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Virginia First-Time Homebuyer Programs

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People looking to buy their first homes in the state of Virginia could be eligible for a little help in making that dream a reality. The state offers several homebuyer assistance programs that provide low interest rates and chip in on down payments. Most programs require free or low-cost homebuyer education classes that provide essential information about the process of buying a home and advice about sustainable homeownership that includes budgeting and maintenance tips.

In January 2019, we researched Virginia’s first-time homebuyer assistance programs. This included a review of the Virginia Department of Housing and Community Development website and other state resources. Here’s what you need to know.

In this guide, we will cover:

Virginia first-time homebuyer programs

Virginia has two primary state agencies that handle homebuyer assistance.

The Virginia Department of Housing and Community Development administers first-time homebuyer down payment assistance and closing cost assistance programs, which are provided by local government agencies and nonprofits. The Virginia Housing Development Authority provides multiple affordable homeownership programs, including low-cost loans, down payment assistance and closing cost assistance.

In addition, there are numerous regional and local organizations listed by HUD that provide homeownership assistance.

Eligibility for Virginia assistance

To be eligible for Virginia’s first-time homebuyer assistance programs, you must be a state resident purchasing a home to be your primary residence. First-time buyers are defined as individuals who have not owned a residence within the previous three years and some single people who previously owned homes with spouses.

In addition, homebuyers must take a homeownership education class.

VHDA Loans

The Virginia Housing Development Authority (VHDA) offers conventional loans with reduced or no mortgage insurance, Federal Housing Administration (FHA) loans, Veterans Affairs (VA) loans and USDA Rural Housing Service loans.

Features

  • Low-interest, 30-year fixed-rate mortgages. Options include conventional loans, FHA loans, VA loans and USDA loans
  • Low or zero mortgage insurance
  • Can be combined with other loan benefit programs, listed below

Eligibility

To qualify, borrowers must:

  • Meet credit score requirements. Minimum credit score requirements for VHDA loans vary by loan type from a 620 FICO score for USDA, VA and FHA loans to 640 for a Fannie Mae reduced mortgage insurance loan to 660 for a Fannie Mae loan without mortgage insurance.
  • Earn less than the program’s income limits. These vary by household size and location from $61,300 for a household with two people in most parts of the state to as much as $146,700 for a household with three or more people in northern Virginia.
  • Purchase a home within price limits. These also vary, from $251,900 for most of the state to $500,000 in northern Virginia near Washington, D.C.
  • Maintain less than a 45% debt-to-income ