At one point Government-backed loans made up a dominant form of lending.  Do you remember that?  The year was 1990 and FHA (Federal Housing Administration) loans made up 28% of home financing. Since then, FHA mortgages fell off in influence until stabilizing at 17% of all loans between 1998 and 2001.  Then, with the rise of subprime and "Alt-A" financing options coupled with the artificially busy home market, FHA loans took another big hit and fell to only 7% of loans in 2006.  What a drop!

Today, however, those of us who follow the national and local markets closely see the revival of the FHA mortgage as happening and necessary to fill the void left by the departure of most lower-tier financing options.  If you're a buyer you need to be looking into FHA as your option in 2008!

With the economic stimulus package proceeding through Washington is an increase in the limits to FHA financing that will significantly bump them to over $600,000 (from $417,000 today).  This means that more markets will be able to enjoy access to lower rates and gentler underwriting.  That's good news for the housing market.  Whether you're a fan of government intervention or not,  these things are happening and customers need to know.

Leading industry observers expect to see FHA loans to rebound from 7% back into the strong double-digits in 2008.  If you're selling your home in Lancaster County, be ready to accept an FHA buyer - by the way, these loans aren't the difficult ones you remember from 10 years ago; FHA has streamlined the appraisal process and brought  it into the 21st century.  I work with many of these and things move along well.

So, look for increased availability of FHA-backed mortgages and be sure if you're buying to explore these with your mortgage professional at your side.

Graph courtesy of Steve Harney and Credit Suisse

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For Lancaster PA homes for sale click here. Jeff Geoghan is a top real estate expert in Lancaster County, PA, and an involved community member. Jeff's work has been featured in the Lancaster Newspapers, WGAL Channel 8, PA Business Journal and Wall Street Journal. Jeff's blog on Lancaster County and its homes is nationally-featured. Contact Jeff for more help with your Lancaster PA Real Estate needs. Jeff is also a photographer - view some of his portfolio. Comments are welcome!