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Second Mortgage / Purchase Assistance Loan Programs for Homeownership Professionals
PHFA offers homeownership professionals / lenders the following purchase assistance loan programs that can be used with PHFA first mortgage home purchase loans.
Keystone Advantage Assistance Loan Program Information
The Keystone Advantage Assistance Loan Program provides a second mortgage loan to help with the costs associated with the purchase of a home. Qualified borrowers can receive up to four percent (4%) of the purchase price or market value or $6,000 (whichever is less) in downpayment and closing cost assistance to be repaid monthly. The assistance loan will be amortized over a ten year term at zero percent (0%) interest.
The Keystone Advantage Assistance can be used in conjunction with the following PHFA first mortgage home purchase loan programs:
- HFA Preferred™(Lo MI), or
- Keystone Government Loan,
- Keystone Home loan.
Buyers must meet the requirements of the applicable PHFA first mortgage program, and must also meet the requirements associated with the Keystone Advantage Program which are listed below:
- The Keystone Advantage Assistance requires all borrowers to have a minimum credit score of 660.
- Assistance can only be used for the minimum required downpayment and/or closing costs.
- The minimum loan amount is $500.
- Borrower(s) liquid assets may not be greater than $50,000 after deducting the funds needed to close on the loan. This includes cash and funds in checking and savings accounts, stocks, bonds, certificates of deposit and similar liquid accounts. Funds from retirement accounts such as 401(k)s, IRAs and pension funds will only be considered if they can be withdrawn without a penalty due to borrower meeting age requirement and/or being retired.
- The Keystone Advantage Assistance program may not be combined with any other PHFA assistance program, with the exception of the Access Modification Loan Program.
- Keystone Advantage Assistance loans may be used on Conventional, FHA, VA or RD loans. All applicable FHA, VA or RD loan underwriting requirements apply, including loan to value and downpayment requirements.
Keystone Forgivable in Ten Years Loan Program (K-FIT)
The Keystone Forgivable in Ten Years Loan Program (K-FIT) is available for qualified homebuyers, to provide assistance towards downpayment and/or closing costs. This program provides a second mortgage loan to help buyers supplement the costs of homeownership. Eligible borrowers may receive five percent (5%) of the lesser of the purchase price or appraised value with no maximum dollar limit in downpayment and closing cost assistance. The K-FIT loan is forgiven on an annual basis over ten years at a rate of ten percent (10%) a year.
The Keystone Forgivable in Ten Years Loan Program (K-FIT) can be used in conjunction with the following PHFA first mortgage home purchase loan programs:
- Keystone Home loan.
Buyers must meet the requirements of the applicable PHFA first mortgage program, and must also meet the requirements associated with the Keystone Forgivable in Ten Years Loan Program (K-FIT) which are listed below:
- The K-FIT program requires all borrowers to have a minimum credit score of 660.
- The maximum amount of assistance to eligible homebuyers will be based upon the lesser of the purchase price or appraised value.
- Assistance can only be used for the minimum required downpayment and/or closing costs.
- The minimum loan amount is $500.
- The K-FIT Loan Program may not be combined with any other PHFA assistance program, except for the Access Modification Loan Program.
- The K-FIT loan Program may be used on Conventional, FHA, VA or RD loans. All applicable FHA, VA or RD loan underwriting requirements apply, including loan to value and downpayment requirements.
- The asset limitation of liquid funds may not be greater than $50,000 after deducting the funds needed to close on the loan. This includes cash and funds in checking and savings accounts, stocks, bonds, certificates of deposit and similar liquid accounts. Funds from retirement accounts such as 401(k)s, IRAs and pension funds will only be considered if they can be withdrawn without a penalty due to borrower meeting age requirement and/or being retired.
Mortgage Tax Credit Certificate Information
A PHFA Mortgage Credit Certificate (MCC) allows homebuyers to claim a tax credit of 20-50 percent (20%-50%) of the mortgage interest paid per year, capped at $2,000 annually. It is a dollar-for-dollar reduction against your federal tax liability.
