PHFA Down Payment Assistance in Pennsylvania: K-FIT, HFA Preferred, and How to Apply in 2026

PHFA down payment assistance Pennsylvania, The down payment barrier stops more Pennsylvania home buyers than the income barrier. A household earning $90,000 per year can often qualify for a mortgage, but coming up with $15,000 to $25,000 in down payment and closing costs while also paying rent is genuinely difficult. Pennsylvania’s Housing Finance Agency (PHFA) addresses exactly this problem with programs that provide down payment and closing cost assistance layered on top of a primary mortgage.

Understanding how PHFA programs work, what they provide, who qualifies, and how to use them, can be the difference between buying this year and waiting another two or three years while trying to save a down payment. Dynamic Funding Solutions specializes in phfa down payment assistance pennsylvania for borrowers throughout Pennsylvania and Florida.

What Is PHFA?

The Pennsylvania Housing Finance Agency is a state government agency created to expand affordable homeownership across Pennsylvania. It does not lend directly to consumers, instead, it funds and administers programs through a network of PHFA-approved lenders across the state. When you apply for a PHFA loan, you work with a private mortgage company or bank that is authorized to originate PHFA products.

PHFA serves buyers in every Pennsylvania county. While its programs are especially impactful in high-cost areas like the Philadelphia suburbs, they are available statewide.

K-FIT: The Forgivable Second Mortgage

K-FIT (Keystone Forgivable in Ten) is the most valuable PHFA program for most Pennsylvania first-time buyers. Here is how it works:

• Provides 5% of the purchase price as a second mortgage (no cap, 5% of the actual purchase)
• The loan is forgiven at 10% per year over 10 years
• No monthly payments, the loan is deferred with no interest accruing during the forgiveness period
• If you sell or refinance in the first 10 years, the remaining unforgiven balance must be repaid at that time

On a $350,000 purchase, K-FIT provides $17,500, enough to cover most of the down payment on an FHA loan or significantly reduce the cash needed for a conventional loan.

K-FIT eligibility:

• First-time buyer status (no primary residence ownership in past 3 years), exceptions for qualifying veterans
• Property must be a primary residence
• Household income must be within PHFA income limits for your county
• Must complete a homebuyer education course (online options available)
• Must be paired with an eligible PHFA first mortgage product (Keystone Home Loan, HFA Preferred, or VA/USDA first mortgage)

K-FIT purchase price limits vary by county. Philadelphia-area counties (Bucks, Chester, Delaware, Montgomery, Philadelphia) have higher limits than central Pennsylvania counties. Limits are updated periodically and are often higher than buyers assume.

HFA Preferred: PHFA’s Conventional Loan with Reduced MI

HFA Preferred is a conventional first mortgage offered through PHFA’s approved lender network. It is not an assistance program by itself, it is the first mortgage that many buyers use as the foundation for K-FIT assistance.

Key features:

• 3% down payment (lower than standard 5% conventional minimum)
• Reduced mortgage insurance rates compared to standard conventional PMI, at the same credit score, PHFA HFA Preferred PMI costs less
• Income limits apply: typically 80% to 100% of area median income depending on the county
• PMI cancels when equity reaches 20% (unlike FHA MIP, which is permanent on low-down-payment loans)
• Available to first-time and repeat buyers (different income limits apply)

For a buyer with a 680+ credit score who qualifies for K-FIT assistance, the combination of HFA Preferred + K-FIT can result in very little out-of-pocket cash at closing: 3% down partially covered by K-FIT, with reduced MI costs going forward.

Keystone Home Loan: FHA, VA, and USDA Versions

PHFA’s Keystone Home Loan is the first mortgage program that allows buyers to access below-market interest rates on FHA, VA, RD (USDA Rural Development), and conventional loans. It provides an interest rate that is typically below what you would receive from a standard lender originating the same loan type without PHFA involvement.

The interest rate benefit is real but varies: in any given week, the PHFA Keystone rate may be 0.125% to 0.375% lower than a retail lender’s rate on the same loan. Over 30 years, that reduces total interest paid.

