Keystone Flex Loan Programs

Purchase and refinance, can include forgivable 2nd, income limits, rehab

Modest suburban houseHomebuyers in the state of Pennsylvania who meet the requirements for the Keystone Flex Loan Program are eligible to receive funding for purchasing or refinancing real estate anywhere in the state.
Borrowers participating in the Keystone Flex Loan Program have the choice between the following three mortgage programs:

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

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

Keystone Flex Eligible Loan Types

  • 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.

Two Flex Loan Programs

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

Conventional, FHA, VA, and USDA financing are all options that are available 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.

Borrower Eligibility

There is no requirement that the borrower must be a first-time home buyer to qualify for a loan under the K-Flex program. It is permissible for the borrower to hold an ownership interest in another residential unit when the loan is being processed and finalized.

Borrower Contribution

Borrowers must make a personal contribution of either 1 percent or $1,000, whichever is lower.

To qualify for the K-Flex purchase options, the remaining portion of the required down payment must be obtained through the Keystone Forgivable In Ten Years Loan Program (K-FIT).

Borrowers can also use an appropriate Community Second or aid that satisfies the requirements set out by the applicable federal government agency, depending on the kind of loan.

Income Limit

Appendix F contains information on the maximum allowable income for participation in this program. The overall revenue eligible for the program must be more than the income specified for the region in which the property is situated. The K-Flex Loan Program does not consider the applicant's household income.

Qualifying Income

The previously mentioned HFA PreferredTM program's underwriting guidelines would be followed for the conventional loan option.

The government loan option would conform to the Keystone Government Loan Program's underwriting standards.

Purchase Price Limit

The maximum purchase price limit for this program in referenced in Appendix F. This covers all expenses related to a finished house.

Interest rate

In comparison to the current interest rate for the Keystone Home Loan, the interest rate for the K-Flex Purchase & Improvement with Keystone Forgivable in Ten Years Loan Program (K-FIT) is 1/4% to 1/2% higher.

Mortgage Limit

The Keystone Flex (K-Flex) Purchase & Improvement loan's maximum mortgage amount is 97 percent of the total purchase cost or the appraised value "as completed," whichever is less.

The total acquisition cost is the sum of the purchase of the property, including any upgrades or repairs.

The Maximum Purchase Price limit for the applicable county under the loan program cannot be exceeded by the "total acquisition cost."

Eligible Repairs & Improvements

Room being renovatedFor the Keystone House Loan Program, the loan's allocation for home improvements cannot exceed $15,000.

The maximum loan amount is $30,000 under the Keystone Flex Purchase & Improvement with K-FIT Loan Program.

If house inspection and construction inspection costs must be funded, they should be accounted for in the mortgage's home improvement section.

They should not be regarded as closing expenses.

The home renovation part of the loan funds may only be used for essential repairs, modifications, or upgrades that significantly enhance the fundamental livability, energy effectiveness, or safety of the purchased property.

The following items fall under eligible repairs, alterations, and improvements: roof repair or replacement, installation or improvement of heating and air conditioning systems, renovation of the kitchen and bathroom, repairs/improvements to the plumbing and electrical systems, and the modification of living space.

Additionally, eligible are advanced to solar energy and energy efficiency.
Luxury amenities like swimming pools, tennis courts, hot tubs/Jacuzzis, saunas, or other leisure facilities are not allowed. Under this scheme, total rehabilitation is not permitted.

Any repairs, modifications, or enhancements must be carried out by a licensed contractor registered with the state. Contractors must be approved if it is necessary.

The appraised value for the property "as improved" must be equal to or less than the acquisition price of the financed property plus the cost of the improvements to the property. Any further improvement expenditures over the appraised value are the borrower's total obligation.

Within 90 days (3 months) after closing, all repairs, modifications, and enhancements must be completed. To be eligible under federal tax rules, the borrowers must occupy the property within 60 days (2 months) following closing.

Quick Recap

  1. Keystone Flex (K-Flex) with K-FIT (Purchase only) can be used with conventional, FHA, USDA, and VA mortgages. The K-FIT is a 10 year forgivable 2nd mortgage that covers the down payment and closing costs.
  2. 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 which is the 10 year forgivable loan for the down payment and closing costs.
  3. Keystone Flex (K-Flex) (Refinance only), available for all loan types except USDA)
  4. Income limits
  5. Purchase price limits


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 are interested in learning more about this program and how it can benefit you, contact your local PHFA office.

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