Whether you're renting and want to become a homeowner, a move-up buyer or just want to refinance, navigating the mortgage market can be challenging. You'll need mountains of paperwork, an understanding of your loan options and education about loan programs and homeownership assistance programs so you can make an informed decision about financing your home.
On this page you'll find tips about mortgage rates, information about down payment assistance options, a guide to closing costs and an overview of the housing market from local experts who can give you insight into buying a home in Virginia.
Comparing Mortgage Rates in Virginia
If you've been tracking mortgage rates, you've probably noticed that they vary according to economic trends. While individual mortgage rates depend most of all on the borrower's credit, the size of the down payment and the type of property, such as a single family home or condo, mortgage rates are also impacted by local housing markets. Competition among lenders in robust housing markets like Northern Virginia keeps rates lower. Virginia's foreclosure laws allow for faster foreclosures, as quickly as 60 to 90 days, which also helps keep rates low since lenders know they can get their money back faster than in other states.
Help for First-time Homebuyers in Virginia
State and local governments frequently provide programs to encourage homeownership to support stable communities. Virginia residents can take advantage of numerous programs meant to assist first-time buyers from homeownership education to financial support. The state housing finance agency, the Virginia Housing Development Authority, (VHDA) offers educational tools online and throughout the state, as well as opportunities and affordable mortgage products tailored to the needs of first-time home buyers,"
"Successful homeownership starts with education," says Toni Ostrowski, director of homeownership for VHDA. "VHDA provides free home buyer education classes where first-time buyers learn the entire purchase process from start to finish and how to stay on track as a responsible homeowner. The class is offered in English or Spanish, in person or online."
The VHDA also offers a variety of home mortgage loans. "Some of our loan products do not require a down payment," says Ostrowski. "VHDA loans also provide high loan-to-value options, flexible underwriting and down payment and closing cost assistance, plus our interest rates are fixed for 30 years. All loans have maximum income and sales price limits and/or loan limits, which vary according to where the home is located."
Since home values tend to be higher in Northern Virginia, loan limits and income limits are higher in that area of the state. "Many first-time buyers have a difficult time saving the necessary funds required for a down payment," says Ostrowski. "VHDA's Down Payment Assistance (DPA) Grant Program can provide income-eligible first-time homebuyers with funds needed for their down payment. VHDA's Down Payment Assistance grant requires no repayment, making homeownership both affordable and attainable."
Virginia also offers a Mortgage Credit Certificate (MCC) for first-time buyers, which could save thousands of dollars in federal income taxes. "Unlike an income tax deduction, an MCC is a dollar-for-dollar credit against a homeowner's federal income tax liability," says Ostrowski.
First-Time Buyer Financial Aid in Virginia
Virginia offers a range of programs sponsored by both state and local entities.
Search for a Virginia Housing Counselor
Understanding Home Affordability in Virginia
While it would be nice to have a formula that calculates exactly how much you can afford to spend on a home in Virginia, home affordability is actually a subjective decision. Home prices fluctuate based on market conditions such as demand for similar homes and the job market. Affordability is impacted by mortgage rates, property taxes, insurance costs and other fees.
To determine how much you can comfortably afford to spend on a home, you need to evaluate your budget for cash flow and look at your income and assets. If you can make a bigger down payment, your monthly costs will be lower. Don't forget to factor in things like transportation and commuting costs. While homes may be less expensive farther from employment centers, the money and time spent commuting may not be worth it to you. Keep in mind other current and future expenses such as home maintenance, college tuition and retirement when developing your budget.
How Virginia Mortgage Rates and Home Prices Affect Monthly Payments
|Metro Area||Estimated Monthly Mortgage Payment*||Q3 2019 (Change from Previous Year)||2018 Median Home Price||2017||2016|
|Virginia Beach-Norfolk-Newport News||$888||$242,000 (+3.0%)||$219,000||$225,000||$215,000|
Source: National Association of Realtors Q3 2019 Metropolitan Median Area Prices and Affordability report.
*Estimated Monthly Mortgage Payment is based on median home prices for the metro area in Q3 2019, a 20 percent down payment and a 30-year fixed mortgage at 3.68 percent. Figure includes principal and interest but excludes insurance and property taxes.
Find Out How Much You Can Borrow in Virginia
The maximum amount you can borrow with a conventional loan or an FHA loan varies according to your personal qualifications including your debt-to-income ratio and the mortgage rate, but each state also has loan limits established by the government. In most of Virginia, conventional loans are capped at $510,400 for 2020, but in areas with higher housing costs such as the Washington, D.C. suburbs the limits are as high as $765,600. Similarly, FHA loans are capped at $331,760 in parts of Virginia but rise to $765,600 in Northern Virginia. Check the following table for loan limits where you want to buy a home.
Homebuying in Virginia: Experts Weigh In
Nela Richardson is former chief economist with Redfin brokerage in Washington, D.C.
