What to know about buying a house in Pennsylvania

Pennsylvania first-time home buyers have plenty of support from both statewide and local organizations. These provide educational courses and counseling, sometimes free of charge.

But, best of all, many of these organizations offer cash assistance to first-time buyers. You could end up with thousands in loans or grants to help with your down payment and closing costs if you qualify. Ready to get started?

In this article (Skip to …)

• PA home buyer overview
• Home loan options
• PA home buyer programs
• First-time buyer grants
• Buying in PA’s cities
• Resources
• PA mortgage rates

Still, with a median sales price of $183,820 statewide in April 2021, that’s a high enough mountain to climb for many first-time home buyers. And real estate price inflation can be daunting when you’re saving for a down payment.

So if you find yourself worrying about minimum down payment requirements, check out the resources on low-down-payment loans and assistance programs below.

.

• Conventional 97 — From Freddie Mac or Fannie Mae. 3% down payment and 620 minimum FICO score. You can usually stop paying mortgage insurance after a few years
• FHA loan — Backed by the Federal Housing Administration. 3.5% down and a 580 minimum credit score. But you’re on the hook for mortgage insurance until you refinance to a different type of mortgage, move home, or pay off your loan
• VA loan — Only for veterans and service members. Zero down payment is required. Minimum credit score varies by lender but often 620. No ongoing mortgage insurance after closing. These are arguably the best mortgages available, so apply if you’re eligible
• USDA loan — For those on low-to-moderate incomes buying in designated rural areas. Zero down payment required. Credit score requirements vary by lender but often 640. Low mortgage insurance rates
• Pennsylvania Housing Finance Agency loans — May include competitive interest rates and down payment assistance. More information below

Note that government loan programs (including the FHA, VA, and USDA home loans) require you to buy a primary residence. That means you can’t use these loans for a vacation home or investment property.

Depending on the mortgage loan you choose, you could potentially get into your new house with minimal cash out of pocket.

These programs even let you use gifted money or down payment assistance (DPA) to cover the down payment and closing costs.

If you’re not sure which program to choose for your first mortgage loan, your lender can help you find the right match based on your finances and home buying goals.

The Pennsylvania Housing Finance Agency (PHFA) offers a selection of loan programs, many of which come with down payment assistance. These are meant to promote affordable housing for first-time buyers in PA.

PHFA loan programs include:

• HFA Preferred loan — A 30-year fixed-rate mortgage with mortgage payments made to the PHFA
• Keystone Home Loan Program — These can include conventional, FHA, VA, or USDA home loans. 0-5% down payment may be required
• Keystone Government Loan (K-Gov) — This program only offers government-backed FHA, VA, or USDA Rural Development (RD) loans

Qualifying home buyers could save up to $2,000 each year in tax breaks if they qualify for PHFA’s Mortgage Tax Credit Certificate (MCC).

PHFA also offers free homebuyer education and counseling through one of its approved counseling agencies. Indeed, if your credit score is lower than 680, it insists you complete an in-person course if you’re using one of its mortgage programs.

To get a mortgage through this organization, you’ll have to pick a private company from its list of approved lenders. And some of its programs have income limits and home purchase price caps as well as minimum credit scores.

The PHFA has some unusually attractive down payment and closing cost assistance programs. However, these tend to be forgivable loans rather than outright grants.

For example, the “Keystone Forgivable in Ten Years Loan Program (K-FIT)” lets you borrow up to 5% of the home’s market or appraised value (whichever is less). But that loan comes with special terms:

• Each year, 10% of the loan is forgiven. So, if you move after Year 1, you have to pay back 90% of the sum you borrowed. But if you’re still in residence after Year 10, you’ll owe nothing
• You’ll need a credit score of 660 and less than $50,000 in liquid assets to qualify

Meanwhile, the Keystone Advantage Assistance Loan Program gives you an interest-free loan that you have to repay over 10 years. That lets you borrow up to 4% of the home’s market or appraised value (whichever is less), but the total you can borrow is capped at $6,000.

Another good offering from the PHFA is the HOMEstead program. This lets you borrow up to $10,000 as a no-interest, second mortgage loan.

• A bit like K-FIT, the HOMEstead loan is forgiven year by year over a set period
• But in this case, that’s only five years. So your loan balance drops 20% each year even though you make no payments
• Providing you still own the home and remain in residence for five years, you’ll have to repay nothing at the end of that time

Each of these programs has its own eligibility requirements and other conditions. So click the “assistance programs” link on PHFA’s website to see whether you’re likely to qualify.

The City of Philadelphia’s Division of Housing and Community Development (DHCD) supports the City of Philadelphia’s “Philly First Home” program. This can provide “a homebuyer assistance grant of up to $10,000 (or 6% of the home’s purchase price, whichever is lower) to assist first-time homebuyers reduce the principal, cover down payment and loan closing costs.”

You must be a first-time buyer and complete a homeownership education course to qualify. And there are caps on eligible household income. Details are shown on the Philly First Home program webpage.

Pittsburgh first-time home buyers

The median home listing price in Pittsburgh was $239,500 in June 2021, according to Realtor.com. That was up by 6.5% year-over-year.

If you want to buy a home at that median price, your down payment options might fall between:

• $7,190 for 3% down payment
• $47,900 for 20% down payment

The Urban Redevelopment Authority of Pittsburgh (URA) says it: “offers a grant to help with down payment and closing costs. Borrowers who earn 80 percent or less of the Area Median Income (AMI) can receive a Down Payment/Closing Cost Assistance Grant of $3,000.”

Fannie Mae has a lookup tool that lets you find the area median income where you wish to buy.

Allentown first-time home buyers

The median home listing price in Allentown was $204,900 in June 2021, according to Realtor.com. That was up by 17.1% year-over-year.

If you want to buy a home at that median price, your down payment options might fall between:

• $6,150 for 3% down payment
• $40,980 for 20% down payment

The City of Allentown says it supports “down payment and closing cost assistance for low/moderate-income households and first-time homebuyer programs run by several nonprofit housing developers.” However, its website doesn’t offer much information on how to apply.

If you’d like more details, try completing the city’s online citizen contact form or just call (610) 439-5999.

You can find the list on HUD’s webpage for PA first-time home buyers.

You can see today’s live mortgage interest rates in Pennsylvania here.

When you’re ready to start the home buying process, make sure you get personalized rate quotes from at least 3 mortgage lenders.

Finding a low-interest loan not only lowers your monthly payments, but can seriously boost your home buying budget as well.

So don’t just look at advertised rates online; actually apply for preapproval and compare the interest rates and monthly payments you’re offered. That’s the only way to know you’re getting the best deal possible on your new home loan.

Verify your new rate (Aug 9th, 2021)