Virginia First-Time Home Buying Assistance Programs for 2022

Virginia First-Time Home Buying Guide

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    By Kim Franke-Folstad

    (Last Updated – 07/2022)

    Virginia is for lovers — or so the state slogan proclaims — and there are plenty of reasons why someone would love to purchase a home there. Good schools, good music, good food, and great scenery, to name a few.

    But for first-time homebuyers in Virginia, breaking into the housing market can be daunting. The median sales price in the Old Dominion had risen to $447,700 by May 2022 — a 9.5% increase in 12 months, according to Redfin. And in some Virginia communities, the year-over-year price increases were much higher. Take Cherry Hill, where home prices were up 31%, for a median price of $670,000 in May.

    Fortunately, Virginia first-time homebuyers may qualify for financial help through programs offered by the state and some cities. There also are longstanding federal programs that could improve a buyer’s chances of success.

    Recommended: The SoFi Guide to First-Time Home Buying

    Who Is Considered a First-Time Homebuyer in Virginia?

    The definition of a first-time buyer might surprise some people. Sure, it’s someone who has never bought a home, but for most programs offered in Virginia and elsewhere, applicants are considered first-time homebuyers if they haven’t owned a home for the past three years.

    9 Virginia Programs for First-Time Homebuyers

    Most first-time homebuyer programs in Virginia are designed to help low- to moderate-income buyers who need help finding an affordable mortgage or coming up with a down payment or closing costs. Which means program participants typically must meet eligibility requirements regarding their income, credit scores, and debt-to-income ratio (DTI).

    There also may be limits on how much the home to be purchased can cost, and the home usually must be owner occupied. Also, at least one of the buyers may have to complete a homebuyer education course as part of the application process.

    The Virginia Housing Development Authority has a long list of programs for first-time homebuyers, but there are other statewide programs you also may want to consider. Read on for a snapshot of what’s available.

    Recommended: Understanding Mortgage Basics

    1. Virginia Housing Conventional Home Loan

    Virginia Housing’s Conventional Home Loan program offers first-time and repeat homebuyers the opportunity to qualify for a 30-year fixed-rate loan with a low down payment combined with the lowest available conventional mortgage insurance payments.

    It can be paired with down payment assistance.

    Benefits and qualifications include:

    •  3% down payment (as low as 1% down with a Virginia Housing Down Payment Assistance Grant or 0% with Virginia Housing Plus Second Mortgage)

    •  Flexible down payment sources are allowed, including gifts, down payment assistance loan or grant, or other eligible second mortgages

    •  640 minimum credit score

    •  Maximum 45% DTI

    •  Maximum 3% seller concessions (6% if down payment is 10% or more)

    •  Must meet Virginia Housing income limits

    •  Must complete a homebuyer education course

    •  Must be a single-family, one-unit home or agency-approved condo (no manufactured homes)

    •  No maximum sales price limit (unless combined with other Virginia Housing programs) An approved lender can help you get started. For general questions, call Virginia Housing at 877-843-2123.

    2. Virginia Housing Conventional No Mortgage Insurance

    This 30-year fixed-rate loan program is similar to the conventional loan program above, except borrowers aren’t required to pay for mortgage insurance. It can be paired with down payment assistance.

    Benefits and qualifications include:

    •  3% down payment (as low as 1% down with a Virginia Housing Down Payment Assistance Grant or 0% with Virginia Housing Plus Second Mortgage)

    •  Flexible down payment sources are allowed, including gifts, down payment assistance loan or grant, or other eligible second mortgages

    •  660 minimum credit score

    •  Maximum 45% DTI

    •  Maximum 3% seller concessions (6% if down payment is 10% or more)

    •  Must meet Virginia Housing income limits

    •  Must complete a homebuyer education course

    •  Must be a single-family, one-unit home or agency-approved condo (no manufactured homes)

    •  No maximum sales price limit (unless combined with other Virginia Housing programs) An approved lender can help you get started. For general questions, call Virginia Housing at 877-843-2123.