Eldad Moraruis a Realtor with Long & Foster Real Estate in Bethesda, Maryland.
Patrick Cunninghamis a senior vice president and partner with HST Mortgage in Fairfax, Virginia.
What was the housing market like in the state before and during the housing crisis?
Northern Virginia weathered the downturn fairly well, but other parts of the state were not as fortunate. Virginia Beach is a vacation destination where many owners have a second home and prices in that market fell steeply. The broader Hampton Roads area was somewhat stabilized by a foundation of military jobs at nearby bases, though it hasn't completely bounced back.
Prices in Virginia went up before the housing crises, but not quite as high as in Washington, D.C. During the crisis there were sharp drops in values and foreclosures rose dramatically.
Northern Virginia didn't have a huge spike in unemployment during the recession, but home values dropped 10 to 50 percent. Prince William, Loudoun and other counties saw the sharpest declines and the largest amount of short sale and foreclosures.
What can first-time buyers expect to find today in the state in terms of affordable homes to buy?
Prices vary widely throughout the state. Northern Virginia is an expensive market, especially "inside-the-Beltway" though there are some affordable condos and townhome options. Buyers willing to go further afield may be interested in the new construction developments. Homes are significantly more affordable in Richmond and the Virginia Beach area for first-time buyers.
Buyers can do well by expanding their geographic search away from Washington, D.C. to places with steady or dropping prices.
Homebuyers will need to sacrifice and buy an older home or a smaller home in Northern Virginia, one they can improve over time.
What is the housing market like in some of the areas of the state that attract first-time buyers?
Richmond is experiencing a downtown resurgence with buyers drawn from Northern Virginia and other states by the relative affordability and cultural amenities. In Richmond's trendy neighborhoods, expect bidding wars. Walkability is a driving factor for many first-time buyers in Northern Virginia who want access to the metro and other amenities.
You can get a lot more for your money by looking at homes farther from the city. New developments in Stafford County are attractive to first-time buyers willing to live away from the city.
The housing market in Northern VA is extremely tight for homes in good condition and desirable areas. Those homes are still seeing multiple offers.
Closing Costs Calculation for Virginia
Closing costs vary by state and by county and you can even find slight variations from one settlement company to another, so it's worth shopping around for a title agency just as you do for a mortgage. In Virginia, closing costs on a $200,000 home with a 20 percent down payment average $1,837, slightly less than the national average of $1,847.
Closing costs vary from one part of Virginia to another because while the state charges a transfer tax of 0.1 percent of the home value and a mortgage tax of 0.25 percent of the loan amount, local jurisdictions can charge up to one-third of the total state transfer taxes to use for local purposes. Two agencies, the Northern Virginia Transportation Authority and the Hampton Roads Transportation Authority, charge 0.40 percent of the home value to pay for transportation projects.
Average Closing Costs in the Old Dominion State
Source: Bankrate's 2015 survey of closing costs.
Mortgage Refinancing in Virginia
If you already own a home you love in Virginia or one you would like to remodel, you may want to look into refinancing. Refinancing activity in the state is robust in areas like Northern Virginia, where home values have recovered from the housing crisis and home prices are so high that even a small reduction in the interest rate can have a big impact. In other areas of Virginia, home prices have remained low and therefore there's less incentive to pay the cost of refinancing. However, some lenders offer "no-cost" refinancing in which the lender pays the fees.
Historically low mortgage rates have encouraged many buyers to refinance, particularly in Northern Virginia. Special government programs such as the Home Affordable Refinance Program have helped homeowners in areas like Virginia Beach and Prince William County refinance in spite of low home equity.
"Refinancing activity is very busy," says Cunningham. "Rates are extremely low. With people regaining some equity, we are seeing more cash out to pay off debt or remodel. Because the home prices have risen in the last few years, we are doing a lot of refinancing to remove mortgage insurance. We can often remove mortgage insurance and lower the rate a little at the same time."
Cunningham says some borrowers, if their home has not regained enough value, are willing to do "cash-in" refinancing: paying down their mortgage in order to qualify for a refinance at a lower mortgage rate. This can significantly reduce your monthly payments since you would be financing a smaller balance and reaping the benefit of a lower interest rate.
Some homeowners in Virginia, especially as they approach retirement, opt for a 10, 15 or 20-year mortgage instead of a 30-year loan to shorten their loan term.
Other Resources for Homebuyers in Virginia
While some programs for homebuyers in Virginia are limited by household income, maximum home price or a loan limit, it's always worthwhile to check out these programs to see if you are eligible. Free homebuyer education classes can help anyone purchase a home in Virginia regardless of whether they are first-time buyers and regardless of their income level.
Free homebuyer education classes, down payment assistance, low interest loans and mortgage credit certificates are available throughthe VHDA.
Information about zero down payment loan programs for buyers in rural areas of Virginia can be found on the state page of thefederal Rural Housing Development program.
Resources for buyers in Richmond area.
Resources for buyers near Charlottesville.