You might find it easier to finish the application, close the purchase and avoid going into significant debt if you have a good understanding of the homebuying process. This guide presents the most important information for Virginia homebuyers.
Although pricing is a crucial component to take into account when purchasing a property, you also need to consider other aspects like the mortgage terms and location.
Virginia's average home price is $383,383, an increase of almost 10.1% from the previous year.
In Virginia, borrowers typically require a 20% down payment for a mortgage. However, there are alternative low and no-down-payment options available if you qualify.
Evaluating potential areas, researching mortgage rates, putting together the requirements and finalizing the loan are all important aspects of the homebuying process in Virginia.
Choose an Ideal Location
One of the primary considerations homebuyers typically take into account when making a purchase is location. The price of your home and mortgage greatly depends on where you decide to live.
You might also want to evaluate your priorities and the resources you need to access. The neighborhood's culture, cost of living, accessibility to particular amenities and range of recreational opportunities typically vary and can impact how ideal a home is for you.
A real estate agent can help you find a home in Virginia based on your needs and preferred price range. The agent will help you at every step of the process, including finding the best place to buy a house in Virginia, locating suitable properties, organizing visits and negotiating with the seller.
When looking for an agent, MoneyGeek advises that you:
- Make sure they have in-depth knowledge of the region.
- Find a trustworthy agent.
- Verify references
- Check and compare prices to make sure they are competitive.
- Evaluate the agent's credentials, training and licensure.
The right real estate representative will not only help you choose the ideal home, but they will also make sure you don't make expensive mistakes. Remember that purchasing a home is a significant financial investment.
The city or county in Virginia where you live will have a significant impact on the cost of living. It's a good idea to calculate the costs of things like:
- Utilities, including water and electricity
- Rates for health insurance
- Car insurance rates
- Passes for public transit
- Taxes on income, real estate and property
Use MoneyGeek's cost of living calculator to estimate how much a typical family needs to live comfortably in Virginia. This can help when budgeting your monthly expenses.
Potential homebuyers might want to consider more reasonably priced areas within Virginia in order to save money. Zillow’s housing cost averages found that Gladstone, Prospect and Dillwyn are some of the most economical neighborhoods in Virginia.
Although it's generally fine to live in a less expensive area, there are drawbacks to consider. For example, residents of suburban or other non-metropolitan locations may lack social amenities like hospitals, shopping centers and schools. You’ll have to weigh the pros and cons of the cost savings before purchasing a home in a more affordable location.
Calculate Mortgage Rates
Your mortgage rates are greatly influenced by a number of variables, including the lender, your credit score, your income, interest rates as well as the type, terms and size of the loan.
In order to select the best mortgage rate for you, which will depend on your financial condition and unique circumstances, it is necessary to evaluate these factors.
Homebuyers in Virginia have a selection of financing alternatives to choose from. The terms, conditions, rates and limits of various loan types vary.
Looking into which lender you can qualify for might help you narrow down your selections since each creditor has a qualification standard that you must meet. Your work history, credit rating, DTI ratio and average monthly income are the most common things they look into first.
The typical interest rates for each type of loan with a 30-year term are listed below:
Check your eligibility before submitting an application for a certain loan type. For example, VA loans are exclusively available to qualified military personnel.
You may end up saving money in the long run by calculating your estimated mortgage. Given that you can determine it according to your circumstances and financial status, this might help you determine how much it costs to buy a property in Virginia.
Check out MoneyGeek's FHA vs. conventional loan calculator if you're unsure of which loan type is best for you. We delve further into a number of suggestions that can aid in determining the type of loan you need.
The next step is to locate a mortgage lender after you have calculated all the crucial data. You should compare the lending options available in your area regardless of if you're a first-time homebuyer or require housing assistance.
Every lender has a different set of criteria, restrictions and requirements that impact your eligibility for a loan. The following factors are typically taken into account by mortgage lenders when assessing your mortgage application:
- Income: Lenders will consider your income. Some creditors might even factor in bonuses, overtime pay and rental income.
- Credit score: This is an indication of your payment behavior based on data from your credit reports, such as how likely you are to repay a loan on time.
- Debt-to-income (DTI) ratio: This is the ratio between your debts and your income. A low DTI ratio means that you have more money available to pay off your loan.
- Down payment: This is a portion of the total cost of your house that you pay upfront when your mortgage is closed. The down payment amount is frequently viewed by lenders as your initial investment in the house.
If there are areas where you don't meet the requirements, you can try again after improving your profile.
