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Pennsylvania 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 a down payment 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 directly to the agency.
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) loans. Each program has different eligibility requirements and restrictions, including household income or home price limits.
HFA Preferred (Lo MI)
The added expense of private mortgage insurance (PMI) can be an obstacle for first-time homebuyers in Pennsylvania. 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 $500 credit toward closing costs.
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. 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 in Pennsylvania with affordable mortgages in the form of FHA loans, VA loans or USDA 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 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.
Pennsylvania down payment assistance
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. The requirements include:
- 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.
Other Pennsylvania homebuyer assistance programs
The PHFA Mortgage Credit Certificate (MCC) can reduce your federal tax bill. It can be used to claim a tax credit of 20 percent to 50 percent of your mortgage interest payments, up to $2,000 per year. The MCC can be combined with these programs:
- HFA Preferred (Lo MI)
- Keystone Government Loan
- Keystone Advantage Assistance loan
The MCC cannot be combined with:
- Keystone Home loan
You may be eligible if you are:
- First-time homeowner (within the past three years)
- Veteran of the armed forces
- Purchasing a home in a targeted Pennsylvania county or area.
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 MCC calculator.
Local homebuyer assistance programs
In addition to statewide assistance programs for first-time homebuyers in Pennsylvania, there could be programs specific to your city. For those in the Philadelphia area, for example, the NeighborWorks America/Wells Fargo NeighborhoodLIFT program provides homebuyer education and up to $15,000 towards closing costs on qualified homes. Pennsylvania first-time homebuyers living in Delaware County might be eligible for the Homeownership First Program, which provides up to $5,000 in down payment and closing cost help to low- and moderate-income borrowers. In Williamsport, the city’s Homebuyer GAP Assistance Program offers a zero-percent deferred loan for up to 20 percent of a home’s purchase price to qualified applicants.
Once you’re ready to become a first-time homebuyer in Pennsylvania, your next step is to find a PHFA-approved lender.