    3. Virginia Housing Plus Second Mortgage

    The Virginia Housing Plus Second Mortgage pairs a Virginia Housing conventional loan, Virginia Housing conventional no mortgage insurance loan, or FHA loan with a second mortgage that borrowers can use to make their down payment.

    The second mortgage is 3% to 5% of the home’s purchase price (amount is based on credit score and mortgage type).

    Benefits and qualifications include:

    •  30-year fixed-rate loan

    •  Qualified buyers with 680 or higher credit scores also can finance part of their closing costs using the second mortgage

    •  Must be a first-time homebuyer unless purchasing in targeted opportunity area

    •  Minimum 620-680 credit score (based on loan program)

    •  Borrowers must have 1% of purchase price available to them at closing

    •  Must meet Virginia Housing income limits

    •  Must complete a homebuyer education course Contact an approved lender to apply. For general questions, call Virginia Housing at 877-843-2123.

    4. Virginia Housing Down Payment Assistance Grant

    Virginia Housing offers a Down Payment Assistance Grant that provides qualifying homebuyers with up to 2.5% of the home’s purchase price for their down payment. The grant must be used with a Virginia Housing conventional first mortgage, Virginia Housing conventional no mortgage insurance loan, or an FHA loan.

    Requirements include:

    •  Must be a first-time homebuyer unless buying in a targeted area

    •  Minimum credit score of 620 to 660 (based on loan program)

    •  Must meet Virginia Housing income and sales price limits

    •  Must complete a homebuyer education course

    •  Virginia Housing mortgage must be locked in before receiving grant An approved lender can help you get started. For general questions, call Virginia Housing at 877-843-2123.

    5. Virginia Housing Closing Cost Assistance Grant

    Virginia Housing’s Closing Cost Assistance Grant can help borrowers who are applying for a USDA or VA loan cover their out-of-pocket expenses. The maximum grant is 2% of the home’s purchase price.

    Benefits and requirements include:

    •  Nonrepayable grant can be applied to closing costs, USDA guarantee fee, or VA funding fee.

    •  Must be a first-time homebuyer unless buying in a targeted area

    •  Minimum credit score of 620

    •  Must meet Virginia Housing income and sales price limits

    •  Must complete a homebuyer education course Contact an approved lender to get started.

    6. Virginia Housing Mortgage Credit Certificate

    First-time homebuyers in Virginia also may benefit from obtaining a mortgage credit certificate through a Virginia Housing-approved lender. Borrowers can claim a portion of their annual mortgage interest (up to $2,000) as a federal tax credit every year for the life of their loan. Homeowners can claim the remaining balance as a regular interest deduction on their income tax return.

    The mortgage credit certificate can be combined with other Virginia Housing programs, and there’s even a Virginia Housing Loan Combo that includes a conventional loan, a down payment grant, and a free homebuyer course.

    You can apply for the credit certificate when you take out a home loan through a participating lender .

    7. Virginia Department of Housing and Community Development Down Payment Assistance

    The Virginia Department of Housing and Community Development (DHCD) has a down payment assistance program for first-time homebuyers who are at or below 80% of the area median income. Qualifying homebuyers may receive a grant worth up to 15% of their home’s purchase price, plus up to $2,500 for closing costs.

    Requirements include:

    •  Minimum credit score of 620

    •  Maximum DTI 45%

    •  Must contribute to the home purchase from personal funds (contribution amount based on area median income)

    •  Must meet U.S. Department of Housing and Urban Development income limits for Virginia

    •  Sales price cannot exceed HUD limits (may vary by location)

    •  Must receive HUD-certified homeownership counseling and complete HUD-certified homebuyer education course

    To apply, you must work through a participating local provider .

    8. HOME of Virginia Steps to Homeownership Program

    Housing Opportunities Made Equal (HOME) of Virginia is a federally funded nonprofit organization that offers assistance to first-time buyers who can get a home loan on their own but may need down payment help.

