2021 Pennsylvania first-time homebuyer assistance programs

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For first-time homebuyers, Pennsylvania is a relatively affordable market with a median home values statewide that are some 30 percent lower than the national median. The commonwealth has a number of helpful programs for first-time homebuyers — and other categories of homebuyers — to obtain affordable mortgages. In addition, there are Pennsylvania home assistance programs that can provide funds for down payments and closing costs.

The Pennsylvania Housing Finance Agency (PHFA) partners with lenders and brokers to offer mortgages with competitive interest rates and low fees. The participating lenders take borrower applications and process the mortgages. PHFA purchases the loans after closing, and borrowers make monthly payments to directly to the agency.

Here’s an overview of Pennsylvania first-time homebuyer programs and other home assistance programs that may help you purchase a home in the Keystone State.

Pennsylvania first-time homebuyer loan programs

PHFA home purchase programs offer 30-year, fixed-rate mortgages with affordable interest rates and fewer fees. The loans can be conventional mortgages, Federal Housing Agency (FHA) loans, Veterans Affairs (VA) loans or U.S Department of Agriculture (USDA) rural development loans. Each program has different eligibility requirements and restrictions, including household income or home price limits.

The three PHFA home loan programs are:

  • HFA Preferred (Lo MI) loan
  • Keystone Home loan
  • Keystone Government loan

Here are more details about each home purchase program.

HFA Preferred (Lo MI)

The added expense of private mortgage insurance (PMI) can be an obstacle for first-time homebuyers. Lenders typically require PMI when the down payment is less than 20 percent of the price of the home. The HFA Preferred (Lo MI) loan helps homebuyers with small down payments get low-cost mortgage insurance.

The program is open to those purchasing or refinancing a primary home with a single unit. You don’t have to be a first-time homeowner to apply for this program, and there are no purchase price limits. However, to qualify, your household income must fall within program limits, and you must contribute at least $1,000 of your own funds toward the down payment.

You’ll also need to complete a homebuyer education course at a PHFA-approved housing counseling agency. Those with FICO scores of 680 or higher can complete the course online at PHFA or Framework. If you do an in-person counseling session, you’ll receive a $300 credit toward closing costs.

Keystone Home

The Keystone Home loan program serves first-time homebuyers, discharged veterans of the armed forces and buyers of homes in targeted Pennsylvania counties. The loans can be conventional mortgages, FHA loans, VA loans or USDA loans. Each type of loan has different characteristics:

  • Conventional loan: Requires a minimum credit score of 660 and 3 percent to 5 percent down payment. Insured by the Pennsylvania Housing Insurance Fund (PHIF).
  • FHA loan: Requires a minimum 3.5 percent down payment. Insured by the Federal Housing Administration.
  • VA or USDA loans: No down payment in most cases. USDA rural development loans are not available in Philadelphia and Delaware counties nor in some major cities.

To qualify, you’ll need to meet the Keystone Home Loan program’s household income limits and purchase price limits.

Keystone Government Loan (K-Gov)

The Keystone Government Loan (K-Gov) program helps participating mortgage lenders and brokers provide homebuyers with affordable mortgages in the form of FHA loans, VA loans or USDA rural development loans. You don’t have to be a first-time homeowner to apply for this program.

The normal underwriting guidelines apply for each type of loan. FHA and VA loan amount maximums apply, as well as USDA loan income limits. Applicants with FICO credit scores lower than 680 must take a homeowner education course.

PHFA down payment and closing cost assistance programs

In addition to home purchase programs, PHFA also has assistance programs, including two that help homebuyers with down payments and closing costs.

  • Keystone Advantage Assistance Loan Program
  • HOMEstead Down Payment and Closing Cost Assistance

You may also qualify for a tax credit that can help offset your annual federal tax bill.

Keystone Advantage Assistance Loan Program

The Keystone Advantage Assistance Loan Program is a second mortgage that can be used toward the down payment or closing costs. It can provide up to 4 percent of the home price or $6,000, whichever is lower. The interest-free loan has a 10-year repayment schedule.

The program can be combined with the HFA Preferred (Lo MI), Keystone Government Loan or Keystone Home purchase programs.


  • Minimum credit score of 660.
  • Must be used for the down payment or closing costs.
  • Minimum loan of $500.
  • After closing, your cash, bank balances, stocks and other liquid assets can’t total more than $50,000.

HOMEstead Downpayment and Closing Cost Assistance Loan

The HOMEstead program can provide between $1,000 and $10,000 in down payment and closing cost assistance. The no-interest second mortgage loan is forgiven over five years, 20 percent each year.

The program has household income limits and home price limits that vary by county, but it is not offered in all counties and cities. Due to federal regulations for lead-based paint, most homes built before 1978 are ineligible.

Mortgage Tax Credit Certificate

The PHFA Mortgage Credit Certificate (MCC) can reduce your federal tax bill. It can be used to claim a tax credit of 20 to 50 percent of your mortgage interest payments, up to $2,000 per year.

MCC can be combined with these programs:

  • HFA Preferred (Lo MI)
  • Keystone Government Loan
  • Keystone Advantage Assistance loan

MCC cannot be combined with:

  • Keystone Home loan

You may be eligible if you are:

In addition, you must meet the household income limits and home price limits of the Keystone Home Loan Program. You can claim the MCC each year until you sell or move out of the home. To estimate your tax credit, use PHFA’s Mortgage Credit Certificate calculator.

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Written by
Jeanne Lee
Contributing writer
Jeanne Lee writes about mortgages, personal finance and enjoys finding ways for people to hack their finances.
Edited by
Senior mortgage editor
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