First-Time Home Buyer Guide for Pennsylvania

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By Brendan Rigney Updated January 3, 2023


What is a first-time home buyer? | Pennsylvania home buyer programs | Buyers with low income | Buyers with disabilities | How to buy your first home | FAQs

For first-time home buyers, Pennsylvania offers several opportunities and resources for folks to find (and afford) their first home.

There are a number of benefits to being a first-time buyer:

  • Eligibility for certain mortgage and cost assistance programs

  • Eligibility for tax breaks

  • Opportunities to build wealth and credit

🏠 Housing market in Pennsylvania

Your first home’s value could increase significantly over the next few years. Plus, you could lock in a low-interest mortgage, saving you money over the long term!

🌡 Seller’s market: Buyer demand is exceeding the number of homes available.

📈 High appreciation rate: Home values are increasing significantly. Homes in Pennsylvania are expected to appreciate 7.9% over the next year.

📉 Low mortgage rates: In Pennsylvania, the average interest rate for new 15-year mortgages is 2.40%. For new 30-year mortgages, the rate is 2.93%.

» READ: 8 Steps to Buying a House in Pennsylvania

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What are first-time home buyer requirements in Pennsylvania?

Here are the criteria to be considered a first-time home buyer according to the U.S. Department of Housing and Urban Development (HUD):

  • Someone who has not owned their primary residence during the past three years

  • A single parent or a displaced homemaker who has only only owned a home with a former spouse

  • Someone who has only owned a home that’s not permanently fixed to a foundation (e.g., a mobile home)

  • Someone who owned a property that otherwise doesn’t comply with state or local building codes

What shape do my finances need to be in?

For starters, you'll need a credit score of at least 660 to qualify for state-sponsored mortgage programs. You'll also need to complete home buyer counseling, which could be waived if your credit score is above 680.

» MORE: How to Fix Your Credit Score in 6 Months

You also need a maximum debt-to-income ratio (DTI) between 40–50%, though each program has its own requirement. However, there’s some variation among different programs.

Some programs have additional financial requirements. For example, programs for low- and moderate-income households also have income limits.

» READ: Pennsylvania Housing Finance Agency (PHFA) Loan Requirements

Tools lenders use to evaluate home buyers

Credit score

Lenders use a credit score to determine a borrower's trustworthiness.

» READ: What Credit Score Is Needed to Buy a House?

Debt-to-income ratio (DTI)

Lenders evaluate a borrower's debt-to-income ratio to prevent the borrower from taking on too much debt and defaulting on their loans. Typically, lenders want your DTI to be 36–43% of your gross income.

To calculate your DTI, add all of your recurring monthly debt payments, plus your estimated mortgage payment, and divide it by your gross monthly income (before taxes).

» READ: How to Find High DTI Mortgage Lenders

Loan-to-value ratio (LTV)

Lenders use a loan-to-value ratio to ensure they provide ONLY the absolutely necessary amount of money to a borrower.

To determine your LTV, lenders divide your home loan amount by your property's value.

An LTV of more than 80% is considered risky, since it means the lender will lend more money to their customers. However, that doesn’t mean a lender won't offer a loan to a borrower with a high LTV.

Private mortgage insurance (PMI)

Lenders use private mortgage insurance to protect their investment in case a borrower defaults on their loan. PMI usually equals 0.3–1.15% of the loan amount.

Lenders typically require PMI on conventional mortgages where the borrower's down payment is smaller than 20%.

Lenders will cancel PMI automatically once a mortgage's LTV reaches 78%.

» READ: How Much Will My Mortgage Payment Be?

Price-to-income ratio (PTI)

Lenders use a price-to-income ratio to calculate housing affordability.

To calculate PTI, lenders divide median home prices by median household income.

If the PTI of a location is over 2.6, it usually means home prices exceed what people can afford based on the local median household income.

What are first-time home buyer programs in Pennsylvania?

The Pennsylvania Housing Finance Agency (PHFA) is the state’s primary mortgage administrator. It also offers down payment and closing cost assistance, tax credits, and home improvement and repair assistance.

What are first-time mortgage assistance programs in Pennsylvania?

PHFA offers first-time home buyers several mortgage loan programs, each with its own eligibility requirements. Many of these can be combined with other assistance programs to get the most bang for your buck.

