PHFA: Keystone Flex Loan Programs

The Keystone Flex Loan Programs are among the affordable housing initiatives the Pennsylvania Housing Finance Agency (PHFA) provides. These initiatives are intended to help people and families with low and moderate incomes buy property.

The Keystone Flex Loan Programs provide a variety of mortgage alternatives, including fixed-rate and adjustable-rate mortgages, and offer flexible underwriting requirements.

Also, qualified borrowers may be given help with closing costs and down payments. The PHFA Keystone Flex Loan Programs are a fantastic resource for anyone looking for cheap and flexible financing solutions to boost homeownership prospects for Pennsylvanians.

Borrowers participating in the Keystone Flex Loan Program have the choice between the following three mortgage programs:

Keystone Flex (K-Flex) with K-FIT (Purchase only)
Keystone Flex (K-Flex) Purchase & Improvement (up to $30,000) with K-FIT (Purchase only)
Keystone Flex (K-Flex) (Refinance only, available for all loan types except RD)

Purchasing a home and refinancing an existing mortgage are eligible uses of the Keystone Flex Loan Program.

Keystone Flex (K-Flex with K-FIT) (Purchase only)

K-Fit stands for "forgivable in 10 years."

Conventional loans - 3% down payment minimum
FHA Loans - 3.5% down payment minimum
USDA Loans - No down payment required
Veteran Loans - No down payment required

Underwriting guidelines for conventional loans are modeled after those established by the HFA PreferredTM program.

There are two Flex Purchase Programs:

1. K-Flex with Keystone Forgivable in Ten Years Loan Program (K-FIT).

Conventional, FHA, VA, and USDA financing are all available options with the K-Flex (first mortgage) and K-FIT lending programs. The K-FIT loan is a second mortgage that may be forgiven after ten years if paid off.

2. K-Flex Purchase & Improvement with Keystone Forgivable in Ten Years Loan Program (K-FIT)

Conventional finance is the only financing that may be obtained for the Purchase and Improvement with the K-FIT loan program. The K-FIT loan is a second mortgage that may be forgiven after ten years if paid off.

Homebuyers may purchase and upgrade a property with the K-Flex Purchase & Improvement with the K-FIT loan program for up to $30,000 using conventional financing alone.

For both purchases, borrowers may finance 95 to 97 percent of the purchase price or assessed value, whichever is smaller, under the K-Flex with K-FIT and K-Flex Purchase and Improvement (up to $30,000) with K-FIT programs.

Refinance Option

The following conditions apply to the Keystone Flex refinance option's restricted cash-out/rate and term refinancing options:

Conventional loans - the maximum cash back allowed is $2,000 or 2% of the new loan's total, whichever is smaller.

FHA loans - Cash back is restricted to no more than $500.

If there is enough equity, the original mortgage and any subordinate liens used to buy the property may be repaid and included in the new mortgage for conventional loans.

Any outstanding subordinate debt may only be re-subordinated for conventional loans provided it satisfies the Community Seconds standards. It is considered in the overall risk evaluation based on the CLTV, HCLTV, and DTI ratios. The borrower is not qualified for refinancing under this program if it does not satisfy the Community Seconds requirements.

Cash Out

The following conditions apply to cash-out refinancing under the Keystone Flex:

Conventional, FHA, and VA loans may be funded with up to $10,000 of the underlying property's equity.

Loans must abide by all regulations set out by relevant governmental bodies.

There is no need for homebuyer education in refinancing transactions.

Borrower Eligibility

1. First-Time Home Buyer Requirement

With K-Flex lending programs, there is no precondition for first-time homebuyers. At the time of loan settlement, the borrower may own an interest in another residential property.

2. Minimum Borrower Contribution

1) Borrowers must contribute the lesser of $1000 or 1% of their funds
2) With the K-Flex purchase choices, the remaining down payment must come from the Keystone Forgivable In Ten Years Financing Program (K-FIT).

Depending on the loan type, borrowers may also use an acceptable Community Second or qualified Community Second that satisfies the requirements of the relevant federal government agency. Form 5 from the Affordable Housing Support Program checklist, required for any funding not managed by PHFA, must be included in the file.

