If you are in the market for a Pennsylvania home but don’t have the funds to cover your down payment and closing costs, we have good news! You may qualify for PHFA’s new K-FIT loan, which can assist with these expenses.
What Is a K-FIT Loan?
The Pennsylvania Housing Finance Agency (PHFA) recently launched a new home purchase assistance loan called K-FIT. The K-FIT loan is “Forgivable in Ten Years” and is available to qualified home buyers to help with down payment and closing costs.
With the K-FIT loan, 10% of the loan is forgiven each year (over ten years). Here’s the great part: K-FITs do not have monthly payments or interest!
Borrowers can only use this secondary, forgivable home loan in conjunction with a PHFA Keystone Home Loan (Conventional, FHA, RD, and VA loans). If the home buyer receives VA or RD financing, funds from the K-FIT loan must be used to cover closing costs, not the down payment.
Who May Benefit From a K-FIT Loan?
The K-FIT loan is designed for low-income and moderate-income Pennsylvania residents who dream of becoming homeowners. Often, the only obstacles that would-be home buyers face are the down payment and closing costs. Fortunately, this forgivable loan can help make homeownership more attainable for many families!
If you currently rent a home, have a low-to-moderate income (but can still make monthly mortgage payments), and want to own your own home, the K-FIT loan may be a good fit.
What Are the Eligibility Requirements For a K-FIT Loan?
There are a few conditions borrowers must meet to qualify for a “Forgivable in Ten Years” loan.
First, home buyers must be eligible for the Keystone Home Loan (KHL), which is a 30-year PHFA mortgage that has purchase and income limits. The Keystone Home Loan is considered the primary home loan, while the K-FIT loan is a secondary loan.
Quick note: With the K-FIT, there is no first-time home buyer requirement.
To be eligible for a K-FIT loan, the borrower cannot have liquid assets greater than $50,000 (after the deduction of their loan closing funds). “Liquid assets” include the following: money in checking/savings accounts, certificates of deposit, stocks, bonds, and other liquid accounts. IRAs, 401Ks, and pension funds are only included if the account owner can withdraw money without penalties.
All new homeowners (including anyone cosigning for the mortgage) must have a minimum FICO credit score of 660 to qualify for a K-FIT loan. Additionally, K-FIT borrowers must complete home buyer education counseling before closing the loan.
If buyers have a credit score of less than 680, they must attend in-person home buyer education counseling. However, online courses are available for those with a credit score greater than 680 – only one borrower is required to complete this online course.
What Are the Loan Terms?
All K-FIT loans are based on the home’s purchase price or appraised value, whichever is the lesser amount. This loan provides 5% of the applicable “lesser” value. There is no cap on the amount of money that can be borrowed, but $500 is the minimum loan amount.
So, if the home is appraised at $230,000 but is financed for $215,000, the K-FIT loan would be 5% of $215,000, which equals $10,750.
Funds cannot be used for anything other than a home’s down payment and closing costs. And as previously mentioned, the K-FIT loan is forgiven at a rate of 10% yearly (over ten years). Also, as a reminder, no interest or monthly payments are associated with K-FIT loans.
Borrowers must be using maximum PHFA financing to be eligible for this loan. K-FIT funds should first be applied towards the down payment, and if there are any remaining funds, they must go towards closing costs. Additionally, borrowers can only use K-FIT money to cover the minimum down payment – excess funds cannot make a supplemental down payment on the home.
It is important to note that K-FIT funds cannot be used to finance the following:
- FHA Upfront Mortgage Insurance Premium
- VA guaranty fees
- RD guaranty fees
Lastly, except for the Access Modification Loan Program, K-FIT loans cannot be used in combination with any other PHFA assistance programs.
Who Provides the K-FIT Loan to Borrowers?
The Pennsylvania Housing Finance Agency makes the K-FIT loan available to approved borrowers. This agency works to ensure that housing options are more affordable for Pennsylvania families. The PHFA predominantly works with older individuals, people with low-income and moderate-income, and other residents with unique housing needs. The PHFA has helped more than 181,660 families obtain home loans since its creation in 1972.
Approved lenders such as « Team Hadley at Fairway Independent Mortgage » help qualified homebuyers obtain PHFA mortgages and K-FIT loans. Be sure to work with only qualified lenders when applying for these loan options.
Final Thoughts
Feel free to check out more information about down payment resources in PA. If you have further questions about the K-FIT loan, please contact us today. We can help determine if you may be eligible for a Keystone Home Loan and a secondary K-FIT loan!
