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Keystone Home Loan Program

Nice two story Pennsylvania homeLooking for a good first time home buyer program? If so, consider Pennsylvania's Keystone Home Loan Program. This loan program offers below market interest rates and is open to all applicants who meet the income and sales price limits.

Eligible properties may be existing owner occupied single family dwelling (attached or detached), including condominium units. If the property is a two unit residence, the borrower must intend to live in one of the units. Three and 4 unit buildings are ineligible with the Keystone Home Loan Program. This loan program is the ideal choice for home buyers who intend to use a 20% down payment for the purchase of a home.

According to the Pennsylvania Housing Finance Agency, you may be eligible for a Keystone Home Loan if you meet the following six conditions:

1. All adults who will occupy the home within 12 months from settlement are first time home buyers. Individuals who have not owned (had Title to) a principal residence during the past three years are regarded as first time home buyers for this program.
You are not a first-time homebuyer, however, you will purchase a house in a Targeted county or area or you are a discharged veteran of the United States Armed Forces. Target counties are indicated by a "T" in the listing of Price and Income Limits (5/15/17).pdf. Please be aware that some Non-Target counties have targeted areas within them. Those areas are listed by county and census tract starting on page three of the purchase price and the income limits above.

2. The gross annual household income for all adults that intend to occupy the home within one year from loan closing does not exceed the Price and Income Limits (5/15/17).pdf. All sources of income must be included, except for income received by persons under age 18 and income received by dependents enrolled in a full-time undergraduate program of at least 12 credits per semester.

3. The purchase price of your prospective home does not exceed the Keystone Home Loan Program purchase price limit. This includes all costs for a complete home. It is also known as the total acquisition cost. The appraised value of land owned outright for more than two years does not need to be included.

4. Home buyers are required to have an acceptable credit history and the ability to make monthly payments on the home you expect to buy. Generally, you should plan to use no more than 30 percent of your income for your monthly mortgage payment. A participating lender or PHFA network counseling agency can help you determine how much of a home you can afford, as well as any credit issues you may need to work on.

5. Home buyer's are required to have sufficient funds to pay the mortgage application and closing costs. Closing costs include credit reports, appraisals, and title insurance fees.

6. Mortgage insurance is required for home buyer's who have a down payment of less than 20 percent of the home’s sales price or appraised value. The amount of the down payment varies according to the loan type (i.e. FHA, VA, USDA, conventional).

Veterans (and their spouses, if applicable) are not required to meet the first time homebuyer requirement in non-target areas under the Keystone Home Loan Program. A veteran is defined as someone who served in active duty of the Armed Forces or Reserves and who was discharged or released under conditions other than dishonorable.

If you meet the income and sales price limitations, you will make mortgage application through an PHFA approved lender. The Pennsylvania Housing Finance Agency does not work directly with the homebuyer, but works though approved lenders. PHFA provides the money to the mortgage company. You and the mortgage lender will determine which of the following loan programs is right for you:

Eligible loan programs

Conventional uninsured loans: Conventional loans currently require a 20 percent down payment under the Keystone Home Loan program, regardless of the credit score. The down payment can come as a gift from an immediate family member (parent, sibling, child, grandparent, aunt or uncle) or a nonprofit organization.

FHA loans: These loans are insured by the Federal Housing Administration (FHA) and require a borrower to have a 3.5 percent minimum investment. The seller is permitted to pay up to 6% of the sales price toward the buyer's closing costs. Read more about Seller Paid Closing Costs

VA and USDA loan: Loans guaranteed by either the Veterans Administration (VA) or Rural Development (RD) require no down payment in most cases. RD loans are not available in Philadelphia and Delaware counties and other major cities.

Borrower should be aware that not all participating lenders offer FHA, VA or USDA loans. Also, those loan types may have additional eligibility requirements regarding the buyer and/or the property.

Keystone Advantage Assistance Loan Program - Do you know about the down payment and/or closing cost assistance loan that's available through the Pennsylvania Housing Finance Agency? Qualified borrowers can receive as much as two percent (4%) of the purchase price or market value, up to a maximum of $6,000

Rotating question mark Frequently Asked Questions About the Keystone Home Loan

Is a mobile home on a rented lot considered "homeownership"?
No, the following do not constitute “ownership interests”:

  • A lease with or without an option to purchase
  • A mere expectancy to inherit an interest in a principal residence
  • A remainder interest
  • An ownership interest in other than a principal residence during the previous three (3) years
  • Owning a mobile or manufactured home on a rented lot is not considered homeownership.
  • The interest that a purchaser of a residence acquires upon the execution of a standard purchase contract, without a right of possession

What income can be excluded from the income calculation:

  • Amounts of educational scholarships paid directly to the student or the educational institution, and amounts paid by the government to a veteran for use in meeting the costs of tuition, fees, books and equipment, but in any such case only to the extent used for such purposes
  • Amounts which are specifically for reimbursement of medical expenses
  • Casual, sporadic or irregular gifts
  • Foster child care payments (unless it is included in income used for qualifying)
  • Income from the employment of children under the age of 18 years (including foster children)
  • Lump sum additions to family assets, such as inheritances, insurance payments (including payments under health and accident insurance and worker’s compensation), capital gains and settlement for personal or property losses
  • Payments received pursuant to participation in ACTION volunteer Programs
  • Relocation payments under Title II of the Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970
  • Special pay to a serviceman head of family who is away from home and exposed to hostile fire