PHFA mortgage program Credit score DTI Minimum down payment

Keystone Home Loan



  • Conventional: 3–5%

  • FHA: 3.5%

  • USDA or VA: 0%

Keystone Government Loan



  • FHA: 3.5%

  • USDA or VA: 0%

HFA Preferred Loan



  • 1% or $1,000, whichever is lower
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Keystone Home Loan Program

PHFA’s Keystone Home Loan Program is a mortgage program specifically designed for first-time home buyers, veterans, and low-income households.

Loans offered through this program can be conventional, or backed by federal agencies like the Federal Housing Agency (FHA), the U.S. Department of Agriculture (USDA), and the U.S. Department of Veterans Affairs (VA). Each of these are 30-year, fixed-rate mortgages.

Keystone Home Loans offer benefits not commonly found with your typical mortgage:

  • Lower mortgage interest rates

  • Fewer fees

  • Low down payment requirements, or zero down payment requirements if you qualify for a USDA or VA loan

Even better, loans offered through this program can be combined with other PHFA programs:

To qualify for the Keystone Home Loan Program, borrowers need to meet county income and home purchase limits. For example, most counties have income limits between $81,000 and $97,000 for households of two, while Philadelphia has a much higher limit of $115,900.

Borrowers also need to have a maximum debt-to-income ratio of 50% if they choose a conventional loan through the Keystone Home Loan Program. If you opt instead for an FHA, USDA, or VA loan, you need a maximum DTI of 45%.

Home buyers also need to meet PHFA credit score guidelines. Keystone Home Loans require a credit score of 680 or higher, or 620 plus a home buyer counseling course.

» JUMP: What shape do my finances need to be in?

Keystone Government Loan Program

Keystone Government (K-Gov) Loans are FHA, USDA, and VA loans administered through PHFA. They provide low-cost financing to low-income households, those looking to buy a home in rural areas, and veterans.

K-Gov is similar to the Keystone Home Loan, except it doesn’t have a first-time home buyer requirement and doesn’t offer conventional loans.

Each type of K-Gov loan is a 30-year, fixed rate mortgage. Potential benefits include:

  • Below-market interest rates

  • Fewer fees

  • Low or no down payment requirement, depending on your loan

The loans are compatible with other PHFA programs, like the Keystone Advantage Assistance Loan, the Access Modification Program, and .

K-Gov loans require a DTI of 45% or lower, but PHFA requires no additional income or home purchase restrictions.

HFA Preferred and HFA Preferred Risk Sharing Loans

PHFA also offers conventional 30-year, fixed-rate home loans backed by the Federal National Mortgage Association (Fannie Mae). These types of loans are for low- and moderate-income borrowers who don't have to be first-time home buyers.

Like most other mortgages, HFA Preferred Loans require borrowers to pay for private mortgage insurance if their down payment is less than 20% of the purchase price. However, HFA Preferred Loans don't require an upfront fee for PMI. That's not always the case with other government-backed mortgages, such as FHA home loans.

Once the loan balance reaches 80% of the purchase price, that insurance is cancelable. In other words, borrowers no longer have to pay a monthly mortgage insurance premium.

» MORE: Buying a Fannie Mae Home: An In-Depth Guide

With HFA Preferred Risk Sharing Loans, borrowers can also waive the PMI while still paying a small down payment. A Risk Sharing Loan is nearly identical to a typical HFA Preferred Loan, although it may include a higher interest rate to offset the waived mortgage insurance.

HFA Preferred Loans require borrowers to:

  • make a minimum down payment of 3%

  • have a DTI of 50% or lower

  • a credit score of 620 or higher and home-buying counseling

» JUMP: What shape do my finances need to be in?

Households also need to meet county income limits, which range $52,080–$75,600 in annual household income.

🖐 NOTE: These limits differ from those included in other PHFA programs.

HFA Preferred Loans offered through PHFA are restricted to single-family homes.

What are down payment and closing cost assistance programs for home buyers in Pennsylvania?

In addition to a mortgage, first-time home buyers often struggle with down payments and closing costs.

The exact costs can vary depending on your type of mortgage and how much you can afford per month.

Keep in mind, a smaller down payment might save you money right off the bat, but it also means you’ll pay more during the course of your mortgage.

Luckily, PHFA and other organizations offer down payment and closing cost assistance programs for first-time home buyers and others.

Keystone Advantage Assistance Loan Program

The Keystone Advantage Assistance Loan Program (or simply Keystone Advantage) is PHFA’s primary assistance program.