The MCC is available to qualified homebuyers in conjunction with the following PHFA first mortgage home purchase loan programs:
- HFA Preferred™(Lo MI), or
- Keystone Government Loan;
- and, may also be combined with a Keystone Advantage Assistance loan.
Due to the source of funds, an MCC cannot be used in conjunction with the Keystone Home loan.
Applicants must meet the requirements of the applicable PHFA first mortgage program, and must also meet the requirements associated with the MCC program which are listed below:
- First-Time Homebuyers: The borrower and all other adults who intend to live in the home within 12 months from closing must be first-time homebuyers (have not had an ownership interest in their principal residence during the previous three years). The first-time buyer requirement does not apply if the borrower is a veteran or is purchasing in a targeted county or area. Target counties are indicated by a "T" in the listing of Purchase Price and Income limits (Appendix A). Please note that some non-target counties have targeted neighborhoods within them as listed in the appendix.
- Income: The gross annual household income for all adults that intend to occupy the home within one year from loan closing does not exceed the Keystone Home Loan Program income limit (Appendix A). All sources of income must be included, except for income received by persons under age 18 and income received by dependants enrolled in a full-time undergraduate program.
- Purchase Price: The purchase price of the prospective home does not exceed the Keystone Home Loan Program purchase price limit (Appendix A). This includes all costs for a complete home. It is also known as the total acquisition cost. The appraised value of land owned outright for more than two years does not need to be included.
- Mortgagor's Affidavit: Borrowers must complete the PHFA Mortgagor's Affidavit at the time of loan application and reaffirm it at closing, and the Recapture Tax Notice must be signed at or prior to closing.
Does the Credit Expire?
The Mortgage Credit Certificate will expire if the home is sold or is no longer used as the borrower's primary residence. If the borrower maintains ownership and continues to occupy the property, they will be eligible to claim the credit for the life of the loan. If the loan is refinanced, the MCC may be eligible for reissue with the approval of PHFA.
How much of a Tax Credit can be claimed?
The amount of the annual tax credit ranges from 20 to 50 percent (20% - 50%) of the annual interest you paid on the mortgage loan. The credit rate percentage is based on the original loan amount as listed in the chart below. The amount of the credit claimed annually cannot exceed the lesser of $2,000 or your annual federal income tax liability, after all other credits and deductions have been taken into account. The $2,000 limit does not apply to the credit rate of 20%. The amount of interest not claimed under the MCC may be used towards the mortgage interest deduction on schedule A of your tax return.
|Loan Amount||Credit Rate|
|Up to $100,000||50%|
|$100,001 - $150,000||40%|
|$150,001 - $200,000||30%|
|$200,001 and greater||20%|
|x||4%||mortgage interest rate|
|=||$2,000||capped annually at $2,000 maximum eligible tax credit amount|
In this example, the tax credit will be the maximum of $2,000 and the remaining $3,000 will be a schedule A deduction per the IRS tax code. Up to 40% of the annual interest paid may be taken as an annual tax credit for the life of the loan.
How to Apply
If you meet the conditions above, contact a PHFA participating lender to start your mortgage application. PHFA also offers homebuyers the opportunity to receive homebuyer counseling and education free of charge through one of its approved counseling agencies. We strongly encourage you to seek the assistance of a counselor before you sign a sales agreement, especially if you are a first-time buyer. Any borrower with a FICO credit score lower than 680 is required to complete a course prior to closing on their loan.
Mortgage Credit Certificate Calculator
The Mortgage Credit Certificate calculator provides an estimate of the potential tax benefits of having an MCC. Please contact your tax professional to determine actual calculations.
Program Information for Persons with Disabilities
The Pennsylvania Housing Finance Agency (PHFA) offers home loans with competitive interest rates and fees through any of the Agency's first mortgage home purchase loan programs (i.e., Keystone Home Loan, Keystone Government Loan, HFA Preferred™(Lo MI), HFA Preferred Risk Sharing™(No MI)). All programs offer a fixed interest rate for 30 years.
