Last Updated on: 11th January 2024, 08:25 pm
Ready to buy a house in Pennsylvania? With a median home price of $250,000 in the state, and an average price of $260,000 in Philadelphia, the state is already fairly affordable for home buyers. As a first time buyer, you can qualify for down payment assistance, first time home buyer loans, and even tax credits that put homeownership even closer within reach!
Most programs for Pennsylvania first time home buyers are offered by the Pennsylvania Housing Finance Agency (PHFA) which provides affordable housing assistance. There are also affordable mortgage programs for first time buyers offered by several PA lenders.
Here’s a complete guide to Pennsylvania first time home buyer programs, including how to qualify. Note that many programs can be combined, but it’s important to check the specific guidelines.
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First Time Home Buyer Tax Credits & Down Payment Assistance in Pennsylvania
Want to know how to buy a house in PA with no down payment? Do you have some money saved up but homeownership is still out of reach? These Pennsylvania first time home buyer grants and tax credits can help you finally make the dream of homeownership come true.
PHFA Grant | PA First Time Home Buyer Grant
This is the most basic of first time home buyer grants in Pennsylvania and a good place to start. The program gives you a grant of $500 toward your down payment when you get an HFA Preferred (Lo MI) loan. You do not need to repay the grant.
You can combine this $500 grant with the Keystone Advantage Assistance (below) for an additional $6,000 in down payment assistance.
PHFA Keystone Advantage Assistance | 0% Interest Down Payment Assistance for PA First Time Home Buyers
The Keystone Advantage Assistance program provides a 0% interest second mortgage of up to 4% of your purchase price or $6,000 that can be used toward your closing costs and down payment. The assistance loan is repaid monthly and amortized over 10 years at 0%.
Note that the Keystone Advantage Assistance can only be used to meet the minimum down payment and closing cost requirements for your loan.
You can use the Keystone Advantage down payment assistance with the following mortgages through PHFA:
- Keystone Home loan
- Keystone Government loan
- HFA Preferred Lo Mi loan (allows you to combine it with the $500 PHFA grant)
You must meet basic eligibility requirements as well. This includes a minimum credit score of 660 and liquid assets that don’t exceed $50,000 (after deducting funds you need for closing costs and down payment).
PHFA Keystone Forgivable in Ten Years Loan (K-FIT) | Forgivable Pennsylvania First Time Home Buyer Assistance
The PHFA introduced one of the best Pennsylvania first time home buyer grants in 2022: a forgivable second mortgage of up to 5% of your purchase price or appraised value with no maximum dollar value.
The new K-FIT program is a forgivable loan with 10% forgiven every year for 10 years. You do not need to make monthly payments on the second mortgage. This new program was designed for low- and moderate-income renters who are barred from buying a home due to the cost.
You can borrow up to 5% of your purchase price or the home’s appraised value. There is no maximum amount. If you are buying a home for $200,000, you can get up to $10,000 in assistance with $1,000 forgiven every year!
This program can only be used with the following home loans:
- Keystone Home Loan (KHL)
- Conventional loan
- FHA loan
- VA loan (only closing costs)
- USDA loan (only closing costs)
To qualify, you must complete free homebuyer education, have a minimum FICO score of 660, and have no more than $50,000 in liquid assets not counting your saved funds for the down payment and closing costs.
There are income and purchase price guidelines if you are using a Keystone Home Loan.
HOMEstead Down Payment & Closing Cost Assistance | Forgivable First Time Home Buyer PA $10,000 Grant
This program provides up to $10,000 in closing cost and down payment assistance as a 0% interest second mortgage. The HOMEstead funds you receive are forgiven at 20% per year with the full amount forgiven as long as you stay in your home for at least five years.
Your first mortgage is provided by PHFA. You must meet the minimum down payment requirement for the loan based on who is guaranteeing or insuring your mortgage with HOMEstead funds used to provide the remainder of the down payment you need or your closing costs.
Note that the HOMEstead down payment assistance is only available in certain areas. Most major cities like Philadelphia and Pittsburgh and seven counties are completely excluded. You must meet these income and purchase price requirements depending on the county.