Keystone Home Loan eligibility:

• Income limits apply (vary by county and family size)
• Purchase price limits apply (vary by county)
• First-time buyer required for most uses (veterans exempt)
• Homebuyer education course required for first-time buyers

The Keystone Home Loan can also be paired with K-FIT assistance, creating a combined package with a below-market rate first mortgage and forgivable second mortgage.

PHFA ACCESS: Assistance for Buyers with Disabilities

The PHFA ACCESS Down Payment and Closing Cost Assistance program provides up to $15,000 in assistance for qualifying buyers who have a disability or have a household member with a disability.

This program does not require first-time buyer status. The assistance is a 0% interest loan with deferred repayment, similar structure to K-FIT but without the forgiveness schedule. Repayment is due when you sell, refinance, or no longer occupy the home as a primary residence.

For eligible buyers, ACCESS is one of the highest-value assistance programs in Pennsylvania and is underused simply because not enough buyers know it exists.

Homebuyer Education Requirement

Most PHFA programs require completion of a homebuyer education course before closing. PHFA accepts courses from approved providers, most of which are available online. The course typically takes 4 to 8 hours and covers budgeting, mortgage basics, the home buying process, and homeownership responsibilities.

Completing the course early, before you are fully in the mortgage process, is advisable. It fulfills the PHFA requirement and provides genuinely useful information about what to expect at closing and after.

How PHFA Works Alongside Your Primary Lender

A common misconception: buyers think they need to apply directly to PHFA. You do not. PHFA programs are originated through PHFA-approved lenders, mortgage companies, banks, and credit unions that have been approved to sell PHFA products.

The process:

1. Work with a PHFA-approved lender (not all lenders are PHFA-approved)
2. The lender originates the first mortgage as a PHFA Keystone or HFA Preferred loan
3. K-FIT or other assistance is added as a second lien alongside the first mortgage
4. PHFA purchases the loan from the lender after closing, you will make payments to PHFA’s servicing system, not your original lender

Dynamic Funding Solutions is a PHFA-approved lender. We originate PHFA loans across Pennsylvania and can confirm program eligibility, income limits, and purchase price limits for any county before you start the application.

Comparing PHFA Programs Side by Side

Who Should Use PHFA Programs

PHFA is most valuable for buyers who have the income to qualify for a mortgage but not the savings for a full down payment and closing costs. If you have $5,000 to $10,000 saved and are looking at a $350,000 to $450,000 purchase, K-FIT can bridge a meaningful gap.

PHFA is less useful for buyers who already have 10% to 20% down, or buyers whose income significantly exceeds PHFA’s limits and who would qualify for better terms through conventional channels without income restrictions.

The only way to know if PHFA makes sense for your specific situation is to run the numbers both ways, with and without PHFA, and compare the total monthly payment and cash-to-close figures.

Start With a PHFA-Approved Lender

The income limits, purchase price limits, and program availability change periodically. A 15-minute call with a PHFA-approved loan officer is the fastest way to confirm eligibility and understand exactly what K-FIT or other assistance would mean for your specific purchase.

Lena Polnet at Dynamic Funding Solutions is licensed in Pennsylvania and works with PHFA programs regularly. She can confirm your eligibility, run both scenarios (with and without PHFA), and identify the most cost-effective path for your situation.

Book a free 15-minute strategy call: https://calendly.com/lpolnet71/strategy_15min

Pennsylvania: (215) 364-7171

Florida: (561) 247-4888

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Dynamic Funding Solutions | NMLS #17144 | Lena Polnet NMLS #17225 | Licensed in Pennsylvania. This content is for informational purposes only and does not constitute a commitment to lend. Loan approval is subject to credit, income, and property qualification. PHFA program availability and limits are subject to change.

Ready to explore your mortgage options? Contact Dynamic Funding Solutions today or view all our loan programs to find the right fit for your situation. Our licensed mortgage professionals serve borrowers throughout Pennsylvania and Florida.

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