PHFA Explained: How Pennsylvania First-Time Home Buyers Can Get Help with Closing Costs
If you’ve been dreaming of buying your first home in Montgomery County or the Greater Philadelphia area, but the thought of saving for both the down payment and closing costs makes you break out in a sweat… you’re not alone.
The Pennsylvania Housing Finance Agency (PHFA) has been a game-changer for thousands of buyers across the state — helping them get into a home sooner, with less cash upfront. And here’s the thing: most people don’t even know they qualify.
So today, I’m going to walk you through what PHFA is, how it works, and how you can use it to buy your first home without draining your savings.
What is PHFA?
PHFA stands for the Pennsylvania Housing Finance Agency, a state agency created to make homeownership more affordable for Pennsylvanians — especially first-time buyers and those with low-to-moderate incomes.
PHFA doesn’t lend you money directly (you’ll still work with an approved lender), but it partners with lenders to offer mortgage programs with:
Lower interest rates
Down payment and closing cost assistance
Flexible credit guidelines
Why PHFA is Perfect for First-Time Buyers
Let’s be real — even if you have your down payment saved, closing costs can throw you for a loop. In Pennsylvania, you can expect closing costs to range from 4–6% of the purchase price.
For example:
On a $300,000 home, that’s $12,000–$18,000 in closing costs.
That’s in addition to your down payment.
PHFA programs can step in to cover a portion (or sometimes all) of those costs, depending on your situation.
Types of PHFA Assistance
There are several PHFA programs, but here are the ones most relevant if you’re light on cash for closing costs:
1. Keystone Advantage Assistance Loan Program
Up to 4% of the purchase price or $6,000 (whichever is less)
Can be used for closing costs and/or down payment
No interest — you pay it back monthly over 10 years
2. Keystone Forgivable in Ten Years Loan Program (K-FIT)
Up to 5% of the purchase price
Forgivable over 10 years (meaning you don’t pay it back if you stay in the home)
Income limits apply
3. HOMEstead Downpayment and Closing Cost Assistance
Provides up to $10,000 in assistance
Forgivable over 5 years
Available in certain counties — many Montgomery County buyers qualify
Who Qualifies for PHFA?
The great news is, you don’t need to have perfect credit or a huge savings account to qualify.
Here are the basics:
Be a first-time home buyer (haven’t owned a home in the last 3 years) — Some exceptions apply for certain target areas.
Meet income limits (varies by county & household size)
Buy a home within purchase price limits for your county
Use a PHFA-approved lender
Complete a home buyer education course
PHFA in Montgomery County & Philadelphia
Here’s what’s great for locals:
Many towns in Montgomery County, Philadelphia, and Bucks County are eligible for target-area exceptions — meaning you can sometimes qualify even if you’ve owned a home before.
PHFA-approved lenders here are familiar with local programs and can layer PHFA with other grants (hello, more free money).
How PHFA Works Step-by-Step
Get Pre-Approved with a PHFA-approved lender (I can connect you with a few I trust).
Select the PHFA program that fits your needs — your lender will help determine eligibility.
Find your home — yes, you can shop with confidence knowing your closing costs will be covered.
Complete the required home buyer education — usually online or in person, often free or low-cost.
Close on your home with assistance applied at settlement.
PHFA Myths — Busted
Myth: “Programs like this take forever and I’ll lose the house.”
Reality: With the right lender, PHFA loans close in a normal time frame — sellers won’t even blink.
Myth: “I probably make too much money to qualify.”
Reality: Income limits are surprisingly high for our area. For a family of four in Montgomery County, it’s often over $100,000+.
Myth: “It’s only for low-income or struggling buyers.”
Reality: PHFA is for smart buyers — why wouldn’t you take advantage of free or low-interest money?
Why You Shouldn’t Wait
The real estate market moves fast — and so does funding. PHFA programs have set funding pools, and when they run out, you’re waiting until next year.
Also, interest rates fluctuate. If you qualify now, it might save you tens of thousands over the life of your loan to lock in sooner.
A Real Example
Last year, I worked with a young couple in Norristown who had $8,000 saved. Their dream home was $245,000. After their down payment, they had almost nothing left for closing costs.
We connected them with a PHFA lender who secured $6,000 through the Keystone Advantage program — and they closed with less than $1,500 out of pocket.
They’re now homeowners, building equity instead of paying rent — and they didn’t have to wipe out their savings to do it.
How to Get Started
If you’re even thinking about buying your first home in the next 6–12 months, here’s your homework:
Talk to a PHFA-approved lender (I can recommend my favorites).
Get a free buyer consultation with me so we can map out your budget and must-haves.
Register for the home buyer education course — it’s quick and helps you get ahead.
💬 Ready to see if you qualify for PHFA?
I’ve helped dozens of first-time buyers in Montgomery County and Philadelphia get into homes with little money down — and I’d love to help you too.
📅 Schedule your free consultation here: Schedule Here
