2023 Virginia First-Time Homebuyer Programs
Virginia first-time homebuyers have a range of programs that can help with the down payment and closing costs of buying a house. Thousands of dollars (or even tens of thousands) could be available to first-time homebuyers — and some forms of assistance won’t need to be paid back. However, these programs have very specific requirements about how much you earn, how long you’ll need to live in the home and sometimes even where you’re allowed to buy.
Here’s what you need to know about first-time homebuyer programs in Virginia.
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First-time homebuyer programs in Virginia
The Virginia Department of Housing and Community Development (VDHD) administers down payment assistance (DPA) programs throughout the commonwealth. Other programs are available on a county- or city-wide basis. Each program has its own set of additional rules, however, including specific income limits.
Virginia Department of Housing and Community Development HOMEownership Down Payment Assistance Program
This program offers grants of up to $2,500 for closing costs and up to 10% of the sales price (as much as 20% in certain high-cost or economically disadvantaged areas). Eligible homebuyers can earn no more than 80% of the area median income and must agree to make the home their principal residence for five to 15 years, depending on the size of the grant. These are “deferred conditional grants,” which means you must repay the grant in full if you sell before a specified time period.
The HOMEownership program is administered by a group of nonprofit organizations throughout the commonwealth of Virginia. Note, however, that not every county in Virginia will offer these grants at a given time.
Requirements
- First-time homebuyer
- Income at or under 80% of area median income
- Undergo homeownership counseling and complete a certified homebuyer education course (could be done online)
- Must contribute anywhere from $500 to up to 1% of home cost from personal funds (dependent on income)
Pros and cons
| Pros | Cons |
|---|---|
Grant may be used for condo or manufactured home purchases Higher grant amounts are possible in costly or economically depressed areas Can qualify with as little as $500 contribution, depending on income | Must keep home as primary residence for five to 15 years, depending on the assistance amount (selling early means repayment in full is required) Cannot refinance or obtain home equity line of credit without repaying grant in full This statewide program isn’t available in every Virginia county Two-unit properties are not eligible |
Virginia Housing Closing Cost Assistance Grant
Closing costs can amount to anywhere from 2% to 6% of your mortgage loan amount. The Virginia Housing Closing Cost Assistance Grant can help ease that burden. Worth up to 2% of the home’s purchase price, this grant is available to income-eligible homebuyers with Veterans Affairs or Rural Housing Service mortgage loans through Virginia Housing. As a grant, this form of assistance doesn’t need to be paid back.
Requirements
- Financing with Rural Housing Service (RHS) or Veterans Affairs (VA) loan through Virginia Housing
- First-time homebuyer (repeat buyers allowed if purchasing in Areas of Economic Opportunity)
- Must meet Virginia Housing income limits, vary by household size and county
- Home must fall within Virginia Housing’s sales price and loan limits, with exceptions possible in designated Areas of Economic Opportunity
Pros and cons
| Pros | Cons |
|---|---|
Doesn't need to be repaid Could improve buyer’s purchase offer Can be combined with other grants outside of Virginia Housing | Income and home price limits apply (although may be relaxed in Areas of Economic Opportunity) Limited to RHS and VA loans only |
Call Chesapeake HOME Program
This program offers up to $25,000 in down payment and/or closing cost help for eligible first-time homebuyers in the city of Chesapeake. To participate, the applicant must sign a promissory note for the grant amount and then live in the home for five to 10 years before the note can be canceled.
Requirements
- Annual income of no more than 80% of area median income (based on household size)
- Buyer must contribute at least 1% of purchase price
- Approved first-time homebuyer education class required
- Home must conform with HUD standards and local codes
Pros and cons
| Pros | Cons |
|---|---|
Generous assistance grants up to $25,000 available Can be used for new or existing home Low minimum required contribution (only 1% of purchase price) | Available only to those buying in the city of Chesapeake Must live in home for five to 10 years for the promissory note to be canceled Cannot already be under contract to purchase |
TAP Into Hope
TAP Into Hope is a Roanoke-based nonprofit whose services include helping first-time homebuyers in Virginia’s 6th Congressional District. Income-eligible applicants may receive a forgivable grant of up to 10% to 15% of home’s purchase price, plus the option of an interest-free down payment assistance loan.
