Pennsylvania has one of the strongest first-time homebuyer assistance programs in the country through the Pennsylvania Housing Finance Agency (PHFA). The problem: most buyers don’t know the programs exist, and navigating the options without guidance is confusing.
This guide breaks down every major PHFA program, how they work together, and what you need to prepare before you apply.
What Is PHFA?
The Pennsylvania Housing Finance Agency is a state agency that offers below-market mortgage rates, down payment assistance, and closing cost grants specifically for Pennsylvania homebuyers. PHFA doesn’t lend directly — it works through a network of approved lenders, including brokers like Lena Polnet at Dynamic Funding Solutions.
PHFA programs are available statewide, covering single-family homes, townhouses, and condominiums that meet PHFA’s property requirements.
The First-Time Buyer Definition
Under PHFA guidelines, a "first-time homebuyer" is someone who has not owned a primary residence in the past three years. This means:
- You may have owned a home previously and still qualify
- You can own investment property and still be a first-time buyer for PHFA purposes
- Both borrowers on a joint application must meet the definition
Some PHFA programs waive the first-time buyer requirement for borrowers purchasing in targeted areas designated by the federal government.
PHFA Core Loan Programs
HFA Preferred (Fannie Mae Conventional)
HFA Preferred is PHFA’s conventional loan product backed by Fannie Mae. Key features:
- Fixed 30-year rate
- 3% minimum down payment
- Private mortgage insurance is required below 20% down, but at reduced rates compared to standard PMI
- Income limits apply
- Available statewide for qualified properties
HFA Preferred is often the most cost-effective option for buyers with credit scores of 680 or higher who can document stable income.
HFA Advantage (Freddie Mac Conventional)
HFA Advantage is PHFA’s Freddie Mac-backed conventional alternative, nearly identical in structure to HFA Preferred. The underwriting guidelines differ slightly between Fannie and Freddie, so a borrower who doesn’t qualify under one may qualify under the other.
Your lender runs the file and determines which is the better fit.
PHFA Advantage (0% Down + K-FIT)
PHFA Advantage layers a 0% down payment with K-FIT assistance to create a potentially zero-out-of-pocket purchase for qualified buyers. This is PHFA’s most aggressive first-time buyer structure. Income and property limits apply.
Keystone Government Loan
Keystone Government is PHFA’s product for FHA, VA, and USDA Rural Development borrowers. If you want FHA financing (3.5% down) with PHFA’s below-market rate, this is the channel.
It can be combined with K-FIT and closing cost assistance, making it one of the lowest total-cash-required paths for buyers who need flexible credit qualifying.
K-FIT: The Forgivable Second Mortgage
K-FIT is the most powerful piece of the PHFA toolkit and deserves close attention.
What it is: A second mortgage equal to 5% of the purchase price or appraised value (whichever is lower), used for down payment and/or closing costs.
Interest rate: 0%
Monthly payment: None
Forgiveness schedule: 10% forgiven each year for 10 years
After 10 years: Fully forgiven — no repayment required
If you sell or refinance before 10 years, the remaining balance is due at that time, prorated based on how many years of forgiveness have already accrued.
Example: Purchase price $300,000 → K-FIT provides $15,000. After 5 years, $7,500 has been forgiven. If you sell in year 5, you repay $7,500 from your proceeds.
K-FIT can be combined with HFA Preferred, HFA Advantage, and Keystone Government — it’s not a standalone product.
Closing Cost Assistance: The PHFA Grant
PHFA also offers a closing cost and/or down payment assistance grant of $500 for borrowers using the HFA Preferred program. While modest, it stacks on top of K-FIT.
Additionally, PHFA has a Closing Cost Assistance Program for borrowers using Keystone Government Loans — up to $1,000 toward closing costs.
ACCESS Program for Borrowers With Disabilities
PHFA’s ACCESS Home Modification Program provides a second mortgage of up to $10,000 to help people with disabilities (or family members living with a person with a disability) make accessibility modifications to a newly purchased home. This is a deferred-payment loan that carries no interest and no monthly payment.
Income and Purchase Price Limits
PHFA sets income limits by county based on household size, and purchase price limits by county. These change periodically. Current limits for major Pennsylvania counties (verify with your lender before relying on these figures):
Income limits (1–2 person household, representative figures):
- Philadelphia County: approximately $114,000–$136,000 depending on program
- Bucks, Chester, Delaware, Montgomery counties: approximately $114,000–$143,000
- Allegheny County: approximately $99,000–$122,000
- Dauphin/Lancaster/York: approximately $95,000–$115,000
Income limits are higher for households of 3 or more people.
Purchase price limits: Vary by county and whether the property is in a targeted area. In most suburban Philadelphia counties, limits are in the $450,000–$500,000+ range for targeted areas.
Your lender will pull the current limits for your specific county at the time of application.
Step-by-Step: How to Prepare for a PHFA Application
Step 1: Check income and purchase price limits for your county. Your lender can do this quickly. If your income is over the limit, PHFA is off the table — but there may be other state and local programs available.
Step 2: Complete a PHFA-approved homebuyer education course. All first-time buyers using PHFA programs must complete this. Online options are available and typically take a few hours.
Step 3: Gather documentation. Two years of tax returns, W-2s or 1099s, one month of pay stubs (if employed), two months of bank statements, and government-issued ID.
Step 4: Check your credit. Most PHFA programs require a minimum 640–660 credit score depending on the loan type. Address any issues before applying.
Step 5: Get pre-qualified through a PHFA-approved lender. This is where you find out exactly which programs you qualify for and how they stack. An approved broker can run all scenarios and build the combination that minimizes your cash to close.
Why Working With a PHFA-Approved Broker Matters
PHFA programs are only available through approved participating lenders. Lena Polnet is a PHFA-approved broker with 28+ years of experience placing Pennsylvania first-time buyers into PHFA programs. She knows how to layer K-FIT with the right first mortgage, how to structure your application to meet PHFA guidelines, and how to move through the approval process without delay.
If you’re a first-time buyer in Pennsylvania, understanding PHFA is non-negotiable. The combination of below-market rates, K-FIT forgiveness, and closing cost assistance can save tens of thousands of dollars over the life of the loan.
Ready to find out which PHFA programs you qualify for? Call (215) 364-7171 or visit dynamicfunding.net to get started.
Lena Polnet, NMLS #17225 | Dynamic Funding Solutions, NMLS #17144 | Huntingdon Valley, PA 19006 | (215) 364-7171 | dynamicfunding.net. This content is for informational purposes only and does not constitute a commitment to lend. Loan programs, rates, and terms are subject to change and borrower qualification. Not all applicants will qualify.