PHFA Keystone Flex-Purchase & Improvement with K-FIT: Your Path to Pennsylvania Homeownership

Buying your first home in Pennsylvania comes with many costs. You need money for the down payment. You need money for closing costs. The Pennsylvania Housing Finance Agency (PHFA) created the Keystone Flex-Purchase & Improvement program with K-FIT to help buyers like you afford homeownership. This program combines two powerful tools. First, you get conventional financing with flexible terms. Second, you receive a forgivable loan that covers part of your down payment and closing costs.

What Is the Keystone Flex-Purchase & Improvement Program?

The PHFA Keystone Flex-Purchase & Improvement program lets you purchase and improve your home in one mortgage. You combine both the home purchase and the renovation costs into a single loan. This approach makes the lending process simple and keeps your costs down. The program works with conventional financing only, and you can borrow up to 97 percent of the total acquisition cost.

The total acquisition cost includes two things. It includes the purchase price of the home. It also includes the cost of the repairs and improvements you plan to make. The program limits your improvement costs to no more than 30,000 dollars. Your purchase price plus improvement costs cannot exceed the maximum purchase price for your county.

Interest rates for the Purchase & Improvement program run about 25 to 50 basis points higher than the standard Keystone Home Loan rate. This small premium covers the added complexity of managing both the purchase and the improvement portions of your loan. The mortgage comes with a fixed interest rate for 30 years, giving you payment stability.

How K-FIT Assistance Works

K-FIT stands for Keystone Forgivable in Ten Years. This subordinate loan provides real financial help to Pennsylvania homebuyers. You receive a second loan based on five percent of the lesser of your purchase price or the appraised value. There is no maximum dollar amount. The minimum K-FIT loan is 500 dollars.

This assistance is forgivable. You do not repay it in the traditional sense. Instead, the loan forgives at a rate of 10 percent per year over 10 years. After 10 years of ownership, the entire loan disappears from your obligation. You keep building equity in your home while your debt obligation shrinks automatically.

• K-FIT provides up to 5 percent of purchase price or appraised value
• The loan forgives 10 percent each year over 10 years
• No maximum dollar amount cap
• Minimum loan amount is 500 dollars
• Works with maximum PHFA financing options

You can use K-FIT funds for two purposes. First, use them to cover your minimum down payment requirement. Second, use them to pay for closing costs. Closing costs are reasonable and customary expenses typically paid by the buyer. You cannot use K-FIT funds to pay for VA or RD guaranty fees or FHA Upfront Mortgage Insurance Premiums, since your first mortgage can cover those items.

Who Qualifies for Keystone Flex-Purchase & Improvement with K-FIT?

The PHFA makes this program available to borrowers who meet specific eligibility standards. You must have a middle FICO credit score of at least 660. The program does not require that you be a first-time homebuyer. You may have owned a home in the past. However, you must be buying this property as your primary residence.

Your down payment and loan-to-value ratio must fall within the allowed range. You can finance 95 to 97 percent of the purchase price or appraised value, whichever is less. Loans with loan-to-value ratios at or below 94.99 percent do not qualify for this program. This rule means you must borrow enough to qualify.

You must complete homebuyer education to qualify for K-FIT. This education requirement helps ensure you understand the responsibilities of homeownership and the terms of your loan. The education covers topics like budgeting, home maintenance, and consumer credit. Many community organizations offer these classes at low cost or free.

The property itself must be an existing single-family dwelling. It can be attached or detached. Condominiums qualify. If the property is a two-unit residence, you must intend to occupy one of the units. You cannot buy a two-unit building as an investment property under this program.

Eligible Improvements and Repairs

The home improvement portion of your Keystone Flex-Purchase & Improvement loan can cover necessary repairs, alterations, or improvements. These improvements must protect or improve the basic livability, energy efficiency, or safety of your new home. Smart home improvement decisions protect your investment and make your home more functional.

Eligible improvements include roof repairs or replacement. They include installation or improvement of heating and cooling systems. Kitchen and bathroom renovations qualify. Plumbing and electrical system repairs or improvements are eligible. You can improve living spaces. Energy conservation improvements are eligible. Solar energy improvements also qualify.

• Roof repair or replacement
• Heating and air conditioning system installation or upgrade
• Kitchen and bathroom renovations
• Plumbing and electrical system improvements
• Energy conservation and solar energy improvements
• Living space improvements

Not all improvements qualify. Luxury amenities do not. Swimming pools, tennis courts, hot tubs, saunas, and other recreational facilities are not eligible. Total home rehabilitation is not eligible under this program. The improvements must be specific, necessary upgrades rather than a complete overhaul.

You must hire a registered and qualified contractor to perform all work. If your state requires a license for the type of work, your contractor must hold that license. Your contractor must provide a written contract that complies with PHFA Form 50. This protection ensures quality work and protects both you and the lender.

