Keystone Advantage Assistance Loan: Your Path to Pennsylvania Homeownership

What Is the Keystone Advantage Assistance Loan?

The Keystone Advantage Assistance Loan helps qualified Pennsylvania homebuyers cover their down payment and closing costs. This subordinate (second) loan works alongside your primary mortgage to make homeownership more affordable. For many buyers, it is the key that unlocks home financing options that would otherwise be out of reach. Financial support for first-time buyers and repeat buyers alike, this program is designed to lower the barrier to entry without adding interest or heavy monthly payments.

Who Qualifies for the Keystone Advantage Assistance Loan?

You must meet these requirements:

Middle FICO score of at least 660
Eligible for a PHFA first mortgage (Keystone Home Loan, Keystone Government Loan, or HFA Preferred)
Liquid assets of no more than $50,000 after closing costs
Completion of homebuyer education or counseling

Liquid assets include: Cash in checking and savings accounts, stocks, bonds, and certificates of deposit.

Note: Retirement funds (401(k), IRA, pension) only count if you can withdraw them penalty-free.

Loan Limits and Terms

Maximum Assistance: The smaller of these two amounts:

4% of the purchase price or appraised value
$6,000 (or up to $6,000 for new construction homes)

Minimum Loan: $500

Interest Rate: 0% (interest-free)

Repayment Term: 10 years

Prepayment: You can pay off the loan early with no penalty.

	$50,000	$100,000	$150,000
Assistance 4%	X 4%	X 4%	X 4%
Assistance Loan	$2,000	$4,000	$6,000
Monthly Payment	$16.67	$33.33	$50.00

How You Can Use the Funds

The Advantage loan covers:

Your minimum down payment requirement (minus your own contribution)
Reasonable and customary closing costs

You cannot use Advantage funds for:

Down payment amounts above the required minimum
VA or RD guarantee fees
FHA upfront mortgage insurance premium (these can be financed through your first mortgage)

Homebuyer Education Requirements

If your middle credit score is below 680: You must complete an in-person homebuyer education class or counseling session before closing. Online courses are not acceptable.

If all borrowers have a middle credit score of 680 or higher: At least one borrower must complete a homebuyer education class or counseling session before closing. You can choose between:

In-person classes or counseling
Telephonic or online courses (HomeView® or PHFA-approved providers)

Your counseling certificate must be included in your closing documents.

How the Loan Works at Closing

When you close on your home:

Your first mortgage closes in your lender's name
Your Advantage loan closes in PHFA's name as a second lien (subordinate mortgage)
You receive only the actual assistance amount needed, rounded to the nearest dollar
The lender can return up to $100 in cash (beyond reimbursement of prior closing costs)

Your lender will prepare two documents:

Subordinate Mortgage (Form 54 ADV)
Subordinate Mortgage Note (Form 55 ADV)

Important: The Advantage loan is recorded as a second lien, directly behind your first mortgage.

Fees and Charges

Except for recording fees and a reasonable notary fee, no additional charges apply to your Advantage loan. This keeps costs low for borrowers.

Can You Assume This Loan?

Yes, the Advantage loan is assumable under certain conditions. The late fee structure matches your first mortgage.

After Closing

When PHFA purchases your first mortgage, the lender is reimbursed for the actual Advantage loan funds you received. Your lender must submit the recorded mortgage documents to PHFA within 60 days to confirm the loan was recorded in second lien position.

Program Restrictions

The Advantage loan cannot be combined with other PHFA assistance programs (except the Access Modification Loan Program)
You must be using maximum PHFA financing
All PHFA, FHA, VA, or RD guidelines apply, including loan-to-value and down payment requirements

Key Takeaways

✓ Interest-free borrowing for down payment and closing costs ✓ Up to $6,000 in assistance (or 4% of purchase price, whichever is less) ✓ 10-year repayment with no prepayment penalty ✓ Available to borrowers with a 660+ FICO score ✓ Second lien position protects your primary mortgage ✓ Homebuyer education requirement strengthens your financial foundation

Why the Keystone Advantage Assistance Loan Matters for PA Buyers

For many Pennsylvanians, the gap between saving for a down payment and keeping up with rising rent feels impossible. The Keystone Advantage Assistance Loan closes that gap. It is one of the most flexible down payment assistance programs in the state because it combines a 0% interest rate with a 10-year term and no prepayment penalty. That means your monthly payment on the assistance loan is predictable and small — typically between $16 and $50 per month — while you build equity in your home.

When you compare this to low-interest mortgage products that might require private mortgage insurance or higher closing costs, the Advantage loan stands out. It is not a grant, but it is also not a burden. It is a bridge. And for first-time buyers who complete a homebuyer education course, it is a bridge that comes with counseling and support.

