Pennsylvania Down Payment Assistance and First Time Home Buyers Programs — An Update

This article is an update of a previous article.
If you are a low to moderate income individual or family looking to buy a home in Pennsylvania, the Pennsylvania Housing Finance Agency (PHFA) may have some home purchase mortgage and down payment and closing costs assistance programs to fit your needs.
All mortgages associated with the PHFA’s homebuyer programs are obtained through PHFA approved and participating lenders. Any homebuyer seeking to utilize a PHFA homebuyer program must apply for the program along with their mortgage application at a participating lender.

First Time Home Buyer And Other Mortgage Loan Programs In Pennsylvania

Keystone Home Loan. The Keystone Home Loan program is a low interest 30 year mortgage available to first time homebuyers and second time homebuyers who have sufficient funds for downpayment and closing costs.
All homebuyers using this program must meet certain income and home purchase criteria depending on whether the home they are buying is located in a targeted area or a non targeted area. (see below for What is a Targeted Area?)

The Keystone Home Loan program has six basic qualifications that a homebuyer must meet to be eligible for the program:

Are you a first time home buyer buying a home in a targeted or non-targeted area? Or, are you are buying a home in a targeted area?

Does your income fall under the prescribed area median family income limit for the size of your household per the area where the home that you want to buy is located?

Does the home price that you are purchasing fall under the home price limits for the area (targeted or non-targeted) where the home is located?

You qualify for an FHA, VA, RHS, or Conventional loan with Fannie Mae and Freddie Mac.

Do you have sufficient funds to cover your own closing costs without needing assistance?

Do you have sufficient funds to cover the down payment requirements of the mortgage program you are using?

Keystone Home Loan Plus. The Keystone Home Loan Plus program is limited to First Time Home Buyers who plan to occupy the home they are purchasing for at least one year. The 6 qualification criteria for the Keystone Home Loan Program from above apply for applicants of the Plus program. Income limits and home purchase limits are lower for this program than the Keystone Home Loan Program.
Additionally, applicants to the Home Loan Plus program cannot have household liquid assets greater than $5,000 after funds have been deducted for closing costs and down payment requirements of the mortgage loan program that the homebuyer is getting. Funds from retirement accounts such as 401(k)s, IRAs, and pension funds will only be considered if they can be withdrawn without a penalty due to borrower meeting age requirement and/or being retired.

Downpayment And Closing Cost Assistance Programs In Pennsylvania

If you are using a PHFA mortgage program to purchase a home, you may qualify for down payment and closing cost assistance. PHFA has a variety of options to take advantage depending on your qualifications.

Keystone Assistance Loan Program. The Keystone Assistance Loan Program provides a zero interest second loan to help with costs associated with a home purchase. This loan has no monthly payment and only becomes due and payable upon sale or transfer of your home. The maximum amount of assistance available is $1,500 for buyers using the Keystone Home Loan program and $3,000 under the Keystone Home Loan PLUS program. Buyers must meet the requirements of the Keystone Home Loan or the Keystone Home Loan PLUS, as well as other criteria.

Downpayment and Closing Cost Assistance Loan (HOMEstead Program) Homebuyers eligible for the HOMEstead program may qualify for up to $10,000 in downpayment and closing cost assistance in the form of a no-interest, second mortgage loan. HOMEstead funds are forgiven at 20 percent per year over five years.
Borrowers must have sufficient funds to make a downpayment of at least three percent of the purchase price, or $1,000 for borrowers who have a credit score of at least 660. HOMEstead funds provide the remainder of the downpayment and the closing costs. In certain cases, based upon family need, the funds may provide additional down money to make the property affordable to the buyer.
Buyers participating in PHFA’s Keystone Home Loan Program are eligible to apply if they meet certain Program Income Limits and home Program Acquisition Cost Limits that vary by county. Most major cities and seven counties are wholly excluded from the program because they receive their own federal allocation.

Programs For People With Disabilities. For buyers with a disability or who have a disabled household member PHFA has several programs that enhance the availability of money for Downpayment and closing cost assistance. PHFA also provides a program for homebuyers using a disability home buying program to allow the homebuyer to get money for making property modifications if necessary to enhance the lifestyle and living needs of the disabled person.
These program names are: Access Downpayment and Closing Cost Assistance Program and Access Home Modification Program. Check with PHFA or a participating lender for more information on these programs.

What Is A Targeted Area?

Targeted areas are areas specified by HUD to have special economic and community development needs. Loan programs, as well as down payment and closing cost program requirements, are relaxed in these areas. Relaxed program guidelines open the door to the number of people who can purchase a home in a targeted area while still being able to take advantage of the Pennsylvania Housing Finance Agency down payment, closing cost, and mortgage loan programs.