The VA home loan benefit is one of the oldest and most popular military benefits–those who serve a minimum amount of time in active service may qualify to apply for a VA mortgage with zero money down, flexible credit guidelines, and the ability to refinance the VA mortgage at a later time.
But the VA mortgage is not the only veteran-friendly home loan option. Depending on the state you live in, you may find a state-operated veteran home loan program that can help you on the road to homeownership.
The Pennsylvania Housing Finance Agency (PHFA) offers help with veteran-friendly home loans and related programs that feature lower fees and rates. PHFA does not lend money but relies on a network of participating lenders who offer need-based help for those who want to get into an affordable home and meet the program requirements.
PFHFA offers the following programs:
- The Keystone Government Loan Program (K-Gov)
- HFA Preferred™(Lo MI)
- Keystone Home Loan
- Keystone Advantage Assistance Loan Program
The Keystone Government Loan Program (K-Gov)
This is the most flexible of the programs offered–veterans should know that this is a first-mortgage home loan program for any qualifying government mortgage loan program including VA loans.
Veterans are not subject to income or asset limits under this program, and the VA maximum loan is determined by negotiations between the borrower and participating lender. Veterans and other applicants are not required to be first-time home buyers, and the K-Gov program description states there are fewer forms to sign on closing day under this program.
Any veteran borrower who meets the PHFA requirements may also qualify for downpayment and/or closing cost assistance through the Keystone Advantage Assistance Loan (see below). Veterans looking for zero-down home loans should consider this down payment assistance because those making qualifying down payments on VA mortgages are eligible for reduced VA loan funding fees.
HFA Preferred (Lo MI)
Borrowers who qualify for the HFA Preferred (Lo MI) loan program are offered relief from mortgage insurance–that expense is paid for under HFA Preferred by “one of several private mortgage insurance companies” when the borrower makes a down payment of less than 20 percent. The participating lender is charged with helping each applicant determine what the cost of this insurance is based on the down payment and other requirements as applicable.
This type of home loan assistance is only for the purchase of primary residences, there is no first-time homebuyer requirement, and borrowers are expected to make a minimum contribution from their own funds. The HFA Preferred option does not include assistance for purchasing multi-unit properties. In order to be approved for HFA Preferred, at least one borrower obligated on the mortgage must attend pre-purchase home buyer counseling. Meeting this obligation may make applicants eligible for a price break on closing costs.
Keystone Home Loan
This PHFA home loan program is offered to those who are not first-time home buyers but who plan to purchase property in a targeted county or target area. It is also intended for those who are retired or separated veterans. These loans are also offered to first time buyers who plan to live “within 12 months from closing” and/or those who have not owned a home in the last three years.
Household income caps apply. “All sources of income must be included, except for income received by persons under age 18 and income received by dependents enrolled in a full-time undergraduate program.” There are also purchase price limits and a requirement for acceptable credit histories and the ability to make the monthly payments on the house purchased. The “ability to make payments” is measured by a rule of thumb stating no more than 30% of your income should be used for housing.
All applicants must be able to pay application and closing cost expenses including down payment funds where required. VA mortgages do not generally require down payments unless certain conditions are met, but be sure to ask the participating lender if there are any additional requirements under this program.
Veterans are encouraged to compare their loan options including conventional mortgages; in the past the PHFA has offered loans insured by the Pennsylvania Housing Insurance Fund with three to five percent down payment options and a minimum FICO score of 660. VA loans require no down payment, but it’s helpful to compare terms and conditions to see if there are any advantages for using one type of loan over the other depending on circumstances.
Keystone Advantage Assistance Loan Program
The Keystone Advantage Assistance Loan Program is basically a second mortgage for the purpose of helping out with closing costs and down payment expenses. Borrowers applying for a VA loan through a participating lender may not need the down payment assistance, but as mentioned above, a down payment can reduce VA loan funding fee expenses. The Keystone Advantage Assistance Loan is offered at zero percent and is a ten-year loan.
This down payment help can be used with the following programs:
- HFA Preferred™(Lo MI)
- Keystone Government Loan
- Keystone Home loan
Minimum FICO scores are required, the minimum loan amount you can apply for is $500, and there are income and asset caps. This downpayment assistance cannot be combined with any other offers.
How To Apply For PHFA Programs
You will need to find a PHFA participating lender and a housing counselor approved by the program to start the mortgage application process. The official site reminds borrowers that any applicant with a credit score lower than 680 is required to complete a counseling program before closing the loan.
Joe Wallace is a 13-year veteran of the United States Air Force and a former reporter for Air Force Television News
