Pennsylvania First-Time Home Buying Assistance Programs & Grants for 2024

Who Is Considered a First-Time Homebuyer in Pennsylvania?

According to federal and Pennsylvania housing authorities, a first-time homebuyer is someone who has not owned a primary home in the last three years.

The U.S. Department of Housing and Urban Development (HUD) also considers these groups first-time buyers:

•  A single parent who has only owned a home with a partner while married

•  A displaced homemaker who has only owned a home with a spouse

•  Someone who has owned a principal residence not permanently affixed to a permanent foundation

•  Someone who has only owned a property that wasn’t in compliance with state, local, or model building codes

Keep in mind that veterans and people buying in federally targeted areas often qualify for the same lending advantages as first-time buyers.

Recommended: First-Time Homebuyer Guide

5 Pennsylvania Programs for First-Time Homebuyers

The Pennsylvania Housing Finance Agency offers mortgage loans and down payment and closing cost assistance to first-time and repeat buyers. In general, you should know your FICO® credit score and household income.

And you might have a good idea of how much home you can buy, but getting the details with a home affordability calculator can’t hurt.

1. HomeFirst Down Payment Assistance Program

Pennsylvania Housing provides a 30-year fixed-rate conventional loan to qualifying buyers, who do not have to be first-time buyers. The mortgage comes with a reduced mortgage insurance coverage requirement.

There are household income limits , and you must have an “acceptable” credit history to qualify. You must put down at least $1,000 toward the home and show the ability to make your monthly payments. Pre-closing homebuyer education is required.

Borrowers obtaining an HFA Preferred loan may qualify to receive a Pennsylvania Housing grant of $500 for a down payment and closing costs. To apply, contact a participating lender .

2. PHFA: Keystone Home Loans

This mortgage program does not require you to be a first-time homebuyer, though you need to be purchasing a home in a targeted county (or be a discharged veteran).

To qualify, you must meet household income and purchase price limits. Additionally, you need an “acceptable” credit history and be able to demonstrate that you can afford your mortgage payments.

To see if you qualify, contact a participating lender .

3. PHFA: HOMEstead Down Payment and Closing Cost Loan

This program offers up to $10,000 in down payment and closing cost assistance through a no-interest second mortgage. The loan is forgiven over five years. Buyers participating in the Keystone Home Loan Program are eligible to apply if they meet income and home purchase price limits .

4. PHFA: Keystone Advantage Assistance Loan

Keystone Advantage provides a second mortgage of up to 4% of the purchase price (or $6,000, whichever is less) for the down payment and closing costs. The loan has 0% interest and has monthly payments for 10 years. To qualify, you must have a credit score of 660 or higher. Your liquid assets cannot be more than $50,000.

5. City and County Programs

It’s a good idea to look into assistance from the city or county where you plan to put down roots. Pennsylvania homebuyers might try an option on this list .

How to Apply to Pennsylvania Programs for First-Time Homebuyers

For the Pennsylvania Housing programs, contact a participating lender to make sure you qualify, start your application, and get guidance on assistance that may pair with your mortgage.

Federal Programs for First-Time Homebuyers

Several federal government programs are designed for people who have low credit scores or limited cash for a down payment. Although most of these programs are available to repeat homeowners, like state programs, they can be especially helpful to people who are buying a first home or who haven’t owned a home in several years.

The mortgages are generally for single-family homes, two- to four-unit properties that will be owner occupied, approved condos, townhomes, planned unit developments, and some manufactured homes.

Recommended: The Average Down Payment on a House

Federal Housing Administration (FHA) Loans

The FHA, which is part of the U.S. Department of Housing and Urban Development (HUD), insures mortgages for borrowers with lower credit scores. Homebuyers choose from a list of approved lenders that participate in the FHA loan program. Loans have competitive interest rates and require a down payment of 3.5% of the purchase price for borrowers, who typically need FICO® credit scores of 580 or higher. Those with scores as low as 500 must put at least 10% down.

In addition to examining your credit score, lenders will look at your debt-to-income ratio (DTI, your monthly debt payments compared with your monthly gross income). FHA loans allow a DTI ratio of up to 50% in some cases, vs. a typical 45% maximum for a conventional loan.

Gift money for the down payment is allowed from certain donors and will be documented in a gift letter for the mortgage.

FHA loans always require mortgage insurance: a 1.75% upfront fee and annual premiums for the life of the loan, unless you make a down payment of at least 10%, which allows the removal of mortgage insurance after 11 years. For a $300,000 mortgage balance, upfront MIP would be around $5,250 and monthly MIP, at a rate of 0.55%, would be around $137. You can learn more about these loans, including FHA loans for refinance and rehab of properties, by reading up on FHA requirements, loan limits, and rates.

Freddie Mac Home Possible Mortgages

Very low- and low-income borrowers may make a 3% down payment on a Home Possible^® mortgage. These loans allow various sources for down payments, including co-borrowers, family gifts, employer assistance, secondary financing, and sweat equity.

The Home Possible mortgage is for buyers who have a credit score of at least 660.

Once you pay 20% of your loan, the Home Possible mortgage insurance will be canceled, which will lower your mortgage payments.

