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PHFA: HFA Preferred™ Loan Program for PA Home Buyers

Beautiful two story houseThe HFA PreferredTM Lending Program is a mortgage option created to help first-time homebuyers acquire a house. In partnership with Fannie Mae, one of the nation's top providers of residential mortgage financing, participating state and local housing finance organizations can provide this service.

For people who may otherwise find it difficult to qualify for a conventional mortgage, the HFA PreferredTM program provides qualified homebuyers with a low down payment alternative, lower mortgage insurance rates, and flexible credit standards.

Overview of the HFA Preferred™ Loan Program (page 27)

The HFA PreferredTM program is a conventional mortgage product offered by the Pennsylvania Housing Finance Agency. The maximum financing amount available under this program to qualifying homebuyers is 97 percent (97%) of the home's assessed value or purchase price, whichever is less.

One hundred five percent (105%) maximum combined loan to value (CLTV). The plan offers a 30-year fixed rate term wholly amortized over a 30-year fixed rate term. Except for any provisions to the contrary, loans must comply with the HomeReady® program requirements as outlined in the most recent edition of the Fannie Mae Selling Guide at

Eligibility Requirements

A new mortgage on the borrower's intended principal home may be funded with the loan. The loan cannot be larger than Fannie Mae can now issue, and high-priced areas are irrelevant. Every borrower shall acquire the Property as their Primary Residence (or refinance a loan on their primary Residence).

Down Payment

The purchase price or appraised value may be funded up to 97% (95 percent for prefabricated homes and manually authorized loans) (3% down payment). The maximum CLTV with a Community Seconds or PHFA-authorized affordable housing assistance loan is 105 percent.

Borrower Eligibility

This program does not have a first-time purchase requirement. At the time of loan closure, the borrower may possess a stake in another residential property.

Minimum Borrower Contribution

The deposit requirement for borrowers is $1,000 or 1% of their funds, whichever is smaller.
An approved Community Second, a gift, grant, or unsecured loan from a family member, domestic partner, fiancé, or fiancée, as well as cash from a church, a government body, a municipality, or a nonprofit organization other than a credit union, may all be used to finance the remaining down payment.

PHFA Grant

Borrowers who get the HFA PreferredTM loan for purchase transactions are eligible for a $500 PHFA Grant, which may be utilized for the down payment and closing costs. The borrower must follow the guidelines and requirements of the HFA PreferredTM program to receive the $500 HFA Award. 

Homebuyer Education

Before closing, all homebuyers with middle credit scores below 680 must receive in-person homebuyer education from PHFA-approved counseling groups. Online courses are not available to borrowers. Only one borrower must attend a homebuyer education class or counseling session before closing for loans with a medium credit score of 680 or above.

Groups that have received PHFA approval must provide counseling or instruction. Participants in HomeView® or PHFA's telephone or online courses must have a FICO score of 680 or above. The counseling certificate must always be included in the delivery package to PHFA (s). Homebuyer education cannot be provided by mortgage insurers.

For refinances, buyer education is not required. Before signing the sale agreement, buyers who get a mortgage loan via the HFA PreferredTM program and complete pre-purchase counseling may be eligible for a $300 closing fee credit.

PHFA-approved housing counseling groups are available, and qualifying borrowers must attend pre-purchase counseling sessions in person. Here, we list the organizations the PHFA and HUD have deemed eligible.

To get the $300 pre-purchase credit after counseling, the counseling service must submit Fannie Mae Form 1017. The loan buy will cost the lender $300. The completion certificate and Form 1017 must be included in the pre-closing packages. If the completion certificate and counseling occurred before the borrower signed the selling agreement, PHFA would need the documents in the purchase package.

The $300 credit should be included on the mortgage application's "Details of Transaction" page. See this link for additional information: start.

Income Limit

Appendix B contains a reference to the program's maximum income level. The combined qualifying income cannot be more than 80% of the area median income for the neighborhood where the Property is situated. 

Qualifying income

Even if approved under HomeReady rules, the following extra eligible income sources cannot be used:

  • Household income for non-borrowers
  • Boarding fees
  • Rent received from ancillary units

Non-occupying Co-borrowers

Non-occupying co-borrowers income is permitted under certain conditions:

Approve Eligible loans have a maximum LTV of 95% (5% down payment) and a non-occupying co-borrower ratio of 40/45. Occupying borrower ratios cannot exceed 45/50.

Manually underwritten loans have a 90% LTV and a 43% DTI limit. The maximum DTI with non-occupying co-borrowers is 36% if any credit score is between 680 and 699, and 45% of all credit scores are over 700.

The income limit includes eligible income. So, the income of the non-occupying co-borrower(s) must be included when establishing income limit eligibility.

Occupancy and non-occupant co-borrowers may own another real estate at closing.

The non-occupying co-borrower(s) must sign a declaration acknowledging that they are equally liable to the principal borrower for monthly mortgage payments and that failing to pay on time would hurt both parties' credit.

Property Eligibility

This program excludes co-ops and multi-unit homes (2-4 units). Fannie Mae allows PUDs.

