First-Time Home Buyer Programs and Grants in Pennsylvania

Written by Steven PorrelloOctober 4th, 20224 minute read

The Pennsylvania Housing Finance Agency (PHFA) offers generous programs to first-time home buyers in Pennsylvania. Statewide programs, such as the FHA Preferred and Keystone Home Loan, can help buyers secure an affordable mortgage on their first home.

Additionally, state and county governments will often give cash assistance, usually in the form of a second mortgage, to help cover closing costs and down payment requirements. These programs often have eligibility requirements, such as occupying your first home for a certain number of years or repaying a portion of the money borrowed.

Below we’ll break down the most common first-time home buyer programs in Pennsylvania and help you know if you’re eligible.

First-time home buyer loan programs in Pennsylvania

These programs help you secure financing for your first home purchase in Pennsylvania. They can be attached to a conventional loan, or any of the government-backed loans, such as an FHA, VA, or USDA loan.

HFA Preferred Risk Sharing

  • What it is: A 30-year conventional loan that doesn’t require borrowers to pay for mortgage insurance.
  • Why it matters: First-time home buyers with less than 20% down payment won’t have to pay the usual PMI. The annual cost of PMI is usually between 0.58% and 1.86% of the loan amount.
  • Who is it for: Low- to moderate-income buyers. You don’t have to be a first-time home buyer to be eligible.
  • Requirements:
    • The home must be your primary residence.
    • Only single-family homes are eligible.

HFA Preferred™ (Lo MI)

  • What it is: A 30-year conventional loan with a low 3% down payment requirement.
  • Why it matters: Many conventional loans require borrowers to have a down payment of 5% or more. The HFA Preferred loan lowers the requirement to 3%.
  • Who is it for: Low- to moderate-income buyers. You don’t have to be a first-time home buyer to be eligible.
  • Requirements:
    • Your income has to be below a certain threshold (check your county’s threshold).
    • Borrowers have to put down at least $1,000 from their own funds.
    • Only primary residencies are eligible.

Keystone Home Loan Program

  • What it is: A government-backed loan (FHA, VA, or USDA) that offers below-market interest rates to first-time home buyers.
  • Why it matters: A low interest rate can significantly lower your monthly mortgage payments.
  • Who is it for: First-time home buyers in a lower income bracket.
  • Requirements:
    • Your gross annual household income must be below the threshold for your county in Pennsylvania.
    • The price of your home cannot exceed the maximum purchase price set by Keystone for your county.
    • You have good credit and your DTI is lower than 43%.

» MORE: Learn about PHFA Keystone Home Loans.

Keystone Government Loan Program

  • What it is: A government-backed loan (FHA, VA, USDA) that offers below-market interest rates, but without the restrictions of the Keystone Home Loan Program.
  • Why it matters: If your income or home’s purchase price exceeds the limits set by Keystone for the Home Loan Program, this program helps you secure financing.
  • Who is it for: Low- to moderate-income home buyers. You don’t have to be a first time-home buyer to be eligible.
  • Requirements:
    • You only have to meet the requirements for your individual loan program (FHA, VA, USDA).

Down payment and closing cost assistance in Pennsylvania

Pennsylvania has numerous first-time home buyer grants and programs that offer financial assistance for closing costs and down payment requirements. Below is a list of the most common programs.

Keystone Flex with K-FIT

  • What it is: A forgivable second mortgage.
  • What it offers: 5% of either the home’s purchase price or the appraised value, whichever is less. For instance, if you buy a $400,000 home, you could receive $20,000 in cash assistance.
  • Do you have to pay it back? No. 10% of the loan is forgiven each year for ten years. If you sell your home before the 10 year period is finished, you’ll have to repay the remaining balance.
  • Requirements
    • A minimum credit score of 660
    • You must complete a home buyer education counseling course.
    • You can’t have more than $50,000 in cash or other liquid assets.

Keystone Advantage Assistance Loan Program

  • What it is: An interest-free second mortgage.
  • What it offers: 4% of either the home’s purchase price or the appraised value, whichever is less (the maximum you can borrow is $6,000).
  • Do you have to pay it back? Yes, you’ll repay the full amount that you borrow over 10 years. However, you don’t have to pay interest.
  • Requirements
    • A minimum credit score of 660
    • You must complete a home buyer education counseling course.
    • You can’t have more than $50,000 in cash or other liquid assets.

HOMEstead Down Payment and Closing Cost Assistance Loan

  • What it is: A forgivable second mortgage.
  • What it offers: You can get up to $10,000 as a forgivable loan.
  • Do you have to pay it back? No. Each year for 5 years, 20% of the second mortgage will be forgiven. However, if you sell your home before 5 years, you’ll be required to pay off your remaining loan balance.
  • Requirements

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