If you’re a first-time home buyer or want to purchase a home in Pennsylvania (PA), then there are a variety of programs available which could provide down payment and closing costs assistance.
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First Time Home Buyer Programs In PA
The Pennsylvania Housing Finance Agency (PHFA) offer several types of loans that could help with the costs associated with buying a home. Let’s take a closer look at these programs.
HFA PreferredTM (Lo MI)
The HFA PreferredTM (Lo MI) loan helps PA homebuyers with less than 20% down payment by offering lower cost mortgage insurance. It’s open to both first-time and repeat buyers with no purchase price limit. To qualify, your household income must meet specific limits, and you need to contribute at least $1,000 of your own money for the down payment and complete a homebuyer education course.
Keystone Home Loan Program
The Keystone Home Loan Program helps first-time buyers, repeat buyers in certain counties, and veterans. The program aims to make home buying more affordable by focusing on specific areas and offering various loan options, such as conventional, FHA, VA, and USDA loans. To qualify, you must meet the program’s household income and purchase price limits, along with loan eligibility requirements.
Keystone Government Loan Program
The Keystone Government Loan Program (K-Gov) offers various mortgage options supported by federal agencies such as FHA, VA, and USDA loans. To qualify, you need to meet the requirements set by these agencies. While the PHFA does not impose additional income or purchase price limits, the federal program limits still apply. This program is open to all buyers, with no first-time homebuyer requirement. However, if your credit score is lower than 680, then you will be required to take a homebuyer education course.
Keystone Flex with K-FIT
The Keystone Flex with K-FIT program combines a traditional mortgage with a forgivable second mortgage (K-FIT) to reduce upfront costs for homebuyers. K-FIT provides up to 5% of the purchase price or appraised value (whichever is lower) to assist with down payment and closing costs, which is forgiven over 10 years.
There is no requirement to be a first-time homebuyer, but you must meet income and purchase price criteria. A minimum credit score of 660 is required, and all borrowers must complete an approved homebuyer education course.
Keystone Flex-Purchase & Improvement with K-FIT
The Keystone Flex Purchase & Improvement with K-FIT program allows homebuyers to purchase and improve a home while receiving assistance for down payment and closing costs in one transaction. It combines a first mortgage with K-FIT second mortgage, providing eligible buyers with up to 5% of the purchase price or appraised value as assistance, without a maximum limit.
This assistance is structured as a forgivable second mortgage, forgiven at a rate of 10% annually over ten years. There is no requirement to be a first-time homebuyer, but applicants must meet specific income and purchase price criteria. Additionally, a minimum credit score of 660 is required, and all borrowers must complete an approved homebuyer education course.
Homestyle
The HomeStyle Renovation program assists eligible homebuyers and existing homeowners in financing repairs, remodeling, renovations, or energy efficiency improvements. Qualified borrowers can finance up to 75% of the property’s appraised value post-improvements. For manufactured homes, repairs can cover up to 50% of the appraised value or $50,000, whichever is lower.
Down Payment Assistance PA
In addition to the various first-time homebuyer programs previously discussed, there are also down payment assistance programs available in Pennsylvania.
Keystone Advantage
The Keystone Advantage Assistance Loan Program provides a second mortgage to help with home purchases. This interest-free loan offers up to 4% of the home’s purchase price or $6,000, whichever is less, for down payment or closing costs. Repayment occurs over 10 years and can be combined with various first mortgage options. To qualify, you need a minimum credit score of 660 and a standard PHFA mortgage. Liquid assets must not exceed $50,000 after deducting necessary closing funds.
KFIT
The Keystone Forgivable in Ten Years Loan Program (K-FIT) assists homebuyers with down payment and closing costs through a second mortgage. Eligible borrowers can receive up to 5% of the purchase price or appraised value, with no maximum limit. The K-FIT loan is forgiven at 10% annually over ten years. To qualify, you need a minimum credit score of 660 and your liquid assets should not exceed $50,000 after closing funds deduction.
Homestead
The HOMEstead program offers eligible borrowers up to $10,000 for down payment and closing costs in the form of a no-interest second mortgage. The loan is forgiven at a rate of 20% per year over five years, with a minimum loan amount of $1,000. Eligibility is based on income and home purchase price limits that vary by county. Funds are distributed on a first-come, first-served basis, and applicants must work with a participating lender.
Access Modification
The ACCESS Home Modification Program provide loans to help individuals with disabilities, or those living with family members who have disabilities, purchase a home that needs accessibility modifications. This program offers a deferred payment loan with no interest and no monthly payments. The loan must be paid back when the property is sold, transferred, or no longer used as the borrower’s primary residence. If your credit score is lower than 680, then you must complete a course before closing on your loan.
FHA 100% Down Payment Assistance
This program enables homebuyers to obtain 100% financing without having to make a down payment. This is achieved by combining a 1st and 2nd mortgage and is compatible with FHA loans. The 2nd mortgage can be up to 3.5%, based on the lesser of the sales price or appraised value, and has a 10-year term. To qualify, you need a minimum credit score of 620 and to complete a Homebuyer Education course.
