What is a HFA loan?

Nice houseFor home finance agencies, the Federal National Mortgage Association (Fannie Mae) created the HFA Preferred Risk SharingTM and HFA PreferredTM lending programs (hence, "HFA"). HFA mortgages are underwritten in line with industry norms. These lending programs, unlike the FHA, VA, or USDA loan programs, do not need a mortgage insurance premium to be paid in cash at closing or financed with the mortgage. The approval criteria for HFA Preferred Risk SharingTM and HFA PreferredTM Loans are somewhat higher (conventional approval guidelines). In addition, the assessment criteria are less rigorous.

The HFA Preferred Risk Sharing™ and HFA Preferred™ loans only require a minimum three percent down payment. (For example: Sales price $100,000 X 3% = $3,000).

The sole difference between the two loans is that the HFA PreferredTM needs mortgage insurance if the down payment is less than 20%. The HFA Preferred Risk SharingTM mortgage does not need mortgage insurance; nevertheless, the interest rate is somewhat higher to compensate for the expense of mortgage insurance.

These loans compete with the FHA home-loan. The FHA home-loan requires a 3.5% down payment; and unlike the FHA loan, there is no up front mortgage insurance premium (aka funding fee).

No First Time Home Buyer requirement and the borrower(s) may have an ownership interest in another residential dwelling at the time of loan closing.

Minimum borrower contribution

Borrowers must contribute the lesser of $1000 or 1% from their own funds. The balance of the down payment and/or closing-costs may come from an eligible Community Second, a gift, grant or unsecured loan from a relative, domestic partner, fiance/fiancee, or from a church, a public agency, a municipality or a nonprofit other than a credit union. Keystone Advantage Assistance Loan Program can also be used with this program.

Home buyer education

In person-home-buyer education class or counseling session must be completed prior to closing if the middle credit score is below 680 (most people have 3 credit scores). The course is provided free of charge by one of PHFA's approved counseling organizations.

A home-buyer education class or counseling session must still be completed prior to closing for all buyers with a medium credit score of 680 or above; however, the course only has to be completed by one borrower and does not need to be "in person." Online and telephone courses are allowed if offered by a PMI-approved business, Framework®-approved education/counseling provider, or PHFA-approved education/counseling provider.

Income limit

The HFA Preferred Risk SharingTM and HFA PreferredTM programs have income limitations, although they are extremely generous. For income limit reasons, the gross annual income (projected for the following 12 months) of all individuals who intend to inhabit the property within one year of loan closing must be included. Except for income obtained by individuals under the age of 18 and/or income received by dependents enrolled in a full-time undergraduate program of at least 12 credits each semester, all sources of income must be listed.

Eligible properties

  • Only single-family homes are available (i.e. single-family home)
  • There will be no duplexes.
  • PUDs (planned urban developments) are allowed as long as the subject development complies with Fannie Mae standards.
  • There will be no prefabricated houses (i.e. mobile homes)
  • There will be no condominiums.

Property must be the primary residence

Non-occupying borrowers are not permitted (aka co-signers)

PHFA Program Comparison FHA HFA Preferred™ Conventional 95% HFA Preferred Risk Sharing™
Purchase Price $120,000 $120,000 $120,000 $120,000
Down payment Requirement $4,200
(3.5%)
$3,600
(3%)
$6,000
(5%)
$3,600
(3%)
Loan Amount $117,827 ($115,800 base) $116,400 $114,000 $116,400
Upfront MIP Payment at Closing $2,027 $0 $0 $0
interest-rate 3.38% 3.75% 3.63% 4.25%
Monthly Mortgage $521 $539 $520 $573
 
Payment (Principal and Interest)
Monthly MIP Payment $121 $75 $70 $0
Monthly Mortgage Payment (Principal and Interest and Mortgage insurance) $642 $614 $590 $573
Difference based on FHA, per month (+/-) $0 (-$28) (-$52) (-$69)