Income Limit

Appendix F contains a reference to the program's maximum income level. The total eligible income cannot exceed the area's stipulated income limits for the property. With the K-Flex Loan Program, household income is not taken into account.

Qualifying Income - The previously mentioned HFA PreferredTM program's underwriting requirements would be followed for the conventional loan option.

The government loan option would follow the Keystone Government Loan program's underwriting guidelines.

Purchase Price Limit - Appendix F lists the maximum purchase price for this program, including the price of a finished house.

Homebuyer Education - The Keystone Flex (K-Flex) Purchase and Keystone Flex (K-Flex) with K-FIT are obtained by borrowers.

Property Eligibility

Properties must conform to the requirements for the particular loan type. Use the Fannie Mae recommendations for conventional loans.

In addition, as outlined in Chapter 8 and Appendix I of this Sellers' Guide, properties must follow the PHFA requirements (e.g., Wood Destroying Insect Certifications, Well Certifications, etc.).

In addition, as outlined in Chapter 8 and Appendix I of this Sellers' Guide, properties must follow the PHFA requirements (e.g., Wood Destroying Insect Certifications, Well Certifications, etc.).
One or two units that are owner-occupied.

Purchase & Improvement Program

Homebuyers may purchase and repair a house as part of the same mortgage transaction with the help of PHFA's Buy & Improvement Program. Only the conventional Keystone Home Loan and the Keystone Flex Buy & Improvement with K-FIT financing program (maximum 97% LTV) are eligible for this program.

Eligible Repairs & Improvements

The maximum loan amount for home upgrades under the Keystone Home Loan Program is $15,000. Under the Keystone Flex Purchase & Improvement with K-FIT Loan Program, the maximum loan amount is $30,000.

If funding is required for house and construction inspection charges, they should be included in the mortgage's home improvement portion and not be considered closing costs.

Use of the home improvement portion of the loan funds must be limited to necessary repairs, alterations, or upgrades to the basic livability, energy efficiency, or safety of the Purchased Property.

Eligible repairs, changes, and improvements include replacing or repairing the roof, installing or upgrading heating and cooling systems, remodeling the kitchen and bathroom, repairing or upgrading the plumbing and electrical systems, and enhancing the living area.

Moreover, improvements in solar energy and energy efficiency are eligible. Swimming pools, tennis courts, hot tubs/Jacuzzis, saunas, and other opulent amenities are not permitted. Total rehabilitation is not allowed under this plan.

Any repairs, alterations, or improvements must be made by a certified contractor who is listed with the state. Where required, contractors must have licenses. In the labor contract, Section 1 of PHFA Form 50 must be observed.

The purchase price of the financed property plus the cost of the improvements to the property shall not exceed the assessed value of the property "as upgraded" and must be less than that amount. Any additional upgrade costs over the assessed value are entirely the responsibility of the borrower.

Any improvements, alterations, and repairs must be performed within 90 days (3 months) after the Closing. The borrowers must occupy the property within 60 days (2 months) after closing in order to qualify under federal tax regulations.

Quick Recap

Keystone Flex (K-Flex) with K-FIT (Purchase only) can be used with conventional, FHA, USDA, and VA mortgages. The K-FIT is a ten-year forgivable 2nd mortgage that covers the down payment and closing costs.
Keystone Flex (K-Flex) Purchase & Improvement (up to $30,000) with K-FIT (Purchase only). You can buy a home and roll in some home improvements. Includes K-FIT, the ten-year forgivable loan for the down payment, and closing costs.
Keystone Flex (K-Flex) (Refinance only), available for all loan types except USDA)
Income limits
Purchase price limits

Conclusion

In conclusion, the Keystone Flex Loan Program through the Pennsylvania Housing Finance Agency offers individuals in Pennsylvania a precious resource to help them purchase or refinance their homes. These loans provide a variety of advantages, including low-interest rates, down payment options, and flexible terms.

Furthermore, the program is designed to help those who may not qualify for traditional mortgage loan products. Finally, if you want to learn more about this program and how it can benefit you, contact your local PHFA office.

SOURCE:
PHFA Sellers Guide (page 46)

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