Buying your first home in Allentown can feel out of reach when down payment and closing costs loom large. You are not alone if you are wondering how to make the numbers work on a starter home in Lehigh County. The good news is that Pennsylvania’s PHFA programs can reduce your upfront cash, steady your monthly payment, and simplify the process. In this guide, you will learn what PHFA offers, who qualifies, how the process works in Allentown, and the practical steps to move from preapproval to closing with confidence. Let’s dive in.
PHFA basics for Allentown buyers
Pennsylvania Housing Finance Agency, or PHFA, helps first-time buyers with affordable fixed-rate mortgages, down payment and closing-cost assistance, mortgage tax credits, and homebuyer education. You do not apply to PHFA directly. You apply through PHFA-approved lenders who deliver these mortgages and assistance programs.
If you live or plan to buy in Allentown, you will want to confirm Lehigh County income and purchase price limits, since those limits affect eligibility for down payment help and Mortgage Credit Certificates.
First-mortgage options
PHFA works with lenders to offer below-market 30-year fixed-rate mortgages. Depending on your situation, your lender may pair PHFA with conventional financing or a government-insured loan. For background on government-backed options, review FHA, VA, and USDA program information from HUD.
Down payment and closing-cost assistance
PHFA offers second-mortgage assistance that can cover part of your down payment and closing costs. Program amounts, interest rates, and repayment rules vary by year and by program. Always review current details on the PHFA homeownership pages and confirm terms with your PHFA-approved lender.
Mortgage Credit Certificate (MCC)
An MCC is a federal tax credit that may let you claim a percentage of your annual mortgage interest as a dollar-for-dollar credit. Many MCC programs use a 20 percent credit up to a cap, but your benefit depends on PHFA’s rules and your tax situation. For tax guidance on credits and deductions, visit the IRS and speak with a tax professional.
Homebuyer education and counseling
PHFA often requires or strongly encourages homebuyer education for borrowers using down payment help or an MCC. Approved counseling agencies operate across the state, including the Lehigh Valley. Check the PHFA site for approved education options.
Who qualifies for PHFA in Lehigh County
First-time buyer definition
PHFA commonly defines a first-time buyer as someone who has not owned a home in the past three years. Some programs make exceptions for veterans or targeted areas. Your lender will confirm how the rule applies to you.
Income and purchase price limits
Limits vary by county and household size. Lehigh County has its own income and sales price caps, and these caps often apply if you plan to use down payment help or an MCC. Check current tables on the PHFA site or ask a PHFA-approved lender.
Credit score, DTI, and reserves
Minimum credit scores and debt-to-income limits depend on your loan type. Conventional loans follow investor rules and any PHFA overlays. FHA allows lower scores in some cases, subject to lender underwriting. Each lender can set additional requirements, so your best move is to get a PHFA-specific preapproval and review options side by side.
Allentown-specific things to know
Allentown has a high share of older homes, including many built before 1978. Federal lead-based paint disclosure rules apply to pre-1978 housing, so make sure you understand the implications during your inspection period. For local housing and permitting context, visit the City of Allentown.
- Pest or termite inspections may be required by your lender, especially with FHA financing.
- Some properties near creeks may have floodplain considerations. Your lender will check flood maps and let you know if flood insurance is needed.
- Property taxes vary by municipality and school district across Lehigh County. Review tax estimates and millage rates for any target property. You can find county resources and recording information at the Lehigh County site.
Working with a PHFA-approved local lender helps with appraisal scheduling, municipal requirements, and closing coordination. Local teams know the Allentown MLS norms, certificate of occupancy needs, and title workflows that can impact your timeline.
The PHFA homebuying timeline
Every purchase is unique, but this is a realistic playbook for planning your move:
- Prequalification or preapproval with a PHFA-approved lender: 1 to 7 days, faster if your documents are ready.
- House hunting and making offers: weeks to months, depending on inventory and your needs.
- Full loan application and disclosures: 1 to 3 business days after going under contract.
- Appraisal ordered and completed: usually 7 to 14 days, longer in peak seasons.
- Underwriting, conditions, and final approval: typically 7 to 21 days, depending on complexity and how fast you respond.
- Closing scheduling and final review: 3 to 7 days after clear-to-close.
- DPA or MCC paperwork: often runs in parallel, but plan for 1 to 2 extra weeks if additional approvals are needed.