Requirements
- Income limits apply, depending on size of household
- Must attend first-time homebuyer class
- Homebuyer counseling required
- Must live in home over a period of time (typically at least five years)
Pros and cons
| Pros | Cons |
|---|---|
Grant can be up to 10% of home’s purchase price (up to 15% for first responders and teachers) Can apply for up to $7,500 extra as an interest-free loan May be used to purchase mobile homes or condos Can be combined with other first-time homebuyer programs | Required to live in home for a period of time (typically, at least five years) Home price limits may apply Grant funds may be limited; administered on a first-come, first-served basis |
Loudoun County Down Payment Closing Costs Assistance Program
This first-time homebuyer assistance program is a 30-year second mortgage against the property at 5% interest. Applicants who have worked and/or lived in Loudon County for at least six months may qualify for up to 10% of the home’s purchase price or $25,000 (whichever is less).
To be eligible, a buyer must earn between $42,700 and $99,650 per year.
Requirements
- First-time homebuyer with contract to buy within 45 to 60 days
- Must live and work in Loudoun County for at least six months (exceptions for active-duty military)
- Gross annual income between $42,700 and $99,650
- Credit score of 620 or higher
Pros and cons
| Pros | Cons |
|---|---|
Up to $25,000 in assistance available Can contribute as little as $1,000 of your own money No prepayment penalty if you retire the loan ahead of schedule | Job and/or current residence must be located in Loudoun County (at least six months) Maximum $99,650 income, regardless of family size A 5% interest loan that needs to be repaid |
Virginia first-time homebuyer qualifications
Buying a home is a big step. Assistance from a first-time homebuyer program can relieve some of the financial pressure. Here are four steps to follow as you decide which assistance program can best help you achieve homeownership:
Step 1: Determine your eligibility, including income limits.Many first-time homebuyer programs were created to help low- to moderate-income people buy a home. Check out each program’s income limits to see if you’re eligible to apply.
Step 2: Understand payment terms.Several of the Virginia first-time homebuyer assistance programs require you to keep the home as your principal residence for a predetermined number of years. If you need to move, or want to refinance early, you might wind up having to pay back some (or even all) of the money you received.
Step 3: Get approved for a mortgage with a participating lender.For example, Virginia Housing requires that you work with an approved mortgage lender in order to be eligible. Check with your program about any requirements regarding your potential lender.
Step 4: Complete the required homebuyer education courses.Some Virginia first-time homebuyer programs require applicants to fulfill certain requirements, such as taking an approved home buying class. Make sure to plan for any such course requirements into your home-buying timeline.
Understanding Virginia first-time homebuyer down payment assistance
Down payment assistance programs for first-time homebuyers in Virginia are typically grants or forgivable loans. However, this isn’t necessarily “free” money — if you don’t follow the program’s rules, you might be required to pay it back. Here’s how the different types of down payment assistance programs stack up.
Deferred second mortgage
Some down payment assistance programs put a second lien on your home, called a second mortgage (in contrast with your original mortgage). In some cases, this could be a deferred or forgivable mortgage (more on this type below), but deferred second mortgages may come due when you sell or refinance the home.
Forgivable second mortgage
Also known as a “soft second” mortgage, this is a second mortgage for down payment and closing costs. Many soft second mortgages are forgivable after you live in the home for a certain amount of time. You won’t have to make any payments on this mortgage unless you refinance or sell the home before the stated time frame.
Grant
In many cases, a grant is money that you don’t have to pay back, typically administered through a local or state source. Make sure you understand the grant rules, however; for example, the HOMEownership Down Payment Assistance Program is a “deferred conditional grant,” which requires homebuyers to stay for a certain number of years. Leaving early or selling the home triggers repayment in full.
Mortgage credit certificate
A mortgage credit certificate lets first-time Virginia homebuyers claim a tax credit of 10% of your annual mortgage interest. This can help reduce your financial burden from year to year, if you live in the home and have any tax liability. A mortgage credit certificate can be combined with other programs to make homebuying more affordable. The MCC is available to first-time homebuyers who meet income and house price limits and use the property as their primary residence.
THINGS YOU SHOULD KNOW
Before applying to a first-time homebuyer program, make sure the rules are the right fit for you. As an example, suppose job transfers are common in your field. Accepting a grant that requires living in the home for a specified number of years could backfire, since moving out early could mean repayment in full. Even if you didn’t want to move — for example, if you or your spouse gets transferred at work — you may still be on the hook for repayment.
How much of a down payment do I need to buy a house in Virginia?
