PHFA loan requirements


What is PHFA? How does it work?

Think of the Pennsylvania Housing Finance Agency as a bank - not really, but you'll understand as you read on. But before I get into an explanation of PHFA, it's necessary to explain how the mortgage business works.

There are 4 popular mortgage programs:

  •  FHA - Federal Housing Administration
    The Fha program only requires a 3.5% down payment, and a percentage of the closing costs can be paid by the home seller. Read more
  •  VA LOAN - Veteran's Administration)
    The VA program is a great choice for cash strapped veterans. No down payment and the seller is permitted to pay ALL closing costs. Read more
  •  USDA LOAN - United States Department of Agriculture
    The USDA mortgage does not require a down payment. Zero, nadda, and the seller can pay a large percentage of the closing costs. Read more
  • CONVENTIONAL - Fannie Mae and Freddie Mac
    Do you have significant down payment? If so, the conventional home loan might be the best loan program. Read more

Each home loan program has it's own guidelines and relative merits.

FFor example, the FHA home loan requires only a 3.5% down payment and you do NOT need to be a first time home buyer, however, there are loan limits.

The USDA home loan (currently) does not require a down payment, however, the home must be located in a designate rural area.
The Veteran mortgage does not require a down payment and the seller can pay all closing costs . . . but of course, you must me an eligible veteran to take advantage of the VA mortgage.

In a traditional mortgage application, you apply for a home loan with either a bank or a mortgage broker for your loan. A competent loan officer will identify the "best" mortgage based on your income and needs.

How PHFA works

Ok, so where does PHFA fit in?

PHFA sits on top of the bank and mortgage broker, PHFA provides the money for the mortgage. PHFA works with approved banks and mortgage brokers. You work through the banker or mortgage broker as you would with the traditional mortgage application. Your home loan is underwritten to either the FHA, VA, USDA or Fannie Mae and Freddie Mac guidelines and then passed on to the Pennsylvania Housing Finance Agency (PHFA).

Now since the Pennsylvania Housing Finance Agency is providing the money; both the banker and broker must comply PHFA's underwriting guidelines (i.e. income and sales price limits) and a few more guidelines to protect your best interest.

Phfa flow chart

So PHFA is a bank?

No. PHFA bundles up a bunch of mortgages and sells the mortgages to investors, however, the mortgage payment is paid to PHFA and the interest on the loan is forwarded to the investor.