Prepare Down Payment Requirements
Normally, a down payment is required before you can buy a house. The specific amount is determined by the type of loan you have.
The sum of the down payment can have an impact on the total cost of your loan because it may make you appear less risky to the lender. Plus, the more you pay upfront, the less you'll have to pay each month.
The amount of the down payment varies depending on the type of mortgage you have. For instance, a conventional loan typically requires a 20% down payment. However, qualifying applicants can obtain a VA home loan with no down payment.
There is no down payment necessary for USDA borrowers who meet the qualifications as well. Additionally, FHA loans require a minimum 3.5% down payment from borrowers.
You can determine your down payment percentage once you are aware of the loans you qualify for. Your down payment also has a significant impact on your monthly expenses. Generally speaking, a bigger down payment means smaller monthly payments and vice versa.
Mortgage insurance safeguards lenders in the event of a borrower's payment default. This is another aspect that prospective homeowners should take into account. Programs like the FHA and USDA loans demand mortgage insurance. On the other hand, mortgage insurance is not necessary for VA loans.
Additionally, private mortgage insurance (PMI) is required for applicants making less than a 20% down payment on a conventional loan. Fortunately, after a period of on-time payments, borrowers might be able to cancel their PMI.
A 20% down payment may be cost-prohibitive for some prospective homeowners. Luckily, Virginia offers a variety of down payment assistance programs to lessen the amount of money that purchasers must put down upfront. This includes:
- The HOMEownership Down Payment and Closing Cost Assistance Program (DPA): An income-eligible homeowner may receive up to 10% or 15% of the sales price (within the DHCD-approved areas) and up to $2,500 to cover closing costs such as legal fees, title insurance and taxes, as necessary.
- Virginia Housing Down Payment Assistance Grant: First-time homeowners can get a grant from Virginia Housing equal to up to 2.5% of the home's cost of purchase. There are restrictions on the property purchase price and household income, and the grant can only be utilized in conjunction with a Virginia Housing loan.
If these loans don't meet your needs, you might check into additional home assistance loans. There are special programs available for first-time homebuyers in Virginia as well.
Get Pre-Approved for a Mortgage
Obtaining a mortgage pre-approval is the next step after selecting a lender. This step is essential because, with pre-approval, you can talk to the lender about their policies and your budget.
Pre-approval differs from prequalification. Your lender just offers an estimated loan amount when you prequalify. Prequalification does not involve a hard credit check, but a pre-approval often does.
In order to confirm your income, credit history and debt-to-income ratio, lenders normally require your financial and personal information. Depending on the type of mortgage, you can also be asked to provide additional supporting papers to prove your eligibility.
To apply for a mortgage in Virginia, you normally need to submit the following documents:
- Social Security number
- W-2 forms
- A photo ID
- Tax filings
- Statements of bank accounts
- Pay slips
- Investment disclosures
- Additional mortgage declarations
Find out what your lender needs from you so that you can promptly get the relevant documents. You can also inquire about substitutes if a document is not available.
Timing is essential at the pre-approval stage. By obtaining the required mortgage paperwork, you can hasten the approval procedure. It generally takes up to 10 days to receive a pre-approval.
Additionally, the pre-approval letter from your lender typically lasts for 60 to 90 days before it becomes invalid. It is important to ensure you are ready to buy a home when you get a pre-approval so that you don’t have to reapply in the event your pre-approval expires.
Obtaining a pre-approval letter will allow you to learn how much you can borrow from a lender. Furthermore, it demonstrates that you're a committed homebuyer with the resources required to get a mortgage. The amount of pre-approval letters you can get isn't limited, but lenders do hard credit checks that could affect your credit score.
A pre-approval letter typically contains the information below:
- Max loan amount
- Mortgage rate
- Sum borrowed
- Loan duration
- Payment each month
However, the information included in a pre-approval letter varies according to the lender. Remember, the validity of a lender's pre-approval letter ranges from 60 to 90 days.
Conduct a Home Inspection
A house inspection must be completed before buying a home. A thorough inspection will identify any material faults in the home and help you steer clear of potentially deadly safety risks.
Home inspections can give the buyer a bargaining position if the house requires repairs or other renovations. Additionally, a professional home inspection may be required before some lenders will finance your home.
Working with a qualified and trustworthy inspector will ensure that you receive an accurate and complete report, which will help you decide whether to move forward with the purchase.
