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Mortgage Programs in Pennsylvania

I know all this mortgage stuff can be overwhelming. There's an FHA mortgage, a conventional mortgage (whatever that is), USDA, and the Veteran's mortgage.

So which mortgage is "right" for you? Let's break it down.

The FHA loan for PA home buyers

FHA logoI read somewhere that approximately 50% of all mortgages currently originated are based on FHA financing. Why is that? The reason is that an FHA mortgage has very generous underwriting guidelines (rules). The minimum down payment is only 3.5%.

Pretty good, and the seller can pay up to 6% of the sales price toward the buyer's closing costs. Once again, the seller CAN pay up to 6% of the sales price, however, the seller is NOT REQUIRED to pay the buyer's closing costs. Now assuming the seller is willing to pay the closing costs, the home buyer only needs to pony up the 3.5% down payment.


So how do you cover that? The down payment can be "gifted" by a family member. So let's say, you're purchasing a $200,000 home and the seller agrees to pay all of the closing costs that add up to 6% of the sales price; that leaves the down payment of $7,000 ($200,000 X 3.5% = $7,000).

If dad and mom (reluctantly) gift you $5,000 and brother and sister gift you $1,000 each, you are now able to buy your dream house. An FHA mortgage is a good choice for little cash outlay at closing. Read more about the underwriting guidelines and mortgage limits on the FHA page.

The FHA loan program is a good choice for home buyers with a limited amount of cash or a credit score below 680.

What is a conventional loan and how does it work?

Fannie Mae aqnd Freddie Mac logoWe'll call this your father's mortgage. At one time, home buyers would go to their local bank to apply for a mortgage and the banker would require a 5, 10,15 or 20 percent down payment. In short, if the mortgage is not an FHA, VA or USDA mortgage, it's a conventional loan. These loans are underwritten to the Federal National Mortgage Association (Fannie Mae) and Federal Home Loan Mortgage Corporation (Freddie Mac) guidelines.

The conventional loans require a minimum down payment of 5%, although the Federal National Mortgage Association offers a 3% down payment program for first time home buyers, called Conventional 97. The seller is permitted to pay a percentage of the home buyer's closing costs, however, the seller assistance limit is not as generous as FHA, VA and USDA loans. The loan limit is higher with conventional mortgages than FHA loans.

The conventional mortgage is a good choice for home buyers with good credit and a down payment of 10% or greater. Read more about conventional home loans

USDA mortgage (also known as the Rural Home Loan Program)

USDA logoI know it sounds a little strange, but the Department of Agriculture offers a mortgage program with a zero down payment, that's right, no down payment. And the seller can pay up to 6% of the closing costs. Again, the seller is not required to pay the closing costs, but they can. If the seller is able to pay all of the closing costs and there's no down payment, it is possible to purchase the home with nothing out of pocket. Now for the down side.The home must be located in a designated rural area. The USDA uses site maps to determine eligibility. Generally, metropolitan areas are excluded. There are income limits. If you meet the income and area requirements, the USDA home loan is a great way to purchase a home!
Read more about the USDA loan

The VA home loan

Veteran's Administration logoThe VA loan is a fantastic home loan. No down payment is required for a VA loan. The seller is permitted to pay ALL closing costs.

There is no monthly mortgage insurance premium. And, the VA discourages excessive junk fees. Read more

Special financing for Pennsylvania home buyers

PA state flagThe Pennsylvania Housing Finance Agency (PHFA) provides below market interest rates for Pennsylvania home buyers. PHFA does not lend money directly to the home buyer, but works with approved lenders to process the mortgage on behalf of PHFA. The agency also offers a down payment/closing cost assistance loan to eligible borrowers.

The Keystone Government Loan Program

The Keystone Government Loan Program is the overall loan program for the FHA, VA and USDA home loans. Home buyers are not required to be "first time" home buyers to participate in the Keystone Government Loan Program. The interest rate is usually less than the market rate for the FHA, VA and USDA home loans.
Learn more about the Keystone Government Loan Program

The Keystone Home Loan Program

The Keystone Home Loan Program has income and purchase price limits, however, the limits are very generous. Home buyers must be first time home buyers with this program, unless they are purchasing a home in a "targeted Pennsylvania county". The Keystone Home Loan Program is a good choice for a home buyer with good credit and a down payment of 10% or more.
Learn more about the Keystone Home Loan program

HFA Preferred Risk Sharing™ & HFA Preferred™ Loans

The HFA Preferred Risk Sharing ™ & HFA Preferred ™ Loans are 3% down payment programs that follow the conventional underwriting rules. The HFA Preferred Risk Sharing ™ program does not require mortgage insurance, however, the interest rate is slightly higher than the HFA Preferred ™ Loan. The HFA Preferred ™ Loan requires mortgage insurance. The Preferred loans are a good low down payment alternative to the government mortgages (i.e. FHA, VA, and USDA).
Learn more about the HFA Preferred Risk Sharing™ & HFA Preferred™ Loans

The Keystone Assistance Program

Could you use a zero percent interest rate loan for the down payment or closing costs? If so, then the Keystone Assistance Program is for you. The assistance loan must be used in conjunction with one of the PHFA programs.
Learn more about the Keystone Assistance Program