The minimum amount of a down payment depends on which loan program you use. Some mortgages, such as VA loans, won’t require any down payment at all. In other cases, you’ll typically be asked to put down 3% to 3.5% of the price of the home. Of course, in some cases there are advantages to putting down a higher down payment, such as having more equity to start or even avoiding paying private mortgage insurance.
Can I qualify for down payment assistance in Virginia?
Each Virginia down payment assistance program has different requirements, so it’s important to match your borrowing profile carefully to the available programs. But if you meet credit score and income/household size rules, you might qualify if funding is available at the time.
How do I apply for Virginia first-time homebuyer down payment assistance?
Read each program’s requirements closely, to make sure you’re eligible. In addition to meeting income and credit score requirements, you might also have to take a homebuyer education course and/or receive homeownership counseling.
Next, visit the program’s website or call to find out how to apply. You’ll need to provide proof of income, bank statements and other relevant paperwork to confirm that you’re eligible.
Other first-time homebuyer loan programs
Conventional loans
A conventional loan is one that isn’t backed by a U.S. government agency. These loans have stricter qualifying guidelines, but also feature more favorable terms. Two conventional first-time homebuyer loan programs are Freddie Mac Home Possible® and Fannie Mae HomeReady®, both of which require just a 3% down payment.
FHA loans
The Federal Housing Authority backs these loans, which are an option for homebuyers with higher debt income ratios and lower credit scores than permitted by conventional lenders. However, FHA loans require two kinds of FHA mortgage insurance: one at the time of purchase, and another one that’s paid annually (and possibly for the length of the loan).
VA loans
VA loans are mortgage loans backed by the Department of Veterans Affairs. They don’t have a required down payment, and sometimes won’t even minimum credit score requirements. However, you or your spouse need to be an active or retired member of the armed services. In Virginia, you can combine the Closing Cost Assistance Grant with a VA loan.
USDA loans
The Department of Agriculture backs USDA loans, mortgages designed to help low to moderate income individuals buy, build, renovate or even relocate homes in rural regions approved by the USDA. Those who qualify can buy with no down payment. This type of loan can also be combined with the Virginia Closing Cost Assistance Grant.
What are the best first-time homebuyer loans?
The best loan for you is one that best matches your personal situation. For example, if you can meet the requirements for a conventional mortgage, you may get the most favorable loan terms. But if you can’t meet those requirements, an FHA loan might be a better fit.
According to a recent LendingTree study, comparison shopping rates among mortgage lenders saved over $60,000 over the lifetime of a mortgage. It’s also a good idea to research whether you’re eligible for any first-time homebuyer programs in Virginia, as this could also save you thousands of dollars (or even tens of thousands) on your home purchase.
Home price trends in Virginia’s major areas
Rising home values and rising mortgage interest rates translates into higher monthly mortgage payments. Home values in Virginia continued to rise in the past year, mirroring nationwide trends.
In Fairfax County — Virginia’s most populous county, located in the D.C. metro area — the median home value was $711,169 in the third quarter of 2022 (the most recent data available), according to the National Association of REALTORS®. Monthly mortgage payments there jumped $1,269 in Q3 2022, compared to a year earlier (from $2,414 to $3,682). Virginia Beach, the commonwealth’s most populous independent city, saw a jump in its monthly mortgage payment over that time period of 56.6%, or $694 ($1,920 up from $1,226); its Q3 2022 median home value was $370,761. And in the capital, Richmond, the median home value was $361,189, while monthly mortgage payments rose from $1,163 to $1,870 — a difference of $707.
Is there a first-time homebuyer tax credit in Virginia?
Yes. The state’s Mortgage Credit Certificate program lets qualifying first-time homebuyers in Virginia claim 10% of their annual mortgage interest as a tax credit. Income and house-price limits apply.
What are the current mortgage rate trends in Virginia?
As of April 13, 2023, fixed-rate mortgages were 6.27% for 30-year products and 5.54% for 15-year ones, respectively. Freddie Mac’s Primary Mortgage Market Survey does note that the rates have decreased for the fifth week in a row, though only by hundredths of percentage points in this fifth one (30-years by 0.01 and 15-years by 0.1). At the same time, the current rates are 1.27 (30-year) and 1.37 (15-year) percentage points higher than the same time last year.
Search more about mortgage rates in Virginia and in your desired hometown at LendingTree’s mortgage rates page.