    Participants must attend a homebuyer education course and meet with a program counselor. Income limits are based on household size. For more information about this program, you can check out the HOME website , email [email protected], or call 804-354-0641.

    9. Virginia Tax First Time Home Buyer Savings Account Subtraction

    Virginia’s Department of Taxation (known as Virginia Tax) offers this opportunity for first-time buyers who are saving for a home. It involves designating an account at a Virginia financial institution as a First Time Home Buyer Savings Account (including savings or other bank accounts, mutual funds, CDs, brokerage, and money market accounts).

    There are limits on how much you can save in the account (principal and interest), and the money in the account can be used only to pay the down payment or closing costs for a single-family home. But the advantage is that any income produced by the account is considered tax-free in the state. You can then subtract this income from your federal adjusted gross income to calculate your Virginia adjusted gross income for your taxes.

    For more information, check out the Virginia Tax website .

    Other Virginia Homebuyer Programs by Location

    If you’ve already chosen the part of Virginia you hope to make your home, you also may want to research local buyer assistance programs.

    If you can’t find assistance in your chosen location, check back occasionally for new offers. Some first-time homebuyer programs base their opportunities (and deadlines) on the funds they expect to become available. When their money runs out, they may press pause.

    Some local programs:

    Alexandria Flexible Homeownership Assistance Program

    This loan program through the city of Alexandria provides down payment/closing cost assistance to first-time homebuyers who purchase a home made available through the Affordable Set-Aside Homebuyer Program, the Neighborhood Stabilization Program, or the Resale Restricted Homeownership Program.

    Assistance is provided through a 0% interest, deferred-payment second mortgage. The assistance amount is based on household size, income, and financial need. For benefits and requirements, check out the website or call 703-746-3087.

    Hopeful buyers also can sign up to receive email alerts about available affordable homes for sale and homebuyer training sessions, or call 703-746-4990.

    Norfolk HomeNet Homeownership Center Programs

    The HomeNet Homeownership Center offers several programs to help residents find, save up for, and buy an affordable home in Norfolk. The center’s opportunities include educational sessions, down payment assistance for qualifying homebuyers, and a matching savings program. Go to the center’s website or call 757-623-1111.

    How to Apply to Virginia Programs for First-Time Homebuyers

    Reaching out to an approved lender is often the key to learning what programs you might qualify for and how to follow all the steps from applying to closing.

    Follow the links and contacts mentioned.

    Federal Programs for First-Time Homebuyers

    Several federal government programs are designed for people who have low credit scores or limited cash for a down payment. Although most of these programs are available to repeat homeowners, like state programs, they can be especially helpful to people who are buying a first home or who haven’t owned a home in several years.

    The mortgages are generally for single-family homes, two- to four-unit properties that will be owner occupied, approved condos, townhomes, planned unit developments, and some manufactured homes.

    Federal Housing Administration (FHA) Loans

    The FHA, which is part of the U.S. Department of Housing and Urban Development (HUD), insures mortgages for borrowers with lower credit scores. Homebuyers choose from a list of approved lenders that participate in the program. Loans have competitive interest rates and require a down payment of 3.5% of the purchase price for borrowers with FICO® credit scores of 580 or higher. Those with scores as low as 500 must put at least 10% down.

    Gift money for the down payment is allowed from certain donors and will be documented in a gift letter for the mortgage.

    FHA loans always require mortgage insurance: a 1.75% upfront fee and annual premiums for the life of the loan, unless you make a down payment of at least 10%, which allows the removal of mortgage insurance after 11 years. You can learn more about FHA loans in general and FHA mortgage limits by area by area.

    Freddie Mac Home Possible® Mortgages

    Very low- and low-income borrowers may make a 3% down payment on a Home Possible® mortgage. These loans allow various sources for down payments, including co-borrowers, family gifts, employer assistance, secondary financing, and sweat equity.

    The Home Possible mortgage is for buyers who have a credit score of at least 660. Once you pay 20% of your loan, mortgage insurance will be canceled, which will lower your mortgage payments.