How It Fits With Other Home Financing Options

Pennsylvania offers several affordable housing loans and government-backed loan programs, including FHA, VA, USDA, and PHFA's own Keystone Home Loan and Keystone Government Loan. The Advantage loan is designed to sit behind one of those first mortgages as a second lien. It does not replace your primary financing; it supplements it. This structure is what makes it so powerful for qualifying for assistance loans when your savings are modest but your credit is solid.

If you are exploring first-time homebuyer incentives, you should also look at the Keystone Forgivable in Ten Years (K-FIT) program and the PHFA $500 Grant. But note: the Advantage loan cannot be combined with most other PHFA assistance programs. It works best when you need help with down payment and closing costs and you are already using a PHFA first mortgage.

Credit Score Requirements and Eligibility Criteria

The credit score requirements for loans like this one are clear: you need a middle FICO score of at least 660. That is lower than many conventional loan thresholds, which makes it accessible to a wider range of buyers. However, if your score is below 680, you must complete an in-person homebuyer education class. If your score is 680 or higher, you can take an online or telephonic course instead. This requirement is not a hurdle — it is a feature. It ensures you understand your personal finances for homebuyers before you sign.

The assistance loan eligibility criteria also include a liquid asset limit of $50,000 after closing. That means you can have savings, but not so much that you could easily cover the down payment yourself. Retirement accounts only count if you can withdraw without penalty. This keeps the program focused on buyers who genuinely need help.

Interest Rate Comparisons and Long-Term Value

When you do an interest rate comparison between the Advantage loan and other second-mortgage options, the difference is stark. Most second mortgages carry interest rates between 5% and 12%. The Advantage loan is 0%. Over a 10-year term, that saves you hundreds or even thousands of dollars. You can use our mortgage calculators to see how the numbers work for your situation.

The loan application process explained on this page is straightforward: you apply with a PHFA-approved lender, get pre-approved for a first mortgage, and then request the Advantage loan as part of your closing package. Your lender prepares the subordinate mortgage documents and submits them to PHFA. You get the funds you need at closing, and you start repaying after closing.

Benefits of Using Assistance Loans

The benefits of using assistance loans go beyond the down payment. They preserve your cash reserves for emergencies, moving costs, and home repairs. They reduce the amount you need to save before buying, which means you can become a homeowner sooner. And because the Advantage loan is assumable, it can be a selling point if you sell your home later.

Some buyers also qualify for community development grants or local housing authority programs that can be layered with PHFA financing. While the Advantage loan cannot be combined with most other PHFA assistance, it can work alongside certain federal programs. Always ask your lender about stacking options.

Finding Reliable Mortgage Lenders and Local Resources

Not all lenders participate in PHFA programs. Finding reliable mortgage lenders who know the Keystone Advantage Assistance Loan is important. You can start with PHFA's approved lender list, or ask a housing counselor for referrals. Local housing market resources — including county housing authorities and nonprofit counseling agencies — can also help you navigate the process.

If you are still in the early stages, consider taking a homebuyer education course through a PHFA-approved counseling agency. These courses are often free or low-cost, and they satisfy the education requirement for the Advantage loan. They also connect you with professionals who understand the local market.

Frequently Asked Questions About the Keystone Advantage Assistance Loan Program

What is the difference between the Advantage loan and my first mortgage?

Your first mortgage is the primary loan from your lender. The Advantage loan is a second, subordinate loan from PHFA that helps you cover costs. The Advantage loan has no interest, while your first mortgage charges interest based on market rates.

If I have $50,000 in liquid assets, am I still eligible?

Eligibility depends on your liquid assets after you pay closing costs. If you have exactly $50,000 remaining after closing, you meet the limit. If you have more than $50,000 after closing, you do not qualify.

Can I use the Advantage loan to pay for the VA funding fee?

No. The VA funding fee can be financed through your first mortgage instead. The Advantage loan is for down payment (minus your required contribution) and closing costs only.

What happens if I pay off my Advantage loan early?

You can pay it off anytime without penalty. There is no prepayment penalty, so paying early saves you interest (though the rate is 0%, so you're only saving the time it takes to repay).

What if I want to sell my home or refinance later?

Your Advantage loan travels with your property as a second lien. If you sell, the loan is paid off from your sale proceeds. If you refinance, PHFA will address the Advantage loan as part of that process.

Does the Advantage loan affect my credit?

Yes, like all loans, the Advantage loan appears on your credit report. This helps you build a positive credit history as you make on-time payments over the 10-year term.

Who do I contact if I have questions about my Advantage loan after closing?

Contact your lender first for questions about your loan documents. PHFA handles the administration of the loan on behalf of the state program.

This guide is based on the June 2025 PHFA Sellers' Guide. Program rules and terms may change. Verify current eligibility and limits with PHFA or an approved lender.