What is PHFA? How does it work?
Think of the Pennsylvania Housing Finance Agency as a bank - not really, but you'll understand as you read on. But before I get into an explanation of PHFA, it's necessary to explain how the mortgage business works.
There are 4 popular mortgage programs:
- FHA - Federal Housing Administration
The FHA program only requires a 3.5% down payment, and a percentage of the closing costs can be paid by the home seller.Learn more about FHA home loans
- VA LOAN - Veteran's Administration)
The VA program is a great choice for cash-strapped veterans. No down payment and the seller is permitted to pay ALL closing costs. Learn more about VA loans
- USDA LOAN - United States Department of Agriculture
The USDA mortgage does not require a down payment. Zero, nadda, and the seller can pay a large percentage of the closing costs.Learn more about USDA home loans
- CONVENTIONAL - Fannie Mae and Freddie Mac
Do you have significant down payment? If so, the conventional home loan might be the best loan program.Learn more about conventional loans
Each home-loan program has its own guidelines and relative merits.
For example, the FHA home loan requires only a 3.5% down payment and you do NOT need to be a first-time home buyer, however, there are loan limits.
The USDA home loan (currently) does not require a down payment, however, the home must be located in a designated rural area.
The Veteran mortgage does not require a down payment and the seller can pay all closing costs . . . but of course, you must be an eligible veteran to take advantage of the VA mortgage.
In a traditional mortgage application, you apply for a home loan with either a bank or a mortgage broker for your loan. A competent loan officer will identify the "best" mortgage based on your income and needs.
Ok, so where does PHFA fit in?
PHFA sits on top of the bank and mortgage broker, PHFA provides the money for the mortgage. PHFA works with approved banks and mortgage brokers. You work through the banker or mortgage broker as you would with the traditional mortgage application. Your home loan is underwritten to either the FHA, VA, USDA or Fannie Mae and Freddie Mac guidelines and then passed on to the Pennsylvania Housing Finance Agency (PHFA).
Now since the Pennsylvania Housing Finance Agency is providing the money; both the banker and broker must comply PHFA's underwriting guidelines (i.e. income and sales price limits) and a few more guidelines to protect your best interest.
So PHFA is a bank?
No. PHFA bundles up a bunch of mortgages and sells the mortgages to investors, however, the mortgage payment is paid to PHFA and the interest on the loan is forwarded to the investor.
Which PHFA program is right for me?
There are 3 PHFA loan programs (and one closing cost/down payment assistance program).
Keystone Home Loan Program has income and sales price limits based on the Pennsylvania county. Home buyers must be first-time homeowners, however, there are a number of county exceptions. Eligible loan programs are:
Conventional uninsured loans require a 20 percent (20 %) down payment under the Keystone Home Loan program, although the down payment can come as a gift from an immediate family member (parent, grandparent, sibling, child, aunt, or uncle) or a nonprofit organization.
FHA, VA, and USDA loans are eligible with the Keystone Home Loan Program.
Keystone Advantage Loan Program does NOT require first-time ownership! This PHFA program is based on FHA, VA and USDA loans.
HFA Preferred Risk Sharing & HFA Preferred Loans are based on the conventional loans. These programs do NOT require first-time ownership, however, there are income limits. The HFA Preferred Risk Sharing & HFA Preferred Loans only requires a 3% down payment. There is no sales price limit, and the loan amount is higher than the FHA loan program. There is mortgage insurance for loans with less than a 20% down payment, although, the HFA Preferred Risk Sharing program has a higher interest rate in lieu of the mortgage insurance. The HFA Preferred Loan has the lower interest rate but requires mortgage insurance for loans with less than a 20% down payment.
Keystone Advantage Assistance Loan Program provides down payment and/or closing cost assistance to qualified PHFA home buyers. The assistance program can be used in conjunction with the HFA Preferred™(Lo MI), HFA Preferred Risk Sharing™(No MI), Keystone Government Loan, or Keystone Home loan (FHA, VA, or USDA loans).