Helping First-Time Homebuyers Get in on PA’s Hot Housing Market

Pennsylvania’s affordability has made its housing market a hot spot for first-time homebuyers. For instance, in Bristol, according to Realtor.com, the median home sale price in Pennsylvania is $212,000, more than $72,000 below the national median home value as reported by the National Association of REALTORS®. Home values have also risen 4% over the past year, demonstrating that an investment now will pay off in the future.

First-time homebuyers are finding that the affordable housing market is highly competitive; houses move fast and cash down payments are often needed to secure a property. The state has proposed a new, homebuyer savings account to support first-time buyers.

Senate Bill 309 would allow eligible first-time homebuyers in Pennsylvania to open a special savings account dedicated to contributions for a down payment or closing costs. Tax deductions for these savings would also be available.

State Sen. Bob Mensch is the bill’s sponsor. He notes that people can contribute up to $50,000 over a 10-year period. For single taxpayers, annual contributions would be capped at $5,000 while couples filing jointly would have their contributions capped at $10,000. Mensch believes the first-time homebuyers savings account could lead to an annual increase of 4,000 home purchases in the state and an economic impact of up to $68.8 million.

Like most first-time homeownership programs, eligibility is contingent on an interested resident’s first-time home buying status. This means applicants may not have owned or purchased a home in three years prior to this purchase.

Mensch remarked on the importance of this program, and homeownership as a whole, in a Pennsylvania Business Report article. He said, “The benefits of homeownership extend beyond the home and the buyer. Homeowners put down stakes and make a long-term commitment that strengthens the entire community, socially, and economically.” He continued, “Providing these tax credits would bring a significant return to our communities.”

Senate Bill 309 is the newest addition to many long-running first-time homebuyer programs in the state. The Pennsylvania Housing Finance Agency (PFA) offers a variety of loan programs for first-time homebuyers.

Loan programs offered by the PHFA for first-time homebuyers include:

• HFA Preferred Low Mortgage Insurance (Lo MI) Loan: This program, while not explicitly for first-time homebuyers, helps with a common first-time home buying issue: a small down payment. The HFA Preferred (Lo MI) loan helps homebuyers with a small down payment find low-cost mortgage insurance. Private mortgage insurance (PMI) is typically required by lenders when a borrower’s down payment is less than 20 percent of a conventional home loan. This helps protect the lender should you default on your loan.
• Keystone Home Loan: This program is designed specifically for first-time homebuyers, veterans, and homebuyers of homes in “targeted counties.” Loans may be conventional mortgages, VA loans, or USDA loans and each loan covered under the Keystone Home Loan Program has a different set of eligibility requirements. For all loans, the applicants must meet household income limits and purchase price limits.

Down payment and closing cost assistance programs offered by the PHFA for first-time homebuyers include:

• Keystone Advantage Assistance Loan Program: The Keystone Advantage Assistance Loan Program can provide up to 4 percent of the home price or $6,000 (whichever is lower) in the form of a second mortgage. This money can be used toward a down payment or closing costs. The loan is interest-free, comes with a 10-year repayment schedule, and can be combined with the HFA Preferred (Lo MI) and Keystone Home Loan Program.
• HOMEstead Down Payment and Closing Cost Assistance: The HOMEstead Down Payment and Closing Cost Assistance program is a no-interest second mortgage that is forgiven over five years at a rate of 20 percent each year. Homebuyers can obtain between $1,000 and $10,000 in down payment and closing cost assistance through this program. To qualify, applicants must meet household income limits and home price limits. This program is not offered in all counties and most homes built before 1978 are ineligible due to federal regulations for lead-based paint.

Mortgage Tax Credit Certificates can be used to reduce your federal tax bill. The MCC can be used to claim a tax credit of 20 to 50 percent of your mortgage payments with a cap of $2,000 per year. The MCC cannot be combined with all of PHFA’s programs. Homeowners can claim the MCC each year they reside in the home.

The housing market in Pennsylvania is booming. First-time homebuyers in the state can access a variety of assistance programs to make their dream of homeownership a reality.