Washington D.C. Mortgage Rates

Living in Washington D.C.

Washington, D.C., is the nation’s capital, a densely populated place where history, politics and cultures collide along the shores of the Potomac River. Tourists visit the Smithsonian museums and national monuments, while politicians work on Capitol Hill and at the White House.

Housing in Washington, D.C., is expensive compared to the U.S. median price of $285,700, per the National Association of Realtors. The median Washington, D.C., home sales price in 2019 was $586,900, down 0.5% from the year prior, according to the District of Columbia Association of Realtors. The market as of mid-2019 is a seller’s market, according to Realtor.com; but over the past year, median sale prices have consistently come in below median asking prices, meaning buyers can still negotiate.

With online retail giant Amazon moving its second headquarters to the metro area, and consistent employment associated with the government, the market promises to remain relatively competitive. Additionally, while Washington, D.C.’s housing is expensive, by some metrics it’s actually quite affordable for inhabitants: More than 60% of residents with a mortgage spend less than 25% of their income on housing, and only 20% of residents spend over 35%.

The rules and costs of buying a home in Washington, D.C.

Buying a home in Washington, D.C., is not significantly different from the process in other states, although the D.C. area’s surrounding states may have policies that differ from those inside the district.

Home seller and buyer laws

In Washington, D.C., homebuyers are not required to hire an attorney for assistance in their transaction, although they may choose to use one. To close on the purchase of property, buyers and sellers can work with a title company or an attorney capable of title work.

Home sellers are required to disclose any property defects relating to water and sewer systems, insulation, structural systems, plumbing, electrical, HVAC, infestation by rodents or wood-destroying insects, appliances, alarm and intercom systems, garage door operations, fixtures and more.

Foreclosure may be judicial or non-judicial. In a judicial foreclosure, the foreclosure process is managed in court. In a non-judicial foreclosure, a lender can launch foreclosure proceedings with a borrower outside of court.

When it comes to property ownership, Washington, D.C., is not a community property district and offers joint property owners “equitable distribution” in the event of divorce or partnership dissolution. This means courts determine what is marital property and what is separately held, and distribute assets accordingly.

Taxes

In Washington, D.C., real estate transfer taxes are typically 1.1% of fair market value for properties worth $400,000 or less, or 1.45% of fair market value for properties with higher values. This means transfer taxes on a $400,000 property would be $4,400.

Typical property taxes are $0.85 per $100 of property value — or $8.50 per $1,000. This means property taxes on a $400,000 home would be $3,400 per year.

Washington, D.C., residents who are seniors, disabled, active-duty military or non-U.S. citizens working on certain types of visas may be eligible for property tax exemptions.

Conforming loan limits

The conforming loan limit for mortgages purchased by government-sponsored enterprises Fannie Mae and Freddie Mac is $726,525 for one-unit properties in Washington, D.C. This is higher than the $484,350 limit for one-unit homes that applies to most of the United States; pricier areas such as D.C. have higher limits. D.C. is expensive enough to boast the ceiling loan limit announced by the Federal Housing Finance Agency for 2019.

Programs for homebuyers in Washington, D.C.

Homebuyers in Washington, D.C., can tap the District of Columbia Housing Finance Agency to learn about their eligibility for programs that offer down payment or other purchase-related assistance to make buying more accessible. The DC Department of Housing and Community Development also offers resources.

DC Open Doors

DC Open Doors provides down payment assistance for up to 3.5% of a home’s purchase price, in the form of a loan with a 0% interest rate that is due if you sell, refinance or move out within the first five years. Homebuyer education is required for first-time buyer participants who are applying for HFA Preferred or HFA Advantage loans. The maximum home loan is $484,350, which is the conforming loan limit for most areas of the country.

The program is open to first-time or repeat buyers with household incomes at or below $140,640, a credit score of 640 or higher and a debt to income ratio not to exceed 45% to 50%, depending on loan type.

Learn more

Mortgage credit certificate

Many first-time buyers in D.C. can claim a federal tax credit of 20% of their mortgage interest paid each calendar year.

The program is open to first-time buyers or those buying in a targeted area, or using a veteran’s one-time exception, who are purchasing single-family residences and who satisfy income limits and sales price maximums.

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Home Purchase Assistance Program (HPAP)

The Home Purchase Assistance Program (HPAP) offers financial assistance of up to $80,000 and closing cost assistance of up to $4,000 to first-time homebuyers in Washington, D.C. Loan repayment is monthly for moderate-income borrowers but may be deferred (until a home sale) for lower-income borrowers.

The program is available to first-time buyers who earn either below 80% or between 80% and 110% of median income. The program prioritizes applications from existing residents who live on a low income, are elderly, disabled or displaced.

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Employer Assisted Housing Program (EAHP)

Local government employees who have worked at least one year at their jobs may be eligible for down payment and closing cost assistance for their first homes in Washington, D.C.

Assistance takes the form of both no-interest loans and grants for homes priced at or below $636,150. Government employees are eligible for loans up to $20,000 and matching funds grants up to $5,000. First responders are eligible for grants up to $10,000, if they agree to a five-year service commitment, and additional matching funds grants up to $15,000. The homes must be primary residences to be eligible.

Learn more

Rate shopping tips

In your home and mortgage search, be proactive in ensuring you get the best interest rate on your loan. Just a small increase or decrease in your rate can mean a difference of thousands of dollars over the life of your loan. Here are a few tips to help you secure the best rate.

Contact at least three lenders on the same day

Interest rates are volatile and change from day to day, so you should get quotes from multiple lenders on the same day. Otherwise, you may not be able to make apples-to-apples comparisons between your quotes, as the rate you are given one day may not be applicable the next day.

Give each lender the same information

Again, you want to make true comparisons among your rate quotes, so be sure to give complete details, from the home you wish to purchase to your financial information, to all your lenders upfront. If you provide partial information or give different information to the lenders you contact, you will not be able to get the most accurate quotes.

Add up all the lender fees to confirm the costs

In addition to the interest rate for each quote you receive, you’ll need to compare the annual percentage rate (APR), which will give you a better idea of the total cost of financing for each loan. Also, consider appraisal and credit report fees, which aren’t always included in the APR. Understanding all the costs involved will not only help you to choose between lenders, it will help you avoid sticker shock later in the homebuying process.

Know when to lock in the rate

To avoid having your preferred interest rate rise along with overall interest rates, you can lock it in for a certain period of time, typically around 30 days. If the deadline passes, you may be able to file for a rate-lock extension. If rates go down after you lock yours in, some lenders may offer a float-down provision that allows you to adjust your rate.

The information in this article is accurate as of the date of publishing.