By The MacDonald Team
Understanding the types of mortgages available is one of the most important things a Pennsylvania homebuyer can do before starting a search. The right loan depends on your financial profile, your down payment, your long-term plans, and where in Pennsylvania you are buying. Here is a guide to help determine the best mortgage for you.
Key Takeaways
- Conventional loans are the most common mortgage type for Main Line buyers and offer the most flexibility for well-qualified borrowers with strong credit and a solid down payment
- FHA loans offer a lower barrier to entry for buyers with smaller down payments or credit scores below the conventional threshold
- Pennsylvania's Housing Finance Agency offers state-backed programs including down payment assistance that many buyers qualify for without knowing it
- VA loans offer exceptional terms for eligible veterans and active service members and should always be evaluated first by anyone who qualifies
Conventional Loans
Among the types of mortgages available to Pennsylvania homebuyers, conventional loans are the most widely used. A conventional loan is not backed by a federal government agency, which gives it more flexibility in terms of loan amount, property type, and use. To qualify, lenders typically look for a credit score of 620 or higher, a debt-to-income ratio within acceptable limits, and a down payment of at least 3% — though putting down 20% eliminates private mortgage insurance and meaningfully reduces the monthly payment. For buyers where sales prices frequently exceed conforming loan limits, a jumbo loan is the relevant product, carrying stricter requirements around credit score, reserves, and debt-to-income ratio.
What to Know About Conventional Loans
- Conforming loans must fall within limits set annually by the Federal Housing Finance Agency, and purchases above those limits require jumbo financing which carries additional qualification requirements
- Private mortgage insurance is required on conventional loans where the down payment is less than 20% and remains until the loan-to-value ratio reaches 80%
- Credit score has a direct impact on the interest rate offered, so improving your score before applying can produce materially better terms
- Conventional loans offer more flexibility than government-backed programs on property type, investment properties, and second homes, making them the dominant product across a wide range of buyer circumstances
FHA Loans
FHA loans are one of the most accessible types of mortgages for buyers who may not qualify for conventional financing, particularly those with lower credit scores or smaller down payments. Insured by the Federal Housing Administration, they require a minimum down payment of 3.5% for borrowers with a credit score of 580 or higher and carry mortgage insurance premiums for the life of the loan in most cases. Pennsylvania's Keystone Home Loan program can be combined with FHA financing for eligible buyers, adding down payment assistance on top of the FHA structure.
What to Know About FHA Loans
- The 3.5% minimum down payment makes FHA loans accessible to buyers who have not yet accumulated conventional down payment savings, but the mortgage insurance premium structure increases total borrowing costs
- FHA loans have loan limits by county — buyers in higher-priced markets like the Main Line should confirm their target purchase price falls within the applicable limit
- Mortgage insurance on most FHA loans runs for the life of the loan rather than dropping off at twenty percent equity as on conventional loans
- FHA loans can be combined with Pennsylvania Housing Finance Agency assistance programs, making them useful for buyers who need help with upfront costs
VA Loans
VA loans are among the most favorable types of mortgages available, guaranteed by the U.S. Department of Veterans Affairs and available to eligible veterans, active service members, and surviving spouses. They require no down payment, no private mortgage insurance, and offer competitive interest rates. For any buyer who qualifies, evaluating VA financing should come before any other loan type because the terms are simply better in most scenarios.
What to Know About VA Loans
- VA loans require no down payment and no private mortgage insurance
- Eligibility is based on length and character of military service — a Certificate of Eligibility confirms your status and your lender can typically help you obtain it
- VA loans carry a funding fee that varies based on down payment amount and whether it is a first or subsequent use
- Loan limits were eliminated in 2020 for most eligible borrowers, meaning VA financing can be used for higher-priced purchases without a down payment requirement
PHFA Programs for Pennsylvania Buyers
Pennsylvania homebuyers have access to state-backed programs through the Pennsylvania Housing Finance Agency that work alongside the standard types of mortgages described above. PHFA's programs include the Keystone Home Loan, the HFA Preferred program, and the K-FIT program. All programs are administered through participating lenders and can be layered with down payment assistance.
What to Know About PHFA Programs
- The Keystone Home Loan and HFA Preferred programs offer 30-year fixed-rate financing and can be combined with down payment and closing cost assistance
- The K-FIT program provides a second mortgage of up to 5% of the purchase price, forgiven at 10% per year over ten years
- PHFA programs are processed through approved participating lenders
- Income and purchase price limits vary by county and are updated periodically
FAQs
What types of mortgages are most common for buyers on the Main Line?
Conventional loans, including jumbo financing for purchases above conforming loan limits, are the most common types here. Buyers with strong credit and a 20% down payment often find conventional financing offers the best overall terms.
Do Pennsylvania first-time homebuyers have access to special programs?
Yes. The Pennsylvania Housing Finance Agency offers the Keystone Home Loan, the HFA Preferred program, and K-FIT down payment assistance among others. Eligibility varies by income, county, and purchase price, and a PHFA-approved lender can help you determine which apply.
Should we get pre-approved before starting our home search?
Yes. Pre-approval gives you a clear budget, establishes credibility with sellers, and identifies any financing issues early. On the Main Line, where well-priced homes move quickly, pre-approval is a prerequisite, not a preliminary step.
Contact The MacDonald Team Today
Understanding the types of mortgages available to you is one of the first steps in any successful home purchase on the Main Line. We work closely with buyers at every stage and can connect you with lenders who know this market.
Reach out to us, The MacDonald Team, and let us help you get started.
Reach out to us, The MacDonald Team, and let us help you get started.
