Mortgage in the Market– The Mix is Fading

Historically, we have always seen a great deal of variety in the market with mortgage programs buyers have used to purchase homes. The type of financing used to purchase is often tied to a buyer’s overall characteristics.

Traditionally, the mix of mortgages products used were Conventional, Federal Housing Administration (FHA), Veterans Administration (VA), USDA Rural Housing (USDA or Farmers Home Administration) as well as a variety of affordable housing programs such as Tenfold (formerly LHOP) and Pennsylvania Housing Finance Agency (PHFA).

Many first-time buyers are drawn to and need government-backed financing or an affordable-housing program to purchase a home due to limited financial resources or the inability to qualify for conventional financing due to overall financial inexperience; however these buyers can also be Veterans who earned the benefit by service to our country.

As professionals in the housing industry – whether on the mortgage side or real estate side, we all have one common goal which is being advocates for homeownership and creating as many opportunities as possible for our clients to achieve “the American dream.”

Unfortunately, the housing market of the of the past two years has created roadblocks and significantly less opportunities for buyers seeking homeownership utilizing any type of government financing and/or affordable housing programs.

In 2018 and 2019, 19% of Lancaster County buyers utilized either FHA or VA for financing for their home purchase. In 2020, that declined to 17.50% and in 2021, 12.00%. For year-to-date ending 9/30/22, the percentage of homebuyers using FHA or VA to purchase a home has decreased to 10%, almost 50% less compared to as recent as 2019.

The decline is usage of government financing for a home purchase is not due to a lack of qualified buyers seeking homeownership with government loans, but the lack of sellers willing to accept buyer’s contracts when government financing is the source.

The major reason sellers are not widely open to accepting government loans or affordable housing financing is that the guidelines require appraisers to look for specific criteria that could pose concerns for health, safety, or security risks. If any of these issues are included within the appraisal report, it is generally assumed that the seller must repair them prior to the sale.

Although these concerns may sound like a major deterrent from accepting an offer with government financing, most of the time these issues are small and require minimal attention from the seller. Most homes that have been taken care of and are fairly new (15-20 years in age), would unlikely have any issues noted from an appraiser that need to be addressed.

It’s understandable that sellers want the smoothest transaction when selling their home, but a more-favorable offer with a higher price or some other favorable characteristics shouldn’t be overlooked simply because the buyer is using financing other than conventional. These buyers can often bring something to a neighborhood or community that others may not – they can be Veterans who served our country, have skills or areas of expertise that bring value as a neighbor, or could be the family with children that brings joy to other families in the neighborhood.

Dan Ranck

Mortgage Loan Officer

NMLS #140989

HomeSale Mortgage, LLC

NMLS #1054689

Direct : 717.271.2400 | efax : 866.849.4320

dan.ranck@homesalemortgage.com | www.danranck.com

Facts, opinions and information expressed in the Blog represent the work of the author and are believed to be accurate, but are not guaranteed. The Lancaster County Association of Realtors is not liable for any potential errors, omissions or outdated information. If errors are noted within a post, please notify the Association. Posts represent the author's opinion and are not necessarily the opinion of the Association.