What is PHFA?
The Pennsylvania Housing Finance Agency (PHFA) offers home purchase and refinance loans to qualified borrowers through a network of partner lenders and brokers.
Their aim is to provide affordable home ownership and rental options to older adults, low- and moderate-income families, and people with special housing needs. But before we get into a deeper explanation of PHFA, it's necessary to explain how the mortgage lending works.
4 popular mortgage programs
There are four popular home loan programs available to prospective home buyers. Each 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 to qualify. 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.
A conventional mortgage tends to offer great interest rates, but requires a better credit score and more money down than other options.
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, nada, 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 savings or other funds to put towards a larger down payment? If so, the conventional home loan might be the best loan program for you. Learn more about conventional loans.
A competent loan officer will identify the "best" mortgage based on your income and needs.
Where does PHFA fit in?
With PHFA, you work with a bank or mortgage broker to apply for a loan, just like you would with a traditional mortgage application. Once approved, 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), who buys the loan from the lender. The mortgage payment is paid to PHFA for the life of the loan.
Since the Pennsylvania Housing Finance Agency holds the liability for the loan, 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.
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% 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).