Other PA State Mortgage Assistance
First Time Home Buyer PA Tax Credit
While there is not a specific tax credit for Pennsylvania first-time homebuyers, there’s a program called the Mortgage Credit Certificate (MCC) which offers a similar benefit. This program is administered by the Pennsylvania Housing Finance Agency (PHFA) and could significantly reduce your federal tax bill
Mortgage credit certificate (MCC)
A Mortgage Credit Certificate (MCC) could help lower your federal tax bill. If you’re eligible, then you could receive a tax credit for a portion of your mortgage interest each year, up to $2,000. Additionally, you may still be able to deduct the remaining mortgage interest on your federal tax return.
To qualify, you need to be a first-time homebuyer, meet income limits set by PHFA, and use the home as your primary residence. It’s recommended to consult with a tax advisor and use the program’s calculator to estimate your potential tax benefits.
PA Refinance Assistance Options
If you’re a current homeowner in Pennsylvania, then the PHFA provides various refinance options. Here’s a brief overview of these programs.
FHA Streamline
The FHA Streamline Refinance simplifies the process of refinancing your existing FHA loan by reducing the paperwork and usually eliminating the need for a new appraisal. This allows you to potentially lower your interest rate or switch to a different mortgage type, such as a fixed rate from an adjustable rate mortgage (ARM).
VA IRRRL
The VA Interest Rate Reduction Refinancing Loan (IRRRL) helps eligible veteran-homeowners refinance their existing VA-guaranteed loan with the purpose of reducing the note’s interest rate, therefore reducing the current monthly mortgage payment. The new loan amount is limited to your existing VA loan balance, along with any approved fees and closing costs.
HFA PreferredTM
The HFA PreferredTM (LO MI) loan is also available for refinancing. Mortgage insurance is provided by one of several private mortgage insurance companies when the borrower puts down less than 20% towards the purchase of the home. Your lender will help you determine the premium cost for your specific situation.
Keystone Flex Refinance
The Keystone Flex Loan Program help homeowners refinance their current mortgage to potentially receive a lower interest rate. You can choose between conventional, FHA, or VA financing, each with a fixed 30-year term. Depending on your loan type, there are different limits to how much you could borrow compared to your home’s value. This program also allows borrowers to take out some of your home’s equity through cash-out refinancing.
Pennsylvania First Time Home Buyer Loan Options
FHA Loan
If you have limited funds for a down payment or a lower credit score, then an FHA loan could be right for you. It’s insured by the Federal Housing Administration, allowing lenders to be more flexible with their requirements. These loans are popular among first-time buyers and can come with either fixed or adjustable interest rates.
VA Loans
Designed for eligible service members, veterans, and surviving spouses, VA loans are backed by the Department of Veterans Affairs. They offer flexible terms tailored to veterans’ needs, including the option for zero down payments.
Conventional Loans
These mortgages are not government-insured and come with either fixed or adjustable interest rates. They are considered conforming loans that meet criteria set by Fannie Mae and Freddie Mac, including specific down payment and income requirements.
USDA Loans
This government-backed option is for home buyers purchasing in designated rural areas. Guaranteed by the U.S. Department of Agriculture, USDA loans eliminate the need for a down payment and private mortgage insurance (PMI).
How can I apply for first time home buyer programs in PA?
If you are interested in applying for a first-time home buyer program in Pennsylvania, then you need to work with a participating lender, like Direct Mortgage Loans. Additionally, the PHFA provides a tool on their website to locate a participating lender in your county.
Pennsylvania First Time Home Buyer FAQ’s
How much do first time home buyers have to put down in Pennsylvania?
In Pennsylvania, the amount required for first-time home buyers to put down on a home varies depending on the type of loan and their individual circumstances. However, there are several zero down payment loan options available for eligible borrowers to consider. It’s best to speak with a loan officer to determine the exact amount.
What credit score do you need to buy a house in PA?
The credit score required to buy a home in Pennsylvania varies depending on the mortgage program you select. Each program has its own specific credit score requirements. For instance, government-backed programs may accept lower credit scores, whereas conventional loans generally require higher credit scores. It’s important to note that even within a program, there may be additional requirements to consider.
How long does it take to close on a house in PA?
The length of time it takes to close a house in Pennsylvania depends on the lender you choose. Typically, if you choose to work with Direct Mortgage Loans, then you could expect to close on your home within 30-45 days.
Is PHFA a government agency?
The Pennsylvania Housing Finance Agency (PHFA) is not a government agency in the traditional sense. It is a state-affiliated organization created by the Pennsylvania legislature. This means that it works closely with the state government on housing programs, but it also has some independence, like its own funding sources and board.
Down payment programs subject to additional eligibility requirements that may vary. Eligibility and approval is subject to completion of an application and verification of home ownership, occupancy, title, income, employment, credit, home value, collateral and underwriting requirements. Loan products described here may not be available at the time of application. All products are subject to eligibility and availability. Speak with a qualified mortgage professional to determine which programs may be available to you. Direct Mortgage Loans, LLC NMLS ID# is 832799 (www.nmlsconsumeraccess.org). Direct Mortgage Loans, LLC office is located at 11011 McCormick Rd Suite 400 Hunt Valley, MD 21031. Equal housing lender.
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