What you need to know about the Keystone Home Loan Program

Nice houseAre you on the lookout for a suitable first-time homebuyer program? If that's the case, take a look at Pennsylvania's Keystone home-loan program. All candidates who satisfy the income and sales price limits are eligible for this loan program, which provides below-market interest rates.

Existing owner-occupied single-family dwellings (attached or detached), including condominium units, are eligible. The borrower must intend to live in one of the units if the property is a two-unit home. The Keystone home-loan program excludes three- and four-unit structures. This financing program is excellent for home buyers who want to put down a 20% down payment on a property.

According to the Pennsylvania Housing Finance Agency, if you satisfy the following six criteria, you may be qualified for a Keystone home loan:

1. All individuals who plan to occupy the house within 12 months after closing must be first-time buyers. For the purposes of this program, individuals who have not owned (had title to) a primary house in the previous three years are considered first-time homebuyers.
or
You are not a First Time Home Buyer, 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. Except for income received by individuals under the age of 18 and 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.

3. The purchase price of your desired house does not exceed the purchase price limit set by the Keystone home-loan program. All expenses for a complete home are included in this figure. The acquisition cost is another name for it. It is not necessary to provide the assessed worth of land that has been owned outright for more than two years.

4. Homebuyers must have excellent credit and the ability to make monthly payments on the home they want to purchase. In general, your mortgage payment should not be more than 30% of your total monthly income. A lender or PHFA network participant  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. Homebuyers must have sufficient funds to pay the mortgage application and closing costs. Credit reports, appraisals, and title insurance fees are all part of the closing expenses.

6. Mortgage insurance is required for homebuyers who put down less than 20% of the home's sales price or assessed value. The amount of the down payment varies based on the loan type (i.e. FHA, VA, USDA, conventional).

Under the Keystone home-loan program, veterans (and their spouses, if applicable) are not required to satisfy the first-time home-buyer requirement in non-target areas. A veteran is someone who served in the Armed Forces or Reserves on active service and was dismissed or released for reasons other than dishonorable.

You will apply for a mortgage via a PHFA approved lender if you satisfy the income and sales price requirements. The Pennsylvania Housing Finance Agency works via approved lenders rather than directly with homebuyers. The money is given to the mortgage firm by the PHFA. Which of the following loan plans is appropriate for you will be determined by you and your mortgage lender:

Eligible loan programs

Conventional uninsured loans:: The Keystone home-loan program currently requires a 20% down payment regardless of credit score for conventional loans.
A gift from a close relative (parent, sibling, child, grandparent, aunt, or uncle) or a nonprofit organization may be used to make the down payment.

FHA loans: The Federal Housing Administration (FHA) insures these loans, and borrowers must put down a 3.5 percent down payment. The seller is allowed to contribute up to 6% of the sales price toward the buyer's closing expenses.Read more about Seller Paid closing-costs

VA and UUSDA loan: In most instances, loans insured by the Veterans Administration (VA) or Rural Development (RD) do not need a down payment.
In Philadelphia and Delaware counties, as well as other large cities, RD loans are not available.

The borrower should be aware that FHA, VA, and USDA loans are not available from all participating lenders. Additionally, certain loan types may have extra buyer and/or property eligibility requirements.

Keystone Advantage Assistance Loan Program - Are you aware of the Pennsylvania Housing Finance Agency's down payment and/or closing-cost assistance loan program? Borrowers that meet the criteria may earn up to $6,000 in addition to 4% of the purchase price or market value.

Keystone Home Loan Frequently Asked Questions

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
  • Just expecting to inherit a share in a primary home
  • 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 on the execution of a standard purchase contract, without a right of possession

What income can be excluded from the income calculation:

  • Sums given directly to the student or the educational institution for educational scholarships, as well as amounts paid by the government to a veteran for use in paying the expenses of tuition, fees, books, and equipment, but only to the extent utilized for such reasons.
  • Amounts expressly designated for payment of medical costs
  • Gifts that are scattered, erratic, or irregular
  • Payments for foster care (unless it is included in income used for qualifying)
  • Earnings from the work of minors under the age of 18 (including foster children)
  • Insurance payments (including health and accident insurance and worker's compensation), financial profits, and settlements for personal or property losses are all lump sum additions to family assets.
  • Payments earned as a result of participating in the ACTION volunteer programs Title II of the Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970 provides for relocation compensation.
  • A serviceman's head of family who is away from home and exposed to hostile fire receives special pay.