Keystone Advantage offers a second mortgage loan to help cover the cost of a down payment or closing costs. The maximum loan amount is $6,000 or 4% of the sales price, whichever is less.

Home buyers need to borrow at least $500 through Keystone Advantage, which is repaid over 10 years with no interest.

Fortunately, a Keystone Advantage loan can be combined with any of PHFA’s first mortgage programs, as well as the agency’s Access Modification Loan Program for persons with disabilities.

Similar to other PHFA programs, Keystone Advantage loans require credit scores of at least 660 and no more than $50,000 in liquid assets.

HOMEstead Downpayment and Closing Cost Assistance Loan

Low- and moderate-income buyers can apply for a HOMEstead loan of $1,000–$10,000 to use toward a down payment and closing costs. This loan can also be combined with Keystone Home Loan mortgages.

The HOMEstead loan is forgiven over five years, at 20% each year. If you move before the loan is fully forgiven, you'll need to repay the remaining balance.

Borrowers are subject to income limits by city and county, including:

  • Allentown

  • Altoona

  • Chester County

  • Delaware County

  • Philadelphia

  • Pittsburgh

  • Scranton

City and county government programs

Some city and county governments offer local assistance programs for first-time home buyers. Additionally, counties offer their own assistance programs. For instance:

  • Philadelphia's Philly First Home program offers up to $10,000 or 6% of the home purchase price (whichever is lower) for the down payment, closing costs, or a mortgage’s principal.

  • Pittsburgh’s First Front Door provides up to $5,000 in grant money for down payment and closing costs.

  • Chester County offers up to $10,000 in down payment assistance.

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Nonprofit programs

NeighborhoodLIFT is a Philadelphia-based assistance that offers grants up to $15,000 to low-income households.

You need to complete eight hours of home-buyer education, be pre-approved by a NeighborLIFT lender, and have a combined household income of $54,000 or less to qualify.

The Chenoa Fund, a national down payment assistance program, offers low-interest second mortgages to low- and moderate-income families.

Borrowers can combine Chenoa Fund loans with typical Fannie Mae mortgages. Borrowers need to have a minimum credit score of 620 and a DTI of 50% or less.

» JUMP: What assistance is available for first-time home buyers with low income?

What are first-time home buyer tax credit programs in Pennsylvania?

Depending on which mortgage program you select, you may also qualify for a tax credit that can significantly lower how much you owe in federal taxes each year.

PHFA Mortgage Tax Credit Certificate

PHFA’s Mortgage Tax Credit Certificate (MCC) lets first-time home buyers, rural residents, and veterans take a huge bite out of their annual federal taxes.

The MCC gives borrowers a credit of 20–50% of the mortgage interest they pay each year, capped at $2,000.

If you’ve paid $4,000 in mortgage interest this year, the MCC would award you a tax credit worth between $800 and $2,000. The exact percentage awarded depends on the home loan amount.

PHFA Mortgage Tax Credit Calculator

The MCC can be used along with PHFA’s Keystone Government Loan, HFA Preferred Loan, and Keystone Advantage Assistance Loan programs.

In addition to being a first-time buyer, borrowers can also be veterans or those looking to move to rural areas to qualify.

The MCC uses household income and home purchase limits identical to PHFA’s Keystone Home Loan Program.

» JUMP: What are first-time mortgage assistance programs in Pennsylvania?

What are first-time home buyer grant programs in Pennsylvania?

PHFA also offers first-time home buyers who obtain an HFA Preferred Loan grants up to $500 toward down payments and closing costs. Unlike loans, this grant doesn't have to be repaid or forgiven.

What assistance is available for first-time home buyers with low income?

Several programs from PHFA and other organizations are specifically designed for first-time home buyers with low income. The Keystone Home Loan and HFA Preferred Loan programs are both meant to support low- and moderate-income households, for instance.

For a person or household to be considered low-income, their annual income needs to fall below 80% of the median family income in their community. In Pennsylvania, median income varies drastically by county, so PHFA’s income and purchase limits vary as well.

Counties with big cities like Philadelphia and Allegheny (which includes Pittsburgh) have higher median incomes, whereas counties with smaller communities like Cameron and Clarion have lower ones.

» READ: Pennsylvania Housing Finance Agency (PHFA) Loan Requirements

Additionally, low-income borrowers can qualify for down payment assistance through PHFA’s HOMEstead Loan program. Home buyers can receive a no-interest and forgivable loan of up to $10,000. Borrowers are subject to county income limits.

