If you are buying your first home in Central Pennsylvania, the state government will literally pay part of your closing costs and down payment. Most buyers qualify. Most buyers never use it. Here is what Pennsylvania Housing Finance Agency (PHFA) actually offers, who qualifies, how to stack the programs, and worked examples for typical Chambersburg-area home prices.
Quick context: why this matters in Chambersburg
The median sale price in Chambersburg is around $242,000 per Redfin. With Pennsylvania closing costs averaging 4.28% of sale price, a typical first-time buyer here needs roughly $25,000 to $35,000 in cash at closing for down payment, closing costs, and prepaids.
That is a lot of money for a first-time buyer. PHFA programs can knock $6,000 to $20,000 off that number, depending on which combination you qualify for.
Program comparison at a glance
| Program | Amount | Interest | Repayment | Best For |
|---|---|---|---|---|
| Keystone Advantage | Up to $6,000 or 4% of price | 0% | 10-year amortization | Lower-cost homes; shorter expected stay |
| K-FIT | 5% of purchase price (no cap) | 0% | Forgiven 10%/year over 10 years | Most buyers (best deal if staying 5+ years) |
| Keystone Home Loan | The first mortgage itself | Market-based but often slightly below | 30-year fixed | Use as base loan with assistance program on top |
| HFA Preferred | 97% LTV conventional first mortgage | Market-based | 30-year fixed | Stronger credit profiles |
| USDA Rural Development | 0% down loan for rural areas | Market-based | 30-year fixed | Rural areas of Franklin/Cumberland counties |
Program 1: Keystone Advantage Assistance Loan
Per PHFA:
- How much: Up to 4% of purchase price OR $6,000, whichever is less.
- For: Down payment AND/OR closing costs.
- Interest rate: 0% — yes, zero.
- Repayment: 10-year amortization (about $50/month on a $6,000 loan).
- Credit minimum: 660.
It is a second mortgage, repaid alongside your first. Because it is 0%, every dollar of your monthly payment goes to principal. On a $300,000 home, you would get $6,000 (since 4% would be $12,000, but the cap is $6,000), repaid at $50/month for 10 years.
Program 2: K-FIT (Keystone Forgivable In Ten Years)
Per PHFA:
- How much: 5% of the lesser of purchase price or appraised value. No dollar cap.
- For: Down payment AND/OR closing costs.
- The magic word: forgivable. Forgiven at 10% per year over 10 years. If you stay in the home 10 years, the loan is fully forgiven and you owe nothing.
On a $300,000 home, that is $15,000 of help, eventually free. On a $400,000 home, $20,000.
K-FIT cannot be combined with Keystone Advantage Assistance — you pick one. For most buyers, K-FIT is the better deal because of the forgiveness feature. Keystone Advantage wins only in very specific edge cases (lower-cost homes where 4% beats 5% of a smaller base, plus shorter expected stay).
Program 3: Keystone Home Loan (the first mortgage)
This is PHFA's actual first mortgage product. It is a 30-year fixed-rate loan, often at a slightly lower rate than market conventional, with the assistance programs (Advantage or K-FIT) layered on top.
To use Keystone Home Loan you need to meet:
- First-time buyer status (have not owned a home in the last 3 years), OR be a veteran, OR be buying in a designated "target area"
- Income limits that vary by county. Per the PHFA Appendix A income and price limits, Cumberland County allows household incomes up to $105,400 with a max purchase price of $496,600. Franklin County's specific 2026 limits should be confirmed with your lender, but they are in the same general range.
- Owner-occupancy — you have to actually live in the home.
Program 4: HFA Preferred (conventional)
For buyers with stronger credit (700+) and higher incomes, HFA Preferred is a conventional 97% LTV (3% down) loan with reduced mortgage insurance compared to standard conventional. It can also stack with Keystone Advantage or K-FIT.
Program 5: Keystone Government Loan (FHA, VA, USDA)
If you qualify for an FHA loan (3.5% down, more flexible credit), VA loan (zero down for veterans), or USDA Rural Development loan (zero down in eligible rural areas — much of Franklin County qualifies), PHFA's Keystone Government Loan adds the assistance programs on top of those federal loans.
