Many consumers of a certain age remember a time (not so long ago) when there were only three or four distinct mortgage products available. Some may even recall when people paid cash for their dwellings. Times change and so does the financial marketplace. Currently there are a wide variety of mortgage products available to perspective homebuyers. In an attempt to remove the mystery that shrouds the mortgage finance industry we have compiled a guide to the different mortgage products available in the state of Pennsylvania.
We will also address the general real estate prices in the state compared to median nationwide prices as well as popular cities to live in the state & fastest growing cities (and why they are growing). As mortgage rates change rapidly and are influenced by a plethora of factors we will not delve too deeply into current rates, however, we will address state-specific issues that may affect consumers in the market for a home loan.
Pennsylvania Mortgage Rates vs. National Median
Pennsylvania mortgage rates are currently 3 basis points below the national average of 4.78%. The Pennsylvania mortgage rate is falling as the national average creeps higher. The median home price in PA is still roughly the same as the national average. For the purposes of our discussion we will avoid specific rates as they change rapidly and are influenced by a myriad of factors.
Popular & Growing Cities in Pennsylvania
- Home prices in the Greater Philadelphia Region of Pennsylvania dropped 5.6% during 2009, median 3rd quarter price average of $227,500.
- Reading Pennsylvania area home prices fell 4.3% during 2009, median 3rd quarter average price of $156,400.
- In the Pittsburgh Pennsylvania area there was a 1.5% drop in median home prices, and a median price 3rd quarter of $124,600.
- The Greater Allentown-Bethlehem-Easton area experienced a 6.1% drop in home prices, and a median 3rd quarter price average of $230,500.
- The Greater Erie Pennsylvania area fell 0.5% in home prices, median 3rd quarter price average was $102,800.
The Center City area of Philadelphia as well as the outlying suburbs are experiencing consistent growth due to a stable job market in the state and the recent addition of legalized casino gambling. One prominent factor that makes property in the state very attractive to homebuyers from other locales in the Northeast is Pennsylvania’s tax structure. PA property taxes fall approximately in the middle when compared to all other states, with the majority of households paying $2,000 to 3,000 when you add it all together. This is much lower than property taxes in other northeastern states.
The Lancaster area, although still a buyer’s market, is a good area to explore if you are in the market to buy a home. In 2009, the overall foreclosure rate was 2.6%.
Pennsylvania Mortgages and Mortgage Loan Rates
Conventional loans in Pennsylvania are comprised of the usual Fannie Mae offerings. VA and FHA loans are available as well. Loan limits on FHA loans vary depending on what part of the state you are looking to purchase and go from $271,050 to $729,750 for a residential single family home. VA loans cap at a maximum of $417,000, except in Pike County, where the cap is $681,250.
Pennsylvania still offers small community or regional banks that provide mortgage loans and retain them in their own portfolio.
Most Pennsylvania residential real estate falls within conventional loan limits. Jumbo mortgages comprise a very small percentage of mortgage originations in the state. Bucks, Northampton and Pike counties have a greater percentage of jumbo loans than the rest of Pennsylvania.
When compared to other parts of the United States the conventional and VA/FHA mortgage rates are similar in Pennsylvania.
Homeowners may chose between many mortgage products such as:
- FHA Loans
- VA Loans
- Interest Only, or I/O Loans
- Option ARM Loans
- Combo Or Piggyback Loans
- Adjustable Rate Mortgages, or ARMs
- Mortgage Buy-downs
- Specialty Loans (such as 203K Loans, Bridge/Swing Loans, Equity Mortgages, Reverse Mortgages, etc.)
State-Specific Mortgage Laws
Pennsylvania mortgage loans are considered recourse loans. In the state of Pennsylvania mortgage lenders foreclose using the judicial foreclosure process, which provides the foreclosed owner the ability to repay the back payments and interest and reinstate the loan up until the point the court renders judgment and makes compulsory the sale of the property in question. When a foreclosure occurs, there is no redemption period in PA. Deficiency judgments are permitted in the state of Pennsylvania. Pennsylvania homeowners can apply for a Homeowner’s Emergency Mortgage Assistance (HEMA) loan. Applying for the HEMA loan usually adds sixty days to the foreclosure process.
A complete discussion of how mortgage interest rates work is a very complex topic. Due to the complex relationships involved, and other intricate factors such as market structures, hedging, advance commitments, and secondary market activities it is almost impossible to isolate one factor that singlehandedly affects mortgage interest rates. The median price of a home in Pennsylvania is $211,500. Recently, homes in Pennsylvania have been appreciating at rates well above the national average.
If you are looking to purchase a home in Pennsylvania you should be aware of a recent phenomenon affecting home affordability throughout the state. Home prices in some areas of PA have been rising significantly faster than the national average. Although mortgage interest rates are below the national average this has created a situation where Pennsylvania has one of the lowest home affordability levels in the country.
A Commonwealth State
Pennsylvania has some state-specific laws and regulations you will want to become familiar with before you proceed with any real estate transactions. Your mortgage professional or your real estate agent should be well-versed in all of the intricacies of PA law. One of the reasons the laws differ from other states is that Pennsylvania is a commonwealth state. One example is a recent change in the law that requires all new construction homes to be built with sprinkler systems to protect homeowners in the event of a fire. Although this law is designed to protect the consumer, many construction experts predict it could add $10,000 or more to the price of a new home.
Pennsylvania offers federal and state FHA, USDA, and VA loans and first-time purchasers may qualify for PA FHA loans boasting below-market interest rates, and, in some cases, may also be eligible for a loan to include down payment and/or closing costs. Some other programs available in the great state of Pennsylvania are:
- Programs to persons with disabilities or persons who live with and care for persons with disabilities which are comparable to FHA loan programs.
- Interest Only PLUS loan which provide qualified buyers with a 100% financing 35-year loan only requiring payment toward the accrued interest on the mortgage for the first five years of the loan. Eligible homeowners do not have to pay on the principal amount borrowed until the first five years have elapsed.
- Teachers and other education may qualify for Pennsylvania’s Extra Credit Teacher Home Purchase Program. This is a down payment assistance loan with forgivable interest designed for teachers and other educators.
The specific criteria for each of these programs differ depending on the county in which you purchase your home. Individual requirements are available directly from the Pennsylvania Housing Finance Agency. As of this writing, the most popular areas to purchase in PA are Allentown, Altoona, Bethel Park, Bethlehem, Chester, Erie, and Philadelphia.