- The Keystone Home Loan program has income and purchase price limits, as well as a first time homebuyer requirement specific to each county.
- The HFA Preferred Risk Sharing™(No MI) and HFA Preferred™(Lo MI) loans have income limits but do not have a first time homebuyer requirement, nor do they have purchase price limits.
- The Keystone Government Loan program does not have income or purchase price limits, as well as not having a first time homebuyer requirement.
Buyers with a disability or a disabled household member, who are eligible for any of these home loan programs, may also be eligible to receive funds to make accessibility modifications to the home they buy and may also be eligible for up to $15,000 in a no interest downpayment and closing cost assistance loan through the Access Downpayment and Closing Cost Assistance Program. The Access assistance loan is only available to buyers who are also using the Access Home Modification Program described below and whose gross, annual household income does not exceed 80 percent (80 %) of statewide family median income as determined by the Federal Department of Housing and Urban Development. It may not be used in conjunction with any other PHFA downpayment and/or closing cost assistance program.
First time buyers may also be eligible for up to $10,000 in a no interest downpayment and closing cost assistance loan through the HOMEstead Program. This assistance may be used with or without the modification program, but the property must meet HUDs Housing Quality Standards, and there are maximum income and purchase price limits depending on the county in which the home is located. The HOMEstead Program is not available in all areas and may not be used in conjunction with any other PHFA downpayment and/or closing cost assistance program.
You may be able to find a home that suits your lifestyle and living needs just the way it is. Or, you may find a home that would suit your needs if certain modifications were made—this is when PHFA's Access Home Modification Program can help. It offers a zero-interest loan between $1,000 and $10,000 in conjunction with a PHFA Keystone Home Loan or Keystone Government Loan. Repayment is not required as long as you occupy the home as your principal residence. Before you sign a sales agreement with the seller, you should first determine if the house suits your present and future living needs, or if it could be made suitable with up to $10,000 in modifications. A professional home designer can help you decide what type of modifications should be made. Common modifications include the addition or repair of an entrance ramp, widening of doors and hallways, installation of grab bars and handrails, bathroom and/or kitchen modifications, and the installation of lifting devices.
If you will be making modifications to the home, you will need to provide the lender with a contract for the modifications. The contract must:
- Be signed by you and a contractor registered with the PA Attorney General's office;
- Be contingent upon approval of your home loan;
- State the specific work to be done and must be supported by specifications, blueprints, drawings, etc.;
- Include the actual maximum amount that can be charged (not estimated amount);
- Include a release of lien clause to maintain clear title;
- State that the contractor agrees to complete the work in compliance with all applicable building codes and zoning restrictions and to obtain the necessary permits and a certificate of completion within 90 days of your closing date.
The appraisal of the home will be based upon the as-is condition of the home. In other words, the home's value does not have to support the amount of the modifications. The funds for the modification(s) will be held in escrow when you close on your home. An initial payment in an amount up to 1/3 of the contract amount may be disbursed to the contractor at or after your closing date.
If you think you might be eligible for a PHFA home loan (with or without any additional assistance loans), contact a participating lender. PHFA does not handle the mortgage application process. Instead, there is a network of lenders and brokers throughout the state that will process and close the loans. PHFA then buys the loan from them immediately following the loan closing (also referred to as Settlement). So, you would be making your mortgage payment directly to PHFA for the life of your loan. The lender will be able to determine if you qualify for a home loan and, if so, how much of a home you can afford. You should not rely on the lender to determine if and what kind of access modifications would be right for you. That is up to you.
PHFA also offers homebuyers the opportunity to receive homebuyer counseling and education through one of its approved counseling agencies. Attending a pre-closing course is required for borrowers with a FICO credit score lower than 680. However, we strongly encourage you to seek the assistance of a counselor before you sign a sales agreement, especially if you are a first-time buyer. Becoming an informed buyer will help you learn what questions to ask and how to understand the home buying process. It will also help you identify and avoid unscrupulous lenders and contractors that do not have your best interests at heart.
