Pennsylvania First-Time Homebuyer Programs

Pennsylvania has multiple first-time homebuyers programs to help make homeownership a reality for Keystone State residents. Eligible buyers can choose between low-rate loans, down payment assistance programs and grants. Here’s a look at several Pennsylvania first-time homebuyer programs, including qualifications and steps to apply.

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First-time homebuyer programs in Pennsylvania

The Pennsylvania Housing Finance Agency (PHFA) offers multiple first-time homebuyer programs to help make homeownership accessible and affordable to Pennsylvania residents. In addition to the statewide programs highlighted here, homebuyers can access first-time homebuyer programs on the county, city and local levels.

HFA Preferred™ Program

This PHFA program is a conventional (nongovernment) loan for low- and moderate-income homebuyers. Features include a 30-year fixed-rate term, low down payment minimums, flexible down payment sources and the ability to pair the loan with other agency grants and assistance. The HFA Preferred™ Program is available to both first-time- and non-first-time homebuyers.

Requirements

• 3% minimum down payment
• 620 minimum credit score
• Income cannot exceed 80% of the Area Median Income (AMI) for your county
• Contribute at least 1% of the loan amount or $1,000 (whichever is less). The remaining down payment can come from gifted funds, assistance programs or other sources.
• Must attend an approved homebuyer education course (in-person if credit score is below 680)

Pros and cons

Keystone Home Loan Program

Under this PHFA program, buyers can secure 30-year fixed-rate loans with low down payment minimums — or even no money down, depending on the loan type. This program is aimed at first-time homebuyers (any buyer who hasn’t owned a home within the past three years), though veterans and buyers purchasing a home in a targeted area are also eligible. Borrowers will need to meet income and purchase price limits.

Requirements

• 0% to 5% minimum down payment, depending on loan type
• 620 minimum credit score (660 for conventional loans)
• Income cannot exceed program limits
• Purchase price must be within program limits
• Must contribute 1% or $1,000 of own funds (for FHA and conventional loans)
• Must buy a first-time homebuyer (exception made for veterans and buyers purchasing in a targeted area)
• Borrowers must attend an approved in-person homebuyer education course if credit score is below 680

Pros and cons

Keystone Advantage Assistance Loan Program

PHFA’s Keystone Advantage Assistance Loan Program is a second mortgage to help buyers with their down payment and closing costs. Eligible buyers can borrow up to $6,000 or 4% of the purchase price or market value (whichever is less). Borrowers have 10 years to repay the zero-interest loan, which they can pair with one of PHFA’s mortgage programs.

Requirements

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

Pros and cons

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

Under this PHFA program, borrowers can receive up to 5% of their home’s purchase price or appraised value (whichever is less) in down payment and closing cost assistance. The assistance is provided through a forgivable second mortgage.

Requirements

• 660 minimum credit score
• Assets may not exceed $50,000
• Must obtain a Keystone Home loan to use
• Must meet all other requirements of first mortgage
• Must attend an approved homebuyer education course
• Must stay in the home for 10 years to receive total forgiveness

Pros and cons

Local first-time homebuyer programs in Pennsylvania

In addition to statewide programs, homebuyers may also qualify for city and local programs. For example, eligible Pittsburgh residents can receive up to $90,000 in grant and forgivable assistance through the OwnPGH Homeownership Program. Meanwhile, Philadelphia residents can receive up to $10,000 (or 6% of the purchase price) in a homebuyer assistance grant through Philly First Home.

For more county, city and local first-time homebuyer programs, review the U.S. Department of Housing and Urban Development’s Pennsylvania homebuying programs.

Pennsylvania first-time homebuyer qualification

To qualify for a first-time homebuyer program in Pennsylvania, borrowers have to follow the programs’ guidelines — which can vary depending on the loan or assistance. Homebuyers can expect the following process for statewide first-time homebuyer programs in Pennsylvania:

Step 1: Review loan and assistance programs.Familiarize yourself with the PHFA’s first-time homebuyer programs. Assistance includes loans, grants, down payment and closing cost assistance, employer-sponsored initiatives and programs for homebuyers with disabilities.

Step 2: Make sure you meet program qualifications.While requirements vary between programs, you’ll need at least a 620 credit score to qualify for most statewide programs and at least $1,000 of your own funds towards a down payment. (Please note that exceptions apply.) In addition, income and purchase price restrictions apply for some programs.

Step 3: Contact an approved homebuyer counselor.If you’re unsure which loan or assistance program you qualify for, working with a PHFA-approved homebuyer education provider is a good place to start. The PHFA offers everyone free homebuyer counseling and education; however, for some programs, taking the homebuyer education course is required.

Step 4: Review and select a participating lender.You’ll apply for PHFA programs directly through a participating lender and will work with them through closing. After your purchase, PHFA will service your loan.

Step 5: Follow program requirements. Once you close on your home, make sure you understand and follow any post-closing requirements. For example, if you receive closing cost assistance through a forgivable loan, you’ll have to remain in the home for a specified time to receive complete forgiveness.

Understanding Pennsylvania first-time homebuyer down payment assistance

Before accepting down payment assistance, understanding each program’s terms is essential. With some down payment initiatives, the funds are gifted and don’t need to be repaid. In other programs, borrowers will need to repay the money or meet certain conditions to receive forgiveness. Here’s a look at the different types of Pennsylvania first-time homebuyer down payment assistance.