Worked example #1: Sarah buys a $260K Chambersburg colonial
Sarah has $15,000 saved and a 720 credit score. Without help, her closing day cash needs are:
- Down payment (3% conventional): $7,800
- Closing costs (4.28% PA average): ~$11,128
- Prepaids/escrows: ~$3,500
- Total: $22,428 — She is short $7,400.
With K-FIT (5% of $260K = $13,000 forgivable) stacked on top of an HFA Preferred first mortgage:
- $13,000 covers her down payment and most of her closing costs
- Her cash needs drop to roughly $9,400 at closing
- If she stays 10 years, the $13,000 is forgiven entirely
She moves in with $5,600 still in the bank as an emergency fund.
Worked example #2: Marcus buys a $190K Greencastle starter home
Marcus is 26, single, makes $58K/year, has $11,000 saved, and a 680 credit score. Without help:
- Down payment (3.5% FHA): $6,650
- Closing costs: ~$8,100
- Prepaids/escrows: ~$2,800
- Total: $17,550 — He is short $6,500.
With Keystone Advantage Assistance ($6,000 at 0%) on top of FHA:
- $6,000 covers most of his closing costs
- His cash needs drop to ~$11,550 at closing
- He repays the $6,000 at $50/month over 10 years (no interest)
He gets in the door with the cash he has.
Worked example #3: The Johnson family buys a $325K Mercersburg home
The Johnsons have $35,000 saved, a household income of $98K, and 740+ credit. They want a USDA Rural Development loan because Mercersburg qualifies as USDA-eligible. Without K-FIT:
- Down payment (USDA 0%): $0
- Closing costs (4.28%): ~$13,910
- USDA upfront guarantee fee (1% of loan): $3,250
- Prepaids/escrows: ~$4,000
- Total: $21,160
With K-FIT (5% of $325K = $16,250 forgivable) stacked on USDA:
- $16,250 covers ALL closing costs and prepaids with money to spare
- Their cash needs drop to roughly $5,000-$6,000 at closing
- If they stay 10 years, the $16,250 is forgiven entirely
USDA Rural Development: the hidden gem of Central PA
Outside of immediate town centers, much of Franklin County and Cumberland County qualifies as USDA "rural" — including parts of Greencastle, Mercersburg, Newburg, Saint Thomas, Fayetteville, and beyond. USDA RD loans require zero down payment and have flexible credit standards.
USDA + K-FIT is the most powerful combination for cash-poor buyers in our service area. We have closed deals where buyers brought $3,000 to $5,000 total to a $200,000 home purchase.
Eligibility quick check
You probably qualify for at least one PHFA program if:
- You have not owned a primary residence in the last 3 years (OR you are a veteran, OR you are buying in a target area)
- Your credit score is 660 or above
- Your household income is under the county limit (typically around $100K to $110K for most household sizes)
- The home will be your primary residence
- The purchase price is under the county limit (around $400K to $500K depending on county)
- You have at least 1% of the purchase price of your own funds to contribute (very low bar)
What to do next
The first conversation should be with a PHFA-approved lender, not the bank you currently use unless they happen to offer PHFA. Most local Central PA banks and credit unions are PHFA-approved. We have a short list of three or four we recommend, and we will send it to you when you reach out — no obligation, no pressure.
Once you are pre-approved through a PHFA lender, the assistance program is layered into your offer naturally. Sellers see a single clean pre-approval letter; the program details happen behind the scenes.
For more on the full pre-approval process, see our complete pre-approval guide. For the broader buying process from end to end, see our Central PA Home Buyer's Guide.
The honest summary
Pennsylvania has some of the most generous first-time buyer assistance in the country. Most Central PA first-time buyers qualify for at least one program. Most never apply because they don't know about it or assume it adds complexity to their offer.
It does not. The program runs in the background. The seller sees a clean pre-approval letter; you save thousands at closing and potentially get tens of thousands forgiven over time. The only complexity is finding a lender who actually knows the programs cold. We can introduce you to a few.