2024 Pennsylvania First-Time Homebuyer Programs and Loans

Pennsylvania first-time homebuyer programs help Keystone State residents get into a property of their own with lower down payment requirements, down payment assistance and/or homeownership grants. Since these programs all work differently and have unique eligibility requirements, it’s important to know how each one works and the steps you may need to take to qualify.

Let’s take a look at several Pennsylvania first-time homebuyer programs and their major details.

First-time homebuyer programs in Pennsylvania

Several first-time homebuyer programs are facilitated through the Pennsylvania Housing Finance Agency (PHFA), an agency in the commonwealth that aims to improve affordability and housing options for low-income and moderate-income families, older adults and families with special housing needs. In addition to programs that apply throughout the entire commonwealth of Pennsylvania, the PHFA also facilitates first-time homebuyer programs that are available in specific cities and counties across it.

Some of the main first-time homebuyer programs available across Pennsylvania are:

• HFA Preferred™ Program
• Keystone Home Loan Program
• Keystone Advantage Assistance Loan Program
• Keystone Forgivable in Ten Years Loan Program (K-FIT)
• PHFA Grant

HFA Preferred™ Program

The HFA Preferred™(Lo MI) loan is one of the most useful first-time homebuyer programs in Pennsylvania, as this fully amortized 30-year fixed-rate loan program is a foundation that other forms of assistance can be coupled with. This first-mortgage is available through traditional mortgage lenders, though the PHFA is the servicer for this loan. Benefits include low down payment requirements, flexibility when it comes to down payment sources and the ability to use the loan alongside other grants and assistance.

Note that you do not have to be a first-time homebuyer to utilize this loan program in Pennsylvania, but you will have to meet income requirements.

Requirements

• Must put down at least $1,000 from your own funds; additional down payment funds can come from other sources (including the PHFA Grant)
• Income must be at or under 80% of the area median income (AMI) for your county
• Primary residence only
• Preclosing homebuyer education course required (in-person with a credit score below 680)
• Housing payment should be 30% of monthly income or less

Keystone Home Loan Program

Pennsylvania’s Keystone Home Loan Program facilitates a 30-year fixed-rate mortgage that’s geared to first-time homebuyers — however, veterans and others who are planning to purchase a home in one of Pennsylvania’s “targeted areas” can also qualify. Benefits of the program include low down payments, or even no down payments, depending on the loan type. This program can also be used alongside the Keystone Advantage Assistance Loan Program (explained below). The Keystone Home Loan Program provides conventional loans, FHA loans, VA loans and USDA loans.

Requirements

• Down payment of 3.5% for FHA loans or 3% to 5% for conventional mortgages (no down payment is required for VA or USDA loans)
• Minimum credit score of 660 required for conventional loans, which are insured by the Pennsylvania Housing Insurance Fund (PHIF)
• Income limits and purchase price limits apply
• Must be a first-time homebuyer, a veteran or someone buying in a targeted area of the Pennsylvania
• Housing payment should be 30% of income or lower

Keystone Advantage Assistance Loan Program

PHFA’s Keystone Advantage Assistance Loan Program is a second mortgage program that can be repaid over 10 years with zero interest. The program aims to help buyers cover part of their down payment and closing costs. This program can work in conjunction with the HFA Preferred™(Lo MI) Program and the Keystone Home Loan Program, as well as a Keystone government loan (an FHA, VA or USDA loan). Eligible borrowers can access funding of 4% of the home’s purchase price or market value or $6,000, whichever amount is lower.

Requirements

• 660 minimum credit score
• Liquid assets may not exceed $50,000
• $500 minimum loan amount
• Must get a first mortgage with PHFA
• Must meet all requirements of first mortgage
• Must attend an approved homebuyer education course

Keystone Forgivable in Ten Years Loan Program (K-FIT)

With the Keystone Forgivable in Ten Years Loan Program (K-FIT), borrowers can receive up to 5% of their home’s purchase price or its appraised value (whichever amount is lower). This assistance comes in the form of a second mortgage that is forgivable over 10 years, which can be used toward a down payment or closing costs. However, it can only be used along the Keystone Home Loan.

Requirements

• 660 minimum credit score
• Liquid assets may not exceed $50,000
• Minimum loan amount of $500
• Must stay in the home for 10 years to receive total forgiveness
• Must meet income and purchase price requirements
• Must attend an approved homebuyer education course

PHFA Grant

The PHFA Grant provides $500 in assistance to homebuyers who need help with their down payment and closing costs. This grant is available with the HFA Preferred™(Lo MI) loan, and doesn’t need to be repaid. Eligible applicants can also combine this grant with the Keystone Advantage Assistance Loan Program.

Requirements

• Must put down at least $1,000 from your own funds (as required by the Lo Mi loan) — additional down payment funds can come from other sources (including the PHFA Grant)
• Income must be at or under 80% of the Area Median Income (AMI) for your county
• Must meet requirements for HFA Preferred™ (Lo MI) loan
• Primary residence only
• Preclosing homebuyer education course required (in-person with a credit score below 680)
• Housing payment should be 30% of monthly income or less

Pennsylvania first-time homebuyer qualifications

Requirements for Pennsylvania first-time homebuyer programs can vary, so you’ll want to read over each programs’ details before you apply. Regardless, you can take the following steps to gauge your approval odds and apply for first-time homebuyer programs in the Keystone State.

Steps to apply for a first-time homebuyer program

Understanding Pennsylvania first-time homebuyer down payment assistance

Down payment assistance programs help Pennsylvania residents come up with the cash they need to close on a home. Here’s a look at the different types of Pennsylvania first-time homebuyer down payment assistance that can apply.