Employer Assisted Housing(EAH) Initiative | PHFA
This program allows participating employers to offer a benefit to their employees for larger down payment assistance through PHFA. Buyers who are working with a participating lender can get Keystone Advantage Assistance of up to $8,000 (increased from the standard $6,000 limit) toward closing costs and their down payment. The assistance is a 0% interest 10-year second mortgage.
You can see a list of participating employers here.
First Front Door Down Payment Assistance | FHLBank of Pittsburgh
This is one of the best Pennsylvania first time home buyer grants if you have already saved up some money for your down payment but still don’t have enough. The program provides up to $5,000 toward closing costs or your down payment through a matching grant. For every $1 you contribute, the First Front Door program will match $3.
The grant does not need to be repaid as long as you maintain the home as your residence for at least five years. If you sell your home before then, you will need to repay the grant.
There are specific program requirements:
- Be a first time home buyer
- Get a mortgage through a participating lender
- If a student, be working 30+ hours per week
- Complete homeowner counseling
Eligible home buyers must have a household income at or below 80% of the area median for the area in which they currently live.
The First Front Door program can only be used with mortgages provided by a participating bank member. However, the program is not restricted to any specific areas of Pennsylvania.
Mortgage Credit Certificate | PA First Time Home Buyer Tax Credit
One of the most powerful first time home buyer programs in PA is the Mortgage Credit Certificate (MCC). This tax credit lets you reduce your federal tax liability by up to $2,000 every year for the life of your mortgage. The credit is worth 20% to 50% of your mortgage interest paid each year. The credit depends on your original loan amount:
- 20% credit: loan of $200,001+
- 30% credit: loan of $150,001 to $200,000
- 40% credit: loan of $100,001 to $150,000
- 50% credit: loan of up to $100,000
You can qualify for the MCC with a Keystone Government or HFA Preferred (Lo MI) mortgage. It can also be combined with the Keystone Advantage Assistance loan. Just note it can’t be used with the Keystone Home Loan program.
The Pennsylvania first time home buyer tax credit has purchase price and income requirements. You must be a first time buyer to qualify.
First Time Home Buyer Loans in Pennsylvania
PA first time buyer home loans are designed with less stringent requirements when it comes to the minimum credit score, down payment, and other qualifications. Many can also be combined with first time home buyer programs in PA to make homeownership more affordable!
HFA Preferred (Lo MI) Loan | Affordable First Time Home Buyer Loan in PA
The HFA Preferred (Lo Mi) loan is a conventional home loan provided by the PHFA. This 30-year, fixed mortgage is available through participating lenders, but the PHFA will remain the loan servicer. This loan does not require that you are a first time buyer.
A first time home buyer in PA putting down less than 20% can qualify with these requirements:
- Household income below these limits
- Contribute at least $1,000 from your own funds for the down payment (the rest can come from a PA first time home buyer grant or a gift)
- Acceptable credit history and ability to repay
- Purchase a single-family home as a primary residence
- Complete homebuyer education
Many of the PA first time home buyer programs in the section above can be used with this mortgage!
Keystone Home Loan(KHL) | Mortgage Designed for PA First Time Home Buyers
This loan option through the PHFA is designed for first time buyers, although people who are not first time buyers can qualify if they buy within a Targeted Area or are a discharged U.S. veteran.
To qualify, you must have acceptable credit history, ability to repay, and an income and purchase price within the guidelines. You must also have the minimum down payment necessary. With less than 20% down, you must purchase mortgage insurance.
The down payment you need ranges from 0% for VA and USDA loans to 3.5% for an FHA loan or to 3-5% for a conventional mortgage.
Keystone Government Loan(K-GOV) | Financing Through PHFA for Government-Backed Loans
This option isn’t limited to first time home buyers in Pennsylvania. The K-GOV option provides first home loan financing by PHFA on FHA, VA, and USDA loans.
PHFA doesn’t impose any additional requirements aside from those for government-backed loans. The advantage of working with PHFA for an FHA loan is being able to take advantage of PA first time home buyer loans for down payment assistance and tax credits.
With the K-GOV loan, you can qualify for the Mortgage Credit Certificate (MCC) and/or the Keystone Advantage Assistance loan for up to $6,000 in down payment assistance.