    Fannie Mae HomeReady® Mortgages

    Fannie Mae HomeReady® Mortgages allow down payments as low as 3% for low-income borrowers. Applicants generally need a credit score of at least 620; pricing may be better for credit scores of 680 and above. Like the Freddie Mac program, HomeReady loans allow flexibility for down payment financing, such as gifts and grants.

    For income limits, a comparison to an FHA loan, and other information, go to this Fannie Mae site .

    Fannie Mae Standard 97 LTV Loan

    The conventional 97 LTV loan is for first-time homebuyers of any income level who have a credit score of at least 620 and meet debt-to-income criteria. The 97% loan-to-value mortgage requires 3% down. Borrowers can get down payment and closing cost assistance from third-party sources.

    Department of Veterans Affairs (VA) Loans

    Active-duty members of the military, veterans, and eligible family members may apply for loans backed by the Department of Veterans Affairs. VA loans , to buy, build, or improve homes, have lower interest rates than most other mortgages and don’t require a down payment. Most borrowers pay a one-time funding fee that can be rolled into the mortgage.

    Native American Veteran Direct Loans (NADLs)

    Eligible Native American veterans and their spouses may use these no-down-payment loans to buy, improve, or build a home on federal trust land. Unlike the VA loans listed above, the Department of Veterans Affairs is the mortgage lender on NADLs. The VA requires no mortgage insurance but does charge a funding fee.

    U.S. Department of Agriculture (USDA) Loans

    No down payment is required on these loans to moderate-income borrowers that are guaranteed by the USDA in specified rural areas. Borrowers pay an upfront guarantee fee and an annual fee that serves as mortgage insurance.

    The USDA also directly issues loans to low- and very low-income people. For loan basics and income and property eligibility, head to this USDA site .

    HUD Good Neighbor Next Door Program

    This program helps police officers, firefighters, emergency medical technicians, and teachers qualify for mortgages in the areas they serve. Borrowers can receive 50% off a home in what HUD calls a “revitalization area.” They must live in the home for at least three years.

    First-Time Homebuyer Stats for 2022

    Ever wonder where you fit amid the buyers shopping for their first home, or their first in years? Here are some stats from a recent National Association of Realtors® Profile of Home Buyers and Sellers:

    •  Percentage of buyers nationwide who are first-time buyers: 34%

    •  Median household income of first-time buyers nationwide: $86,500 Type of home purchased by first-time buyers:

    •  Detached single-family home: 80%

    •  Townhouse/rowhouse: 9%

    •  Condo/apartment (five or more units): 1%

    •  Duplex/condo/apartment (two to four units): 2%

    •  Other: 8%

    Median home price of first-time homebuyers: $252,000

    Median down payment of first-time homebuyers: 7%

    Median age of first-time homebuyers: 33

    Relationship status of first-time homebuyers:

    •  Married: 50%

    •  Single females: 20%

    •  Unmarried couples: 17%

    •  Single males: 11%

    First-time homebuyers with kids nationwide:

    •  No children: 70%

    •  One child: 15%

    •  Two children: 11%

    •  Three or more children: 5%

    Additional Financing Tips for First-Time Homebuyers

    In addition to federal and state government-sponsored lending programs, there are other financial strategies that may help you become a homeowner. Some examples:

    •  Traditional IRA withdrawals. The IRS allows qualifying first-time homebuyers a one-time, penalty-free withdrawal of up to $10,000 from their IRA if the money is used to buy, build, or rebuild a home. The IRS considers anyone who has not owned a primary residence in the past three years a first-time homebuyer. You will still owe income tax on the IRA withdrawal. If you’re married and your spouse has an IRA, they may also make a penalty-free withdrawal of $10,000 to purchase a home. The downside, of course, is that large withdrawals may jeopardize your retirement savings.