Deferred second mortgage

A deferred second mortgage is sometimes called a “soft second” loan. A deferred second mortgage doesn’t accrue interest, and repayment may not be required until homeowners pay off their first mortgage, or refinance or sell the home.

Forgivable second mortgage

A forgivable second mortgage doesn’t require monthly payments or accrue interest. That said, buyers will need to live in the home for a specific amount of time to have their loan forgiven. If they refinance, sell or pay off their first mortgage before the timeline ends, they’ll typically need to repay a portion or all of the loan.

The Keystone Forgivable in Ten Years Loan Program (K-FIT) is an example of this type of down payment assistance program in Pennsylvania.

Grant

Individuals who qualify for first-time homebuyer grants won’t have to pay the money back. However, other requirements must be met. An example of this in Pennsylvania is the $500 PHFA Grant, which is available for buyers who qualify for the HFA Preferred™(Lo MI) Loan Program.

Mortgage credit certificate

A mortgage credit certificate (MCC) is a federal income tax credit that’s available to homebuyers who meet specific requirements. These credits are typically available to low-income and moderate-income buyers who are purchasing a single family residence they plan to occupy as their primary home.

Keep these things in mind about DPA programs

Down payment assistance programs may or may not be used alongside loans for first-time homebuyers. It all depends on the specific requirements and limitations for various programs. You should also note that income limits can apply, and that most programs are for primary residences only. Further, these programs may or may not be available to you if you already own another property, and some programs are for purchase loans only (not for mortgage refinance loans).

How much of a down payment do I need to buy a house in Pennsylvania?

Average down payment amounts for first-time homebuyers vary widely by state, and depend on the type of mortgage you apply for and how much it costs to purchase a particular home. A recent LendingTree study showed that the average down payment for first-time buyers in Pennsylvania was $32,337 in 2023. With the average first-time homebuyer in Pennsylvania taking out a home loan for $265,606 in 2023, that works out to be an average down payment of about 12%.

Can I qualify for down payment assistance in Pennsylvania?

Qualifications for down payment assistance programs in Pennsylvania vary. For example, you typically need to meet the qualifications for the first mortgage, which may include minimum credit score and down payment requirements, income and purchase price restrictions and the requirement to complete a homebuyer education course.

How do I apply for Pennsylvania first-time homebuyer down payment assistance?

PHFA down payment assistance programs require you to work with a participating lender, apply for funding and get approved. Remember that some down payment assistance programs offer funds that don’t need to be repaid, whereas others come in the form of a loan that requires monthly payments.

 Here’s what you need to know about the process of applying for a home loan.

Other first-time homebuyer loan programs

While the commonwealth of Pennsylvania boasts its own share of first-time homebuyer programs, below are several national programs that are also worthy of your consideration.

Conventional loans

Conventional mortgages offer competitive mortgage rates and flexible loan terms, though they notably aren’t backed by the government, as some other types of home loans for first-time buyers are. Buyers who purchase a home with a conventional mortgage will need to meet eligibility requirements that vary by lender. Further, private mortgage insurance (PMI) is required for borrowers who put down less than 20% of the purchase price.

FHA loans

Federal Housing Administration (FHA) home loans are popular with first-time homebuyers, since it’s possible to put down as little as 3.5% of the purchase price with a credit score of 580 or higher. Buyers with credit scores as low as 500 can also qualify with a down payment of 10%. FHA loans come with competitive mortgage rates and no income limits — however, FHA loan limits will apply.

VA loans

Military members, veterans and eligible spouses may be able to qualify for a VA loan with no down payment requirements and competitive VA loan rates. But while there’s no minimum credit score for VA loans, VA lenders typically require a 620 score or higher.

USDA loans

USDA loans are available through the U.S. Department of Agriculture, and they have no down payment requirements. However, these loans can only be used for homes that are located in areas of the country deemed rural by the USDA. Note that income limits apply for these loans as well, so not everyone can qualify.

What are the best first-time homebuyer loans?

The best home loan for you can depend on your income, how much you plan to spend on a property, your credit score and how much you have saved up for a down payment. The chart below shows which loan program works best for different types of buyers.

Home price trends in Pennsylvania’s major areas

Statewide, data from the Federal Housing Finance Agency (FHFA) shows that Pennsylvania home prices increased 6.88% in 2023. Over the five-year period leading up to the end of 2023, home prices increased 52.76% in the Keystone State.

In the Philadelphia metro area, year-over-year prices rose 2.84% in 2023, but prices were up 39.30% over a five-year period. Meanwhile, on the other side of the commonwealth, the Pittsburgh metro saw steeper price increases — in 2023, prices rose 6.47%, while the Steel City metro area witnessed prices rise by nearly 50% over the past five years. The Pennsylvania metro area with the largest yearly price increase was in the Philadelphia suburbs — Montgomery, Bucks and Chester counties — which saw prices rise 8.41% year-over-year and 55.41% over the previous five years.

Is there a first-time homebuyer tax credit in Pennsylvania?

There’s no longer a federal tax credit for first-time homebuyers in any state, including Pennsylvania. However, there are some tax breaks you can qualify for when you buy a home.

What are the current mortgage rate trends in Pennsylvania?

Rates on 30-year fixed loans and 5/1 ARMs are sitting close to where they were three months ago. However, the rates on 15-year fixed loans have been more volatile in Pennsylvania. In the past three months, 15-year fixed rates are up just over half a percentage point.