Right Step Mortgage | TD Bank
TD Bank offers a first time buyer mortgage in Pennsylvania through its Right Step program. A Right Step mortgage does not require mortgage insurance and you can qualify with a down payment as low as 3%.
To qualify for the TD Right Step Mortgage, you must be a low- or moderate-income buyer or buying a home in a Low-to-Moderate income area. This income is defined as less than 80% of the HUD median.
First Time Home Buyer Programs in Philadelphia
Buying a home in Philly? There are many first time home buyer programs in Philadelphia, PA that make homeownership within reach!
Philly First Home Program | Philadelphia Division of Housing and Community Development (DHCD)
This program isn’t currently accepting new applicants, but the temporary suspension came during the COVID-19 pandemic and will be lifted.
The First Home program is offered by the City of Philadelphia with up to $10,000 (6% of your purchase price) as a first time buyer grant. The first time home buyer assistance can be used toward your down payment, closing costs, or to reduce the principal of your loan!
This program requires completing free Philadelphia homeownership counseling before you sign your sale agreement. It can be used to buy a single-family home or duplex in the city limits. First time buyers must meet income guidelines to be eligible.
Housing Choice Ownership Program | Philadelphia Housing Authority (PHA)
Low-income households eligible for Housing Choice vouchers from HUD can use their vouchers to make homeownership more affordable. This program, offered through the PHA, lets you apply Housing Choice vouchers toward mortgage payments.
There are several eligibility requirements:
- Only first time home buyers
- Complete pre-purchase homeownership counseling
- Earn at least $14,500 per year (or $6,624 for disabled families)
- Have been employed for 12+ months and work 30+ hours per week (disabled and elderly buyers are exempt)
- No criminal history in the last 5 years with no history of fraud involving federal grants or programs
- Home must pass an inspection
You can use Housing Choice vouchers for up to 15 years on a 20+ year mortgage or up to 10 years on a mortgage with a term of less than 20 years.
Starter Mortgage Program & Loan Subsidy for First Time Home Buyers in PA | M&T Bank
M&T Bank’s Home Starter Mortgage is an affordable home loan designed for PA first time home buyers. The program has many advantages:
- Lower down payment requirement
- Ability to finance most of the closing costs
- Ability to use non-traditional sources of credit such as proof of timely rent and utility payments
- No private mortgage insurance (PMI) requirement
M&T Bank also offers a subsidy for buyers purchasing a home in certain neighborhoods. If you are buying a home within one of four counties – Philadelphia, Delaware, Montgomery, and Chester – in a census tract that is 50% or more Black or Hispanic, you can qualify for their mortgage subsidy. The subsidy program can be used to buy down your mortgage interest rate, contribute thousands toward your down payment, or pay closing costs.
Neighborhood Opportunity Program | Bryn Mawr Trust (BMT)
Bryn Mawr Trust offers one of the best first time home buyer programs in Philadelphia that is currently available. Designed for low- to moderate-income buyers, this first time home buyer loan offers:
- Low down payment options with as little as 3% down
- No private mortgage insurance (PMI) required (for mortgages below $100,000 and/or in low-to-moderate income census tracts)
- Seller’s assist of up to 6% allowed
- Minimal reserves required
- Discounted closing costs
Pennsylvania First Time Home Buyer FAQ
Who is considered a first time home buyer in Pennsylvania?
As a general rule, you are considered a first time home buyer if you have not had any share of ownership in a home in the past three years. You are still eligible if you owned a home while married but not as a single person.
What programs are available for first time home buyers in Pennsylvania?
There are many first time home buyer programs in Pennsylvania including down payment grants of up to $10,000 that are deferred or forgivable, affordable loans designed for first time buyers, and tax credits to save up to $2,000 per year.
Do you have to pay back down payment assistance in Pennsylvania?
This depends on the program you choose. Some PA down payment assistance programs are forgiven with no monthly payments if you remain in the home for a specific amount of time. Some require monthly payments as a 0% second mortgage.
Now that you have a better understanding of the first time home buyer programs in PA, are you ready to join the ranks as a homeowner? Once you’ve started the process of buying a home, give us a call at Suburban Solutions for an affordable, personalized moving quote so you can settle into your new home without the stress!