What to know about buying a house in Virginia

Home prices have been shooting up in the Old Dominion. And that can often put first-time home buyers under pressure.

Luckily, if you’re a first-time home buyer in Virginia, there’s plenty of help available. That ranges from advice and homebuyer education courses to cash grants or loans to help you out with your down payment. Ready to get started?

In this article (Skip to …)

• VA home buyer overview
• Home loan options
• VA home buyer programs
• First-time buyer grants
• Buying in VA cities
• Resources
• VA mortgage rates

• Conventional 97 — From Freddie Mac or Fannie Mae. 3% down payment and 620 minimum credit score. The mortgage must be within local conforming loan limits. You can usually stop paying mortgage insurance after a few years
• FHA loan — Backed by the Federal Housing Administration. 3.5% down and a 580 minimum credit score. But you’re on the hook for mortgage insurance until you refinance to a different type of mortgage, move home, or pay off your loan
• VA loan — Only for veterans and service members. Zero down payment is required. Minimum credit score varies by lender but often 620. No ongoing mortgage insurance after closing. These are arguably the best mortgages available, so apply if you’re eligible
• USDA loan — For those on low-to-moderate incomes buying in designated rural areas. Zero down payment required. Credit score requirements vary by lender but often 640. Low mortgage insurance rates
• Virginia Department of Housing and Community Development — May include competitive interest rates and down payment assistance. More information below

All these first-time home buyer programs — except for conventional loans — require you to buy a primary residence. That’s a home you’ll live in full-time (not a second home or investment property).

You’ll also have to choose which type of mortgage rate you want: a fixed-rate mortgage or an adjustable-rate loan.

Fixed-rate mortgages have a set interest rate and monthly payment that never changes. Adjustable-rate loans can be cheaper at the beginning, but you run the risk of your rate and mortgage payment rising later on.

If you’re not sure which program to choose for your first mortgage loan, your lender can help you find the right match based on your finances and home buying goals.

1. The Virginia Department of Housing and Community Development (Virginia DHCD)
2. Virginia Housing (formerly the Virginia Housing Development Authority or VHDA)

You’ll have to meet some eligibility requirements, whichever provider you choose. Each gets to set its own rules. But there are a few common guidelines you can expect to see:

• Income limits — Your household income typically can’t be above 80% of your area median income (AMI)
• Caps on your new home’s sales price
• Mandatory home buyer education course
• Requirement to use an approved lender for the program

Because each rule book is different, it’s important to explore each provider’s offering to see which suits you best.

Virginia Housing lets you download a handy e-booklet (PDF) in English or Spanish, which details its programs.

Virginia DHCD’s down payment assistance program doesn’t provide outright home buying grants. But it does offer conditional ones.

If you’re eligible, you may be in line for a grant that you never have to repay, providing you remain in the home for a certain number of years.

• If you borrow up to $14,999, you have to remain in residence for five years. And you have to pay back the whole amount if you move earlier
• If your grant exceeds $40,000, you have to stay put for 15 years for it to be forgiven
• For grant amounts between $15,000 and $40,000, the period of residency is 10 years

The highest grants are available only in places designated as “high-cost areas” or “chronically economically depressed.” You can find details through the link above.

Virginia Housing doesn’t let you borrow as much as Virginia DHCD. It usually offers 2% — but sometimes 2.5% — of your next home’s purchase price. But this is a true grant. So there are no residency requirements. Once you have the money, it’s yours to keep.

You could also get a mortgage credit certificate (MCC) with Virginia Housing, which is “a dollar-for-dollar [tax credit] toward your federal income tax liability.” And, “The annual credit is equal to 10% of the annual mortgage interest you pay.”

The City of Virginia Beach also has a down payment assistance program of its own. It says, “Individuals may … qualify for down payment assistance or, if a veteran seeking a VA loan, a closing cost assistance grant.” Visit the above link for more information.

Norfolk first-time home buyers

In June 2021, the median list price of homes in Norfolk, VA was $249,900, according to Realtor.com. That was a year-over-year increase of 8%.

If you want to buy a home at that median price, your down payment options might fall between:

• $7,770 for 3% down payment
• $51,800 for 20% down payment

The City of Norfolk and Norfolk Redevelopment and Housing Authority (NRHA) has a down payment assistance program called the NRHA HOME program that is a lot like the one offered by Virginia DHCD.

This is a similarly generous loan (rather than a grant) that’s forgiven as the years pass. For example, if you borrow less than $15,000, you’ll owe nothing after five years because the whole amount will have been forgiven over that period.

However, there’s an important difference between the two programs. Because, with Virginia DHCD, you’d have to repay the entire grant if you moved at the end of year four. But with NRHA, you’d only pay back 20% of your loan. Because NRHA forgives its loans year by year. So 80% of it would have been forgiven by the end of year four.

That’s a key difference, and one you should bear in mind if you’re choosing between the two programs.

Chesapeake first-time home buyers

In June 2021, the median list price of homes in Chesapeake, VA was $304,900, according to Realtor.com. That was a year-over-year rise that month of 8.4%.

If you want to buy a home at that median price, your down payment options might fall between:

• $9,150 for 3% down payment
• $60,980 for 20% down payment

You can find out more about the Chesapeake Redevelopment and Housing Authority (CRHA) HomeOwnership Program (HOP) by downloading its PDF brochure. It’s an unusual program so we’ll quote directly from that brochure to be sure we get the information right:

“HOP will assist residents/clients transition from renting to homeownership and create a pool of residents adequately prepared to pursue the goal of buying their own home through local homeownership programs and resources.

“Current HCV voucher holders who participate in the HOP program and meet all program requirements may be able to use their housing assistance with a monthly mortgage payment, thereby increasing their borrowing capacity. The assistance may continue for 15 years for 20+ year funding, or 10 years if less than a 20-year mortgage. Assistance under this program may be either a monthly home-ownership assistance payment or a single, down payment assistance grant.”

Want more information? Call (757) 523-0401.

Virginia first-time home buyers can often find help by reaching out to one of two statewide agencies: the Virginia Department of Housing and Community Development (Virginia DHCD) and Virginia Housing.

But you should still check to see if a more local solution might meet your needs better.

According to the U.S. Department of Housing and Urban Development (HUD), there are plenty of regional organizations that can help renters on the path to homeownership.

You can fund HUD’s full list of regional and local assistance programs in Virginia here.

You can see today’s live mortgage rates in Virginia here.

When you’re ready to start the home buying process, make sure you get personalized rate quotes from at least 3 mortgage lenders.

Don’t just look at advertised rates online; actually apply for preapproval and compare the interest rates and fees you’re offered. That’s the only way to know you’re getting the best deal possible on your new home loan.

Verify your new rate (Aug 9th, 2021)