You should have a home inspection checklist that includes the following areas to rule out any potential safety hazards, problematic construction or severe damage:
- Doors and windows
- Attic and basement
- surrounding terrain
- electrical apparatus
- Plumbing system
- Systems for heating and cooling
- Big appliances
In addition, certain home inspections focus on the foundation of a building, pests, molds and wastewater.
With the exception of the federal requirement to disclose lead-based paint in older homes, sellers in the state of Virginia are not compelled by law to disclose problems or draw attention to defects in the house they are selling.
This is why it’s wise for you to get your potential home examined before buying it. It's also a good idea to learn in advance what your home inspector intends to check. You can then ask them to look at anything else you think might need to be evaluated.
When buying a property in Virginia, a home appraisal is a vital step. Based on the property's current market value, a professional will put a dollar value on it. This can give the mortgage lender more information about how much money they're willing to loan a borrower.
An appraiser will examine the inside and outside of your possible home during the home assessment phase and take measurements of the property. A written report will be provided to the buyer by the appraiser following a physical inspection.
Close Your Mortgage Loan
After reviewing the lending policies thoroughly, you can finalize your mortgage loan. There are closing costs to consider when purchasing a property.
Your payments to the lender for the credit report, the appraisal and the document preparation process are included in the closing expenses. You might also have to pay third parties for things like pest inspections, legal services and home appraisals.
When it’s time to finalize your mortgage, there will be many documents to sign. These can include the following:
- Loan application: You’ll have to sign your loan application to confirm all the details are accurate.
- Mortgage note: This shares your mortgage amount, interest, payment schedule and more.
- Property deed: All the information about the property are posted in the property deed.
- Closing disclosure: Your loan terms are listed in the closing disclosure. Lenders must give you this document three business days before closing.
Before signing any documents, make sure you carefully read them. Pay close attention to details that are easy to overlook, including the fine print. Make sure you are familiar with all the terms and charges related to your mortgage.
Closing costs are calculated by adding up all of the many fees and charges a homebuyer must pay when taking possession of the property. These can include the following:
- Credit report: A credit reporting service compiles and gives a lender a borrower's financial history, exposing the risk involved.
- Escrow: A borrower's home insurance, real estate taxes and PMI, if applicable, are placed in an account set up by the lender.
- Prepaid interest: Prepaid interest is the interest a borrower pays on a mortgage prior to the start of the loan term.
- Homeowners insurance: Owners are protected by homeowner insurance from liability resulting from specific accidents on the property as well as damage to their homes and personal items.
Depending on your lender, you can also be required to pay additional types of closing costs.
Purchasing a house, especially if you're a first-timer, can be stressful. However, by following a step-by-step procedure, you can become a homeowner.
Once you've determined Virginia is the best state to buy a property, following the instructions in this guide will help you complete the transaction smoothly. When in doubt, you can always get advice from your realtor.
Verify your documentation to see when your first payment is due after receiving your mortgage. To avoid missing payment deadlines, it is best to set up automatic mortgage payments. Additionally, you can program reminders for when your payments are due.
Virginia Homebuying Details
Virginia homebuyers should remember to research their new home’s location, evaluate different mortgage types and shop around for a lender that fits their needs. Although these are general steps to follow throughout a homebuying journey, there may be processes unique to Virginia. Feel free to contact your lender or a real estate professional so you can prepare for Virginia’s homebuying steps.
Additionally, Virginia residents can seek homeowner assistance programs to help them buy the home of their dreams.
Virginia Housing Plus Second Mortgage
The Virginia Housing Plus Second Mortgage combines a first mortgage from Virginia Housing that qualifies with a second mortgage from Virginia Housing to fund the down payment. The closing costs will be covered in full or in part for those borrowers with specific credit qualifications. There is no prepayment penalty on this 30-year, fixed-rate loan and if you meet the requirements, you may also be eligible for a Mortgage Credit Certificate (MCC).
Mortgage Credit Certificates
First-time homebuyers can earn a dollar-for-dollar credit for the federal income tax burden with a Mortgage Credit Certificate (MCC). As long as you continue to reside in the property, this can lessen your yearly financial expenses.
Closing Cost Assistance Grant
This subsidy helps with the upfront costs associated with purchasing a home. It lowers out-of-pocket costs and can be combined with a Mortgage Credit Certificate by homebuyers to lower the cost of homeownership.
Frequently Asked Questions About Buying a Home in Virginia
You can use the information offered by MoneyGeek to guide you through the Virginia homebuying process by reading the answers to these frequently asked questions.