Moving into your new home is just the start to the benefits and responsibilities of owning your own place to live. Sticking to a sound budget will help you keep up with your mortgage payments and save some funds for future replacement and maintenance items. Keeping your home attractive and in good repair will help it to maintain or even increase in value. Getting to know your neighbors will provide you with a sense of community and security. When you start off on the right foot, you can have peace of mind knowing that you made the best decision on what will probably be the largest purchase of your lifetime.
HOMEstead Downpayment and Closing Cost Assistance Loan Program
Homebuyers eligible for the HOMEstead program may qualify for up to $10,000 in downpayment and closing cost assistance in the form of a no-interest, second mortgage loan. HOMEstead funds are forgiven at 20 percent per year over five years for all loans closed on or after January 1, 2007. The minimum loan amount is $1,000. The first mortgage is provided by PHFA at the same rate as the Keystone Home Loan program.
HOMEstead borrowers must meet the minimum downpayment requirement based on whoever is insuring or guaranteeing the loan. HOMEstead funds may provide the remainder of the downpayment and the closing costs. In certain cases, based upon family need, the funds may provide additional down money to make the property affordable to the buyer.
Buyers participating in PHFA’s Keystone Home Loan Program are eligible to apply if they meet certain HOMEstead Program income and home purchase price limits that vary by county. Most major cities and seven counties are wholly excluded from the program because they receive their own federal allocation. Eligible areas are noted on the limits above. The home must also meet other property guidelines specified by federal rules. Federal regulations for Lead-Based Paint Hazard Reduction (24 CFR Part 35) are applicable to HOMEstead Second Mortgage Program applicants. Therefore, most homes built prior to 1978 are not eligible for HOMEstead assistance.
As in all PHFA homeownership programs, loans are made by a local participating lender, not by the Agency itself.
Program requirements and funding availability are determined by the US Department of Housing and Urban Development as set forth in the HOME Investment Partnership Program and the American Dream Downpayment Initiative. PHFA HOMEstead funding is therefore allocated to eligible homebuyers on a first-come, first-served basis.
Employer Assisted Housing (EAH) Program Information
The Pennsylvania Housing Finance Agency is pleased to offer an Employer Assisted Housing (EAH) Initiative to help address the issues regarding the lack of affordable housing for low- to moderate-income workers. Throughout the country and certainly throughout Pennsylvania, homeownership is beyond the reach of core community employees, medical personnel, school employees, police and fire personnel, county workers, laborers, service industry staff, etc.
Participating employers who offer a monetary home purchase benefit to their staff, partner with PHFA to stretch their employees' home buying dollars even further. Although the employers' benefits do not have to be contingent on a PHFA mortgage, if the employee is approved for a PHFA mortgage, through a participating lender, the borrower will receive additional financial advantages, at no cost to the employer! An Employer Assisted Housing program benefits everyone; the employee, the employer and the local communities.
Stretch your home buying dollars even further with EAH!!
Homebuyers working for a Participating EAH Employer can receive a Keystone Advantage Assistance Loan of up to $8,000 for downpayment and/or closing cost assistance in the form of an interest free loan amortized over 10 years. Employees must meet the eligibility requirements for the Advantage Program to qualify. Assistance under the Program is limited to the lesser of 4% or $6,000 to non EAH borrowers.
Combining the Employers benefit with a PHFA mortgage will reap even more benefits for the employee. All PHFA loans have the following advantages:
- Competitive rates and fees
- Free homebuyer counseling
- Downpayment and closing cost assistance loans are available
- 30 year, fixed-rate terms
- Mortgage loans for new or existing homes
- Conventional, FHA, VA, and RD loans
- Funds are available year round
- Refinance loan programs are available