebuyer (unless borrowers are purchasing a home that is qualified as a target county or area), there are other qualifying criteria, including purchase price restrictions and income limits. Similarly to terms in other programs, these limits vary by location. Borrowers are required to fill out the PHFA Mortgagor’s Affidavit when they apply for their home loan and reaffirm it at closing, and the Recapture Tax Notice will need to be signed at or before closing.

Other homebuyer programs exclusive to Pennsylvania homebuyers

Even if you’re not purchasing a home for the first time or purchasing a home in a designated targeted location, if you’re buying a home in Pennsylvania, there are still other state-exclusive programs that can assist with your home purchase.

Other PHFA mortgage programs that are available to homebuyers in Pennsylvania, including repeat homebuyers, are:

Keystone Government Loan (K-Gov)

The Keystone Government Loan Program (K-Gov) offers first homebuyer mortgages that are backed by Rural Development (RD), the Federal Housing Administration (FHA), or the Department of Veterans’ Affairs (VA). Qualifying for this type of loan will depend on the specific guidelines set in place by each federal agency. There aren’t specific purchase price or income limits that this program has set, but there are limits that each federal agency has in place. Homebuyers who qualify for this program are encouraged to apply for other programs as well, such as the Keystone Advantage Assistance Loan, and a Mortgage Tax Credit Certificate.

HFA Preferred™(Lo MI)

With this type of loan, mortgage insurance is offered through one of the many private mortgage insurance companies available when the homebuyer makes a down payment that’s less than 20 percent of the property purchase price. The lender helps determine what the premium cost for your exact situation will be. Anyone obtaining the HFA Preferred loan may also be eligible to receive a $500 grant to use towards closing costs or their down payment, but borrowers must also put down $1,000 from their own personal funds. This loan is also only available for a property that is going to be used as a borrower’s primary residence.

Borrowers should have a credit score of at least 680 before applying for an HFA Preferred™(Lo MI) loan.  Prior to closing, borrowers are also required to complete face-to-face counseling with a HUD-approved counseling organization. Upon completion of the course, homebuyers may also be eligible to receive a $300 credit towards closing costs. There are also income limits in place in order to qualify, which vary by county.

PHFA Grant

Qualifying borrowers can receive $500 towards their closing costs and down payment through a PHFA grant if they obtain an HFA Preferred™(Lo MI). This grant money does not need to be paid back.

Keystone Advantage Assistance Loan Program

If you need help with purchasing a home, the Keystone Advantage Assistance Loan Program offers a second mortgage loan to assist with various associated  costs. Eligible homebuyers can receive closing cost assistance and down payment funding up to $6,000, or four percent of the property purchase price, whichever amount is lower. The assistance loan will be amortized over an interest-free, ten-year term.

In order to qualify for the Keystone Advantage Assistance Loan Program, homebuyers should have a credit score of at least 660. Additionally, a borrower’s liquid assets cannot exceed $50,000. Assets such as 401(k) accounts, pensions, and IRAs may also count towards this limit if they are eligible for withdrawal without penalties. For example, if the borrower has reached retirement age, and is therefore able to withdraw from these accounts without paying a penalty, these assets count towards the $50,000 limit.

Borrowers can use the Keystone Advantage Assistance Loan Program in conjunction with the Keystone Government Loan, Keystone Home Loan Program, or the HFA Preferred™(Lo MI). It can also be used on FHA, RD, or VA loans, in addition to conventional mortgages. Other terms and conditions may apply if using an FHA, RD, or VA loan.

Keystone Forgivable in Ten Years Loan Program (K-FIT)

The Keystone Forgivable in Ten Years Loan Program (K-FIT) is similar to the Keystone Advantage Assistance Loan Program, except qualifying borrowers can receive down payment and closing cost assistance that equates to five percent of the lesser of the purchase price or appraised value with no maximum dollar limit. This loan is forgiven on a yearly basis over a ten-year period, at a rate of 10 percent annually. Eligibility for this program is the same as the Keystone Advantage Assistance Loan Program. If you plan on applying for the K-FIT program in conjunction with another PHFA first mortgage home program, keep in mind that it can only be used with the Keystone Home Loan Program.

HOMEstead Downpayment and Closing Cost Assistance Loan

Through this program, borrowers can receive a no-interest, second mortgage loan that provides up to $10,000, with a minimum amount of $1,000, in closing cost and down payment assistance. These loans are forgiven at 20 percent annually over a five-year period. The first mortgage is offered through the PHFA at the same rate as the Keystone Home Loan program.

Down payment requirements vary based on who is guaranteeing or securing the mortgage. The remainder of closing costs and/or down payment money can be paid with HOMEstead funds.

The U.S. Department of Housing and Urban Development sets the funding availability and program requirements, as indicated in the HOME Investment Partnership Program and the American Dream Downpayment Initiative. As such, this program is available to borrowers on a first-come, first-served basis. ‘

In order to qualify for this program, borrowers can only purchase homes that meet specific federal guidelines. Most homes built prior to 1978 will not qualify due to potential lead-based paint hazards. Eligibility is also based on home purchase price limits and income restrictions, which vary by county.

Employer Assisted Housing (EAH) Initiative

Low-to-moderate-income workers may be able to take advantage of an Employer Assisted Housing (EAH) Initiative if their employer participates in this program. Available through the PHFA, this program offers financial assistance to borrowers, regardless of the type of mortgage they obtain.

Borrowers who are eligible for the EAH Initiative may also qualify for an interest-free loan amortized over 10 years to help with closing costs, and/or a Keystone Advantage Assistance Loan of up to $8,000 to use toward their down payment.

Programs for homebuyers with disabilities

Anyone who qualifies for one of these programs, and also has a disability or lives with someone with a disability, may qualify to receive additional funds needed to make necessary changes to their home for accessibility purposes through the ACCESS Home Modification Program. Eligible borrowers for this program may also qualify for a zero-percent closing cost and down payment loan up to $15,000 through the ACCESS Downpayment and Closing Cost Assistance program.

In order to qualify, applicants cannot have a household income that exceeds 80 percent of Pennsylvania’s family median income as determined by the Federal Department of Housing and Urban Development.

Purchasing a home with little to no down payment 

There are also several types of mortgages available to homebuyers throughout the United States, and not just Pennsylvania, that meet certain criteria and are looking to take out a mortgage with little to no money down. Some of these mortgage options include FHA loans, Conventional 97 loans, VA loans, and USDA loans. Learn more about all of the options available, and what is required to qualify for each type of these mortgages.

What are today’s mortgage rates in Pennsylvania?

When you’re ready to start the homebuying process, Filo Mortgage is here to help. Contact us today to learn more about the current mortgage rates in Pennsylvania, your different options for a mortgage, and to discuss the different Pennsylvania first-time homebuyer programs that are available.

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