    •  Roth IRA withdrawals. Because Roth IRA contributions are made with after-tax money, the IRS allows tax- and penalty-free withdrawals of contributions for any reason as long as you’ve held the account for five years. You may also withdraw up to $10,000 in earnings from your Roth IRA without paying taxes or penalties if you are a qualifying first-time homebuyer and you have had the account for five years. With accounts held for less than five years, homebuyers will pay income tax on earnings withdrawn.

    •  401(k) loans. If your employer allows borrowing from the 401(k) plan that it sponsors, you may consider taking a loan against the 401(k) account to help finance your home purchase. With most plans, you can borrow up to 50% of your 401(k) balance, up to $50,000, without incurring taxes or penalties. You pay interest on the loan, which is paid into your 401(k) account. You usually have to pay back the loan within five years, but if you’re using the money to buy a house, you may have up to 15 years to repay.

    •  State and local down payment assistance programs. Usually offered at the regional or county level, these programs provide flexible second mortgages for first-time buyers looking into how to afford a down payment.

    •  The mortgage credit certificate program. First-time homeowners and those who buy in targeted areas can claim a portion of their mortgage interest as a tax credit, up to $2,000. Any additional interest paid can still be used as an itemized deduction. To qualify for the credit, you must be a first-time homebuyer, live in the home, and meet income and purchase price requirements, which vary by state. If you refinance, the credit disappears, and if you sell the house before nine years, you may have to pay some of the tax credit back. There are fees associated with applying for and receiving the mortgage credit certificate that vary by state. Often the savings from the lifetime of the credit can outweigh these fees.

    •  Your employer. Your employer may offer access to lower-cost lenders and real estate agents in your area, as well as home buying education courses.

    •  Your lender. Always ask your lender about any first-time homebuyer grant or down payment assistance programs available from government, nonprofit, and community organizations in your area.

    The Takeaway

    If you can qualify for one of the first-time homebuyer programs in Virginia, you may be able to reduce the costs of a purchase. Other first-time buyers can look for advantages among mortgages on their own.

    Make your dream of being a homeowner come true with SoFi’s competitive mortgage rates and down payments as low as 3% for qualifying first-time homebuyers.

    View your rate


    FAQ

    Should I take first-time homebuyer classes?

    Yes! Good information is key to a successful home-buying experience for anyone, but especially for newcomers, who can easily be overwhelmed by the jargon, technicalities, and magnitude of applying for a mortgage and purchasing a home. First-time homebuyer classes can help. Indeed they are required for many government-sponsored loan programs.

    Do first-time homebuyers with bad credit qualify for homeownership assistance?

    Often they do. Many government and nonprofit homeowner assistance programs are available to people with low credit scores. And often, interest rates and other loan pricing are competitive with those of loans available to borrowers with higher credit scores. That said, almost any lending program has credit qualifications.

    Is there a first-time homebuyer tax credit in Virginia?

    Yes. Virginia Housing administers a mortgage credit certificate program that allows qualifying borrowers to claim a portion of their annual mortgage interest paid as a federal credit every year for the life of their loan.

    Is there a first-time veteran homebuyer assistance program in Virginia?

    Virginia Housing’s Closing Cost Assistance Grant allows VA loan applicants to cover their closing costs or the VA funding fee by providing up to 2% of the home’s purchase price.

    Also, Virginia Housing partners with the Virginia Department of Veterans Services to offer the Granting Freedom program, which provides grants of up to $8,000 for home modifications to Virginia veterans and service members who sustained a line-of-duty injury that resulted in a service-connected disability. If you qualify, you could use the money to make a home for sale a better fit for your needs.

    VA loans are available nationwide to eligible service members, veterans, and eligible surviving spouses. You can email the regional VA office in Roanoke for information at [email protected]

    What credit score do I need for first-time homebuyer assistance in Virginia?

    Most homebuyer programs in Virginia require a credit score of at least 620.

    What is the average age of first-time homebuyers?

    The median age of first-time buyers is 33.


    Photo credit: iStock/Sean Pavone
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