The Loan Application and Closing Process

Applying for a Keystone Flex-Purchase & Improvement loan with K-FIT follows standard mortgage procedures. You work with a PHFA participating lender or a third-party originator. These professionals guide you through the application process. They help you gather documentation. They answer your questions about the program requirements.

During the application phase, you provide financial information to the lender. You submit proof of income. You provide documentation of your assets and debts. You authorize a credit check. The lender verifies your employment. The underwriting process reviews all this information to confirm you meet the program guidelines.

The lender orders an appraisal of the property. This appraisal determines the "as improved" value of your home. The appraiser considers the improvements you plan to make. Your purchase price plus the improvement costs cannot exceed the appraised value. If improvement costs exceed the appraised value, you pay the difference from your own funds.

Home inspection fees and construction inspection fees can be included in the improvement portion of your mortgage. These inspection costs are not counted as separate closing costs. Building them into the improvement budget makes sense because they relate directly to the work being done.

At closing, you sign all loan documents. You receive the funds for your home purchase. A portion of the loan proceeds goes into escrow to cover the improvement costs. As construction progresses and invoices are paid, escrow funds are released. This process protects you by ensuring improvement costs are legitimate and the work is completed properly.

Important Program Details and Restrictions

The PHFA has designed the Keystone Flex-Purchase & Improvement with K-FIT program to work smoothly for borrowers who use maximum PHFA financing. You must be utilizing the highest amount of PHFA financing available to you. This requirement ensures the program serves its intended purpose of helping borrowers maximize their purchasing power.

K-FIT cannot be combined with other PHFA assistance programs. You must choose whether to use K-FIT or another assistance option. K-FIT stands alone as your assistance vehicle. If you currently have other PHFA assistance, you cannot add K-FIT on top of it.

• Must use maximum PHFA financing available
• Cannot combine K-FIT with other PHFA assistance programs
• K-FIT is not eligible for resubordination
• Unforgiven K-FIT funds must be paid off when refinancing with PHFA
• K-FIT loan can be assumed when the first mortgage is assumable

K-FIT loans are not eligible for resubordination. This means you cannot change the lien position of the K-FIT loan after closing. If you refinance with PHFA in the future, any unforgiven K-FIT funds must be paid off. You cannot carry them forward into a new mortgage. Plan accordingly if you think you might refinance during the 10-year forgiveness period.

The K-FIT loan can be assumed if the first mortgage is assumable. However, if your first mortgage has a Mortgage Credit Certificate, only the loan gets assumed, not the certificate. Your lender can explain how assumption would work with your specific situation.

Frequently Asked Questions About Keystone Flex-Purchase & Improvement with K-FIT

What credit score do I need to qualify for Keystone Flex with K-FIT?

You need a middle FICO credit score of at least 660. This score gives you access to the Keystone Flex program and K-FIT assistance. A score of 660 is achievable for many borrowers who have managed their credit responsibly. If your score is below 660, work on improving it before applying. Pay bills on time. Reduce outstanding debt. Dispute any errors on your credit report.

Can I use K-FIT funds if I was not a first-time homebuyer?

Yes, you can. The Keystone Flex-Purchase & Improvement program with K-FIT does not require you to be a first-time homebuyer. You can qualify even if you owned a home before. Your previous homeownership experience does not disqualify you. You simply must be purchasing this property as your primary residence.

How much can I borrow for improvements under this program?

You can borrow up to 30,000 dollars for improvements under the Keystone Flex-Purchase & Improvement with K-FIT program. This amount is separate from your K-FIT assistance. If you are using the standard Keystone Home Loan program, the improvement limit is 15,000 dollars. Choose the Keystone Flex option if you need more improvement funding.

What happens if my improvement costs exceed the appraised value?

You pay the difference yourself. If your purchase price plus improvement costs exceed the appraised "as improved" value, the additional costs are your responsibility. You cannot finance the excess through the mortgage. Budget carefully and get firm contractor quotes before signing your purchase agreement.

What happens to my K-FIT loan after 10 years?

The K-FIT loan is completely forgiven after 10 years. You do not need to take any action. The forgiveness happens automatically at a rate of 10 percent per year. After 10 years of ownership and making on-time payments, the entire subordinate loan disappears. You own your home free of this debt obligation.

Taking the Next Step Toward Pennsylvania Homeownership

The PHFA Keystone Flex-Purchase & Improvement program with K-FIT removes barriers to homeownership for Pennsylvania borrowers. This program acknowledges that many first-time and repeat buyers need help covering down payments and closing costs. By combining a purchase loan with home improvement financing and a forgivable assistance loan, PHFA created a powerful tool.

Start by connecting with a PHFA participating lender in your area. Bring a list of questions about the program. Review your finances and determine how much house you can afford. Complete homebuyer education. Get preapproved for a mortgage. Find a property that meets the program guidelines. Begin building the equity and stability that comes with homeownership.

Your dream of owning a home in Pennsylvania is within reach. The Keystone Flex-Purchase & Improvement with K-FIT program exists to help you achieve that dream. Take action today toward your future as a Pennsylvania homeowner.