Purchasing property in the Commonwealth is a little easier thanks to some great programs that offer affordable home payments and down payment assistance options in Virginia. The Virginia Housing Development Authority (VHDA) offers grants in addition to more traditional down payment assistance (DPA).
In fact, some options even provide free down payment money for qualifying buyers and properties. Read on to discover more about down payment assistance in Virginia.
Understanding your options
The VHDA provides 30-year, fixed-rate mortgage loans to first-time and qualifying, repeat Virginia homebuyers. Additionally, if you’re a first-time borrower, you may be eligible for Mortgage Credit Certificate (MCC) tax credits, which allow you to claim a dollar-for-dollar tax credit during a given year. Sound interesting? Here are some options to consider:
- The VHDA FHA Loan with a DPA Grant provides a low down payment option with additional free DPA up to 2.5% of your property’s purchase price. That means with the combination of the FHA first mortgage and the grant, you will have a net down payment of 1%. Even better? The grant does not require repayment.
- The Fannie Mae No MI Program with a VHDA Grant offers one big advantage—it doesn’t require mortgage insurance, which can make a sizable difference in your monthly payment. Plus this option doesn’t have a financed funding fee like its FHA counterparts, and it is open to repeat buyers purchasing in targeted areas. Further benefits include a 3% down payment requirement that shrinks to 1% when coupled with a 2% DPA grant.
- FHA Purchase with a VHDA Plus Second Mortgage provides a no-down-payment option. Rather than requiring the net 1% down, the VHDA Plus Second Mortgage covers 3.5% of the sales price, bridging the gap between the property’s purchase price and the FHA first mortgage loan amount. Essentially, the FHA requires 3.5% down, but the DPA covers the difference. Though this DPA isn’t free, it provides an inexpensive advantage for first-time buyers in Virginia. Plus if you have a credit score of 680 and above, you can receive up to 5% to cover closing costs as well as your down payment.
- Fannie Mae No MI with a VHDA Plus Second Mortgage doesn’t require mortgage insurance while also providing a no-down-payment option for first-time buyers as well as repeat buyers purchasing in targeted areas. The VHDA Plus Second Mortgage provides between 3% to 4.5% of the purchase price as DPA, and since the first mortgage requires a 3% down payment, you’re covered with potential room to spare. To qualify for the higher DPA and use the remaining 1.5% for closing costs, you must have a minimum credit score of 680.
Learn how to qualify
Keep in mind that a first-time homebuyer is anyone who hasn’t owned and occupied a home in the last three years. In addition to traditional loan requirements, the qualifying standards for the aforementioned products are a bit more detailed:
- You must live on the Virginia property for one year.
- You must have a minimum credit score of 620 to 660, depending on the loan product.
- Your debt-to-income ratio cannot exceed 45%.
- You must meet household income limits, which range from $61,300 to $117,300, depending on your household size and property location.
- Your property must meet FHA’s condition and safety requirements.
- Your property must not exceed the sales price limit, which is defined by the VHDA based on the property’s locale.
- You must take a homebuyer education course.
So if you’re planning to purchase a home in the mountains, valleys, or beaches of the Commonwealth, reach out to an OVM Financial expert for more information about down payment assistance in Virginia. You can also check out our blog for other posts about down payment assistance in Maryland and the minimum down payment for a house.