Fannie Mae HomeReady Mortgages

Fannie Mae HomeReady^® Mortgages allow down payments as low as 3% for low-income borrowers. Applicants generally need a credit score of at least 620; pricing may be better for credit scores of 680 and above. Like the Freddie Mac program, HomeReady loans allow flexibility for down payment financing, such as gifts and grants.

For income limits, a comparison to an FHA loan, and other information, go to this Fannie Mae site .

Fannie Mae Standard 97 LTV Loan

The conventional 97 LTV loan is for first-time homebuyers of any income level who have a credit score of at least 620 and meet debt-to-income criteria. The 97% loan-to-value mortgage requires 3% down. Borrowers can get down payment and closing cost assistance from third-party sources.

Department of Veterans Affairs (VA) Loans

Active-duty members of the military, veterans, and eligible family members may apply for loans backed by the Department of Veterans Affairs. VA loans, which can be used to buy, build, or improve homes, have lower interest rates than most other mortgages and don’t require a down payment. Most borrowers pay a one-time funding fee that can be rolled into the mortgage.

Another benefit of VA loans is that they do not require private mortgage insurance (PMI) for borrowers who make a down payment of less than 20%. And they have more flexible credit score requirements. In some cases, even those who have previously been in foreclosure or bankruptcy can qualify.

Borrowers applying for a VA loan will need a Certificate of Eligibility from the VA so make sure to review a guide to qualifying for a VA loan as a first step in the process.

Native American Veteran Direct Loans (NADLs)

Eligible Native American veterans and their spouses may use these no-down-payment loans to buy, improve, or build a home on federal trust land. Unlike VA loans listed above, the Department of Veterans Affairs is the mortgage lender on NADLs. The VA requires no mortgage insurance, but it does charge a funding fee.

US Department of Agriculture (USDA) Loans

No down payment is required on these loans to moderate-income borrowers that are guaranteed by the USDA in specified rural areas. Borrowers pay an upfront guarantee fee and an annual fee that serves as mortgage insurance.

The USDA also directly issues loans to low- and very low-income people. For loan basics and income and property eligibility, head to this USDA site .

HUD Good Neighbor Next Door Program

This program helps police officers, firefighters, emergency medical technicians, and teachers qualify for mortgages in the areas they serve. Borrowers can receive 50% off a home in what HUD calls a “revitalization area.” They must live in the home for at least three years.

First-Time Homebuyer Stats for 2024

Here’s some data about Pennsylvania home sales.

•  Median sales price in Pennsylvania (January 2024, Redfin): $264,700

•  3% down payment in Pennsylvania: $7,941

•  20% down payment: $52,940

•  Average credit score in Pennsylvania (average U.S. score is 718): 723

Financing Tips for First-Time Homebuyers

In addition to federal and state government-sponsored lending programs, there are other financial strategies that may help you become a homeowner. After reading up on how to choose a mortgage term, check out these tips on how to lower your mortgage payment:

•  Traditional IRA withdrawals. The IRS lets first-time homebuyers who qualify make a one-time, penalty-free withdrawal of up to $10,000 from their IRA if the money is used to buy, build, or rebuild a home. The IRS considers anyone who has not owned a primary residence in the past three years a first-time homebuyer. You will still owe income tax on the IRA withdrawal. If you’re married and your spouse has an IRA, they may also make a penalty-free withdrawal of $10,000 to purchase a home.

•  Roth IRA withdrawals. Because Roth IRA contributions are made with after-tax money, the IRS allows tax- and penalty-free withdrawals of contributions for any reason as long as you’ve held the account for five years. You may also withdraw up to $10,000 in earnings from your Roth IRA without paying taxes or penalties if you are a qualifying first-time homebuyer and you have had the account for five years. With accounts held for less than five years, homebuyers will pay income tax on earnings withdrawn.

•  401(k) loans. If your employer allows borrowing from the 401(k) plan that it sponsors, you may consider taking a loan against the 401(k) account to help finance your home purchase. With most plans, you can borrow up to 50% of your 401(k) balance, up to $50,000, without incurring taxes or penalties. You pay interest on the loan, which is paid into your 401(k) account. You usually have to pay back the loan within five years, but if you’re using the money to buy a house, you may have up to 15 years to repay.

•  State and local down payment assistance programs. Usually offered at the regional or county level, these programs provide flexible second mortgages for first-time buyers looking into how to afford a down payment.

•  The mortgage credit certificate program. First-time homeowners and those who buy in targeted areas can claim a portion of their mortgage interest as a tax credit, up to $2,000. Any additional interest paid can still be used as an itemized deduction. To qualify for the credit, you must be a first-time homebuyer, live in the home, and meet income and purchase price requirements, which vary by state. If you refinance, the credit disappears, and if you sell the house before nine years, you may have to pay some of the tax credit back. There are fees associated with applying for and receiving the mortgage credit certificate that vary by state. Often the savings from the lifetime of the credit can outweigh these fees.

•  Your employer. Your employer may offer access to lower-cost lenders and real estate agents in your area, as well as home buying education courses.

•  Your lender. Always ask your lender about any first-time homebuyer grant or down payment assistance programs available from government, nonprofit, and community organizations in your area.

The Takeaway

In Pennsylvania, first-time homebuyers of moderate means may be able to get a mortgage and down payment assistance through the state or a local agency. Other first-time buyers can shop for an advantageous mortgage on their own.

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