Deferred second mortgage

A deferred second mortgage has no monthly payments and won’t accrue interest, but homeowners will have to repay the loan if they sell the home or transfer ownership. These mortgages are sometimes called “soft second” loans.

Forgivable second mortgage

Another type of assistance is a forgivable second mortgage. With these loans, buyers won’t make payments or pay interest; however, they need to remain in the home for a specific time to receive forgiveness. If they sell before the required time, they may need to repay a portion or all of the loan.

Second mortgage

Some down payment assistance comes in the form of a traditional second mortgage. These are loans borrowers pay in addition to their primary home mortgage. The terms vary between programs; sometimes, the second mortgage may have zero interest and is spread over several years, while other loans may carry a low interest rate. Typically, the loan amount is limited to a maximum dollar amount or percentage of the home value.

Grant

Homebuyers won’t need to repay grant assistance; however, they’ll have to use the funds for the purpose specified in the program terms. For example, PHFA offers a small down payment and closing costs grant of $500 to borrowers in its HFA Preferred Program. Many Pennsylvania city governments provide additional grant programs.

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

Depending on the loan you apply for, you may be able to purchase a home without making a down payment. Some government mortgages, such as VA and USDA loans, don’t require them at all. Other mortgages, such as FHA and some conventional loans, have low down payment requirements of 3.5% and 3%, respectively.

If you’re applying for a PHFA loan that requires a down payment, you may only need $1,000 of your own funds — the rest of the down payment can come from gifted funds, down payment assistance or other sources.

Can I qualify for down payment assistance in Pennsylvania?

The qualifications for down payment assistance vary by program. Typically, you may need to meet the requirements of a first mortgage, which can include income restrictions, a down payment minimum, homebuyer education requirements and other guidelines. Some PHFA down payment assistance programs require a credit score of 660, which is higher than the requirement for most of their mortgage programs.

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

For PHFA down payment assistance, you’ll need to work with a participating lender and apply for one of the agency’s mortgages. For programs from county or city governments, you’ll follow their guidelines, which may require you to apply through specific lenders or community organizations.

Other first-time homebuyer loan programs

In addition to state first-time homebuyer programs, borrowers can access nationally available loans. Some of the following mortgage programs aren’t necessarily limited to first-time homebuyers, but they are popular with new buyers looking for low down payments and other flexible terms. Many state first-time homebuyer programs incorporate these loan options.

Conventional loans

Conventional (non-government) loans are the most common type of loan. These mortgages have fewer fees than government loans, but are harder to qualify for. Some conventional loan programs, such as Fannie Mae HomeReady® and Freddie Mac Home Possible®, have only a 3% minimum down payment but also have income restrictions. Borrowers putting down less than 20% on a conventional loan can request PMI cancellation once their mortgage balance reaches 80% of their home value, or wait for it to cancel automatically when it reaches a 78% LTV ratio.

FHA loans

Mortgages guaranteed by the Federal Housing Administration (FHA) are popular with first-time homebuyers because of the low down payment requirement of 3.5% and low minimum credit score of 580. In addition, borrowers with credit scores between 500 and 579 may still qualify if they put 10% down. FHA loans don’t have income limits; however, the mortgage amounts are subject to FHA loan limits.

VA loans

Military members, veterans, and eligible spouses can get a VA loan, a mortgage that’s guaranteed by the United States Department of Veterans Affairs (VA) with no down payment or income limits. While there’s no minimum credit score, VA lenders typically require a 620 score or higher.

USDA loans

The U.S. Department of Agriculture (USDA) offers loans for low- and moderate-income borrowers who live in designated rural areas. USDA loans have no down payment requirement and no program credit score, but if working with a lender, they may require a 640 credit score or higher.

What are the best first-time homebuyer loans?

Finding the best first-time homebuyer loan for your situation will depend on your credit score, down payment, loan amount and other factors.

Home price trends in Pennsylvania major areas

Home prices directly impact monthly mortgage payments. With increased interest rates and high home prices, financing a home in Pennsylvania has gotten more expensive in the past year, following national trends.

According to the most recent data from the National Association of REALTORS®, the median home price in Philadelphia County was $240,825 in the third quarter of 2022. Residents there pay an average of $1,247 for a 30-year mortgage — a $423 increase from the $824 of that period in the previous year. Nearby Montgomery County’s median home price is $407,340, with residents paying $2,109 on average, increasing by $716 from $1,393 over that same time. In Allegheny County — which includes Pittsburgh — the Q3 2022 median home price was $222,296, with mortgage payments rising by $404, from $747 to $1,151.

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

Some states participate in a Mortgage Credit Certificate (MCC) program, which allows eligible homebuyers to receive a federal tax credit on mortgage interest paid, up to $2,000. The Pennsylvania Housing Finance Agency paused its MCC program for new home purchases in early 2023. However, residents refinancing a loan with an existing mortgage credit certificate can be reissued the credit.

What are the current mortgage rate trends in Pennsylvania?

Mortgage rates are another factor that significantly affects your home loan payment. According to Freddie Mac’s Primary Mortgage Market Survey, as of December 28, 2023, the average rate for a 30-year fixed-rate mortgage is 6.61%. This average is 5.93% for 15-year fixed-rate mortgages. Good news for buyers: Current rates forecasts state that rates are expected expect rates to drop as we start 2024.