Total time from contract to keys is commonly 30 to 60 days. Your speed improves when you provide complete documents early and respond quickly to lender requests.
Step-by-step: how to use PHFA in Allentown
1) Learn the basics and limits
- Review current PHFA programs and Lehigh County income and sales price limits.
- If you will use DPA or an MCC, plan to complete a PHFA-approved homebuyer education course.
2) Get a PHFA preapproval
- Contact a PHFA-approved lender to discuss loan type, interest rate options, DPA eligibility, and whether an MCC fits your tax picture.
- Ask your lender to outline credit, debt-to-income, and reserve expectations for your loan scenario.
3) Shop with strategy
- Tour homes with your agent and confirm municipal requirements for each property.
- Prioritize properties with strong condition reports if you use FHA or VA, since those loans have specific appraisal standards.
4) Under contract
- Sign your formal loan application and provide all requested documents.
- Schedule inspections immediately to protect your timelines.
- Your lender orders the appraisal and coordinates with PHFA for any DPA or MCC forms.
5) Underwriting to clear-to-close
- Reply to all lender conditions quickly and completely.
- Your agent coordinates with the seller for any repairs or municipal certifications needed.
6) Final walk-through and closing
- Review your Closing Disclosure and wire instructions carefully.
- Sign loan and title documents, and the title company records your mortgage and any assistance.
What to bring: your document checklist
Gather these items before you apply. Having them ready helps you close faster.
- Government-issued photo ID
- Social Security numbers for all borrowers
- Two most recent pay stubs
- W-2s for the past two years
- Federal tax returns for the past two years if self-employed, or if your lender requests them
- Two to three months of bank statements and statements for retirement or investment accounts
- Gift letters and proof of transfer if you are using gift funds
- Current lease and proof of rent payments if requested
- Divorce decree or child support documentation if applicable
- Proof of funds for closing if not fully covered by DPA
For a refresher on the mortgage process and common forms, explore the Consumer Financial Protection Bureau’s Owning a Home resources.
Money-saving strategies with PHFA
- Confirm Lehigh County income and price limits early if you plan to use DPA or an MCC.
- Complete homebuyer education before you shop if your assistance program requires it.
- Ask your lender to compare scenarios: conventional with DPA, FHA with DPA, and whether an MCC helps your tax situation.
- Keep your funds sourced and seasoned. Avoid large unexplained deposits during underwriting.
- Schedule inspections quickly, and build in time for any repair negotiations.
- Use a local title company and lender who know Lehigh County recording timelines.
How a local advisor helps you win
As a long-time Allentown advisor, I coordinate PHFA-approved lender introductions, keep your paperwork on track, and guide you through inspections and municipal requirements. You get clear steps, realistic timelines, and steady communication from the first tour to the keys. If you want a calm, organized path to your first home, reach out and let’s talk about your plan.
Ready to explore your options and build a PHFA-ready strategy? Connect with Renee Marinelli to get started.
FAQs
Do I have to be a first-time buyer to use PHFA?
- Many PHFA products target first-time buyers defined as no home ownership in the past three years, with some exceptions such as certain targeted programs or veteran exemptions.
Can I combine PHFA with FHA, VA, or USDA loans?
- Yes, PHFA works through approved lenders and can pair with government-backed or conventional loans, depending on your eligibility and lender offerings.
How much down payment assistance is available in Lehigh County?
- DPA amounts and terms change by program year and can depend on county rules, so review current limits on PHFA’s site or ask a PHFA-approved lender for today’s numbers.
How does the Mortgage Credit Certificate reduce my costs?
- An MCC provides an annual federal tax credit based on a percentage of mortgage interest paid, subject to PHFA rules and IRS limits, so speak with a tax professional about your personal benefit.
What if my credit score is not where it needs to be?
- Your lender can outline options, including FHA pathways and steps to improve credit such as paying on time and reducing balances, before you reapply.
What timeline should I expect from contract to closing?
- Most PHFA purchases close in 30 to 60 days, with the appraisal and underwriting steps driving the schedule and DPA or MCC paperwork sometimes adding 1 to 2 weeks.
Are there special inspections or disclosures in Allentown I should plan for?
- Older homes often require lead-based paint disclosures, and some areas may have flood insurance needs, so plan inspections and lender checks that address these risks early.