Employer-assisted housing

Low- and moderate-income buyers who are backed by a participating employer also qualify for PHFA’s Keystone Advantage Assistance Loan of up to $8,000. That’s more than the typical assistance loan amount of $6,000 or 4% of the home purchase price!

Here’s how employer-assisted housing could work for prospective home buyers:

  1. You're approved for a mortgage.

  2. Your employer authorizes a loan or grant.

  3. You use those funds toward the down payment, closing costs, or another part of the home purchase — depending on the employer’s program.

What assistance is available for first-time buyers with disabilities?

In Pennsylvania, borrowers can qualify for the Access Home Modification and Access Downpayment and Closing Cost Assistance programs when they enroll in one of PHFA's first-mortgage programs.

You or someone in your household must be living with a permanent physical or mental impairment to be considered disabled.
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Both of these programs are subject to income limits: household income can't exceed 80% of the state median family income.

The Access Home Modification Program offers a zero-interest loan of up to $10,000 to make a home more accessible. Here are some examples of accessibility projects:

  • Installing an entrance ramp

  • Widening doors or hallways

  • Installing grab bars or handrails

  • Modifying a kitchen or bathroom

Meanwhile, borrowers can apply to the Access Downpayment and Closing Cost Assistance Program for no-interest loans to help them with the extra costs of purchasing a home. Loans can be as large as $15,000, and this program is compatible with HOMEstead loans.

What's the process of buying a house for the first time?

Taking a step-by-step approach can make your journey in buying your first home much easier.

» READ: 8 Steps to Buying a House in Pennsylvania

Step 1: Evaluate your financial situation

First, take a look at your finances: your income, debt, savings, credit score, and so on. These will play a big role in what kind of mortgage you get.

Audit yourself. Is your DTI at or below 50%? Is your credit score solid — around 700 — or could it use some juice?

» LEARN: How to Fix Your Credit Score in 6 Months

Step 2: Choose the right neighborhood

Whether you're considering a rural community or a specific neighborhood in one of the big cities, pay attention to stuff like home values or local amenities. Do you still want to live there?

» FIND: The 5 Most Affordable Places to Live In Pennsylvania

Step 3: Find a great real estate agent in Pennsylvania

A great real estate agent can make all the difference, especially a local one who can help you know your new community before taking the plunge.

You can pick an agent based on their experience, what kinds of houses they specialize in, or online reviews.

» COMPARE: Top Real Estate Agents in Pennsylvania (January 2022 Rankings)

Step 4: Get pre-approved for a mortgage

Before touring homes, you’ll need to get pre-approved for a mortgage. To do this, first consider the different types of mortgages (like 15-year and 30-year mortgages) and different lenders.

Step 5: Start house hunting in Pennsylvania

Make a list of priorities. What are the top things you want or need for your first home?

Keep in mind that housing availability can depend on the season. In other words, the time of year you go house hunting can determine which and how many homes you can check out.

Step 6: Make offers

Be quick with making an offer once you find a home you love. Houses in Pennsylvania are selling within an average of 55 days!

Additionally, think of ways in which you can sweeten the offer if needed. Consider including items like repairs credits that can save the seller time and money.

Step 7: Inspection and appraisals

After an offer is accepted, you should still have a licensed inspector look at the home.

Plus, you’ll want an appraiser to make sure you aren’t overpaying for your new home.

Step 8: Final walkthrough and closing

Take one final look at the property before shaking hands. If everything looks good, congratulations — you’ve bought your first home!

Looking for an agent to help you find your first home?

Clever can get you started fast — and save you money.

FAQs for first-time home buyers in Pennsylvania

Does Pennsylvania have a first-time home buyer program?

The Pennsylvania Housing Finance Agency (PHFA) offers first-time home buyers several programs that can make buying your home easier and more affordable.

PHFA’s Keystone Home Loan Program offers first-time home buyers mortgages with below-market rates and fewer fees. PHFA also offers down payment and closing cost assistance with its Keystone Advantage Assistance Loan Program.

What credit score is needed to buy a house in Pennsylvania?

You need a score of 660 or higher to be eligible for programs offered by the Pennsylvania Housing Finance Agency. You’ll also need to take home buying counseling courses, unless your score is 680 or higher.

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