Condominium projects must fulfill Fannie Mae and lender requirements. PHFA won't accept these.

PHFA and Fannie Mae-approved manufactured houses may be financed up to 95% LTV and 105% CLTV. DU underwrites manufactured houses.

Manual Underwriting

Manually underwritten loans cannot exceed 95% LTV. All applicants need a 680 credit score, and borrowers with a qualifying credit score between 680 and 699 might have a 36 percent back/total DTI.

The maximum back/total DTI is 45% for 700+ credit score borrowers. No-credit or "thin" file borrowers are unacceptable. Manually underwritten loans need no DU findings to report, and PHFA cannot bend these rules.

Private Mortgage Insurance

Private mortgage insurance is required for HFA Preferred loans over 80% LTV. Private mortgage insurance is required if your down payment is less than 20%.

Keystone Advantage Assistance Loan Program

Buyers with a middle FICO of at least 660 who qualify for a PHFA first mortgage through the Keystone Home Loan, Keystone Government Loan, or HFA Preferred mortgage programs may apply for the Advantage assistance loan for first mortgage program details.

 Qualified homebuyers may borrow some of their downpayment (other than their minimum necessary contribution) and closing fees through Advantage. Eligible homebuyers will get up to the lesser of the purchase price or appraised value.

Advantage aid is limited to 4%, or $6,000. The minimum loan is $500. The minimum downpayment and closing charges must be covered by funds (reasonable and customary costs that the buyer typically pays).

New home buyers may get $6,000. Interest-free Advantage loans amortize over ten years. Advantage loans have no prepayment penalty.

Liquid Asset Limitation

After loan closing costs, the borrower's liquid assets cannot exceed $50,000. Cash, savings, stocks, bonds, CDs, and other liquid assets are included. 401(k), IRA, and pension funds will only be considered if the borrower is retired and may withdraw them without penalty.

HomeStyle® Renovation Program (Page 34)

Qualified borrowers may utilize the Fannie Mae HomeStyle® Renovation mortgage to fund home improvements as part of buying or refinancing an existing property. Only HFA PreferredTM is a product that qualifies for this program.

The Fannie Mae HomeStyle remodeling program is the foundation for the HomeStyle® Renovation mortgage. This article's material is meant to provide you with a better understanding of the loan program.

Mortgage Terms

The 30-year fixed interest rate is based on HFA PreferredTM Agency rates. 
The maximum mortgage amount is 97% of the lesser purchase price or the appraised value, with a maximum combined loan-to-value (CLTV) of 105%.

The maximum CLTV for manufactured dwellings is 105%. Except as indicated in this chapter of the PHFA Sellers' Guide, loans must fulfill HomeReady® program standards as established in the most recent Fannie Mae Selling Guide at

Eligibility Requirements

HomeStyle Renovation loans must meet HFA PreferredTM underwriting and eligibility requirements.

Eligible Properties

Existing single-family houses with current owner occupants (attached or detached), including prefabricated homes, PUDs, and condos that qualify for Fannie Mae financing, may be included in the properties.

Eligible Repairs & Improvements

With HomeStyle Renovation, qualified borrowers may contribute up to 75% of the lower 2) Purchase cost + renovation expenses.

Mobile homes that qualify may undergo renovations for up to $50,000 or 50% of their "as completed" assessed value.
The money from the home improvement loan may only be used for necessary maintenance, alterations, or improvements that materially preserve or improve the bought Property's basic habitability, energy efficiency, or safety.

Renovations to the kitchen and bathroom, plumbing and electrical system installation or improvement, roof repair or replacement, and enhancements to the living space are all examples of repairs, modifications, and improvements that must be permanently fixed to the Property. Tennis courts, Jacuzzis, saunas, and other abundant facilities are excluded from the competition.

After closing, all upgrades must be completed within 180 days (6 months). The borrowers must occupy the property within 60 days of the closure (2 months).

Underwriting/Processing (Page 36)

Examine the borrower's construction contracts, estimates, etc., to verify the proposed repairs/improvements.
The pre-closing package must contain the Fannie Mae HomeStyle Maximum Mortgage Worksheet (FNMA form 1035) to establish the maximum mortgage amount.

The escrow might include up to six months of PITI payments if the repairs would prevent the borrower from moving home immediately after closing and did not exceed the permissible limit of the "as finished" assessed value. December 2022: The maximum mortgage worksheet FNMA Form 1035 must include payment reserves. 


In conclusion, the HFA PreferredTM Loan Program is a mortgage option designed to help first-time homebuyers purchase a home. This program, in partnership with Fannie Mae, offers qualified homebuyers a low down payment alternative, lower mortgage insurance rates, and flexible credit standards.

The program offers financing for up to 97% of the home's purchase price or assessed value, whichever is smaller, and the eligibility requirements do not include a first-time purchase requirement.

Additionally, the program offers a $500 PHFA Grant and requires homebuyer education for borrowers with middle credit scores below 680. With the HFA PreferredTM Loan Program, first-time homebuyers have a better chance of owning a home with a low down payment and flexible credit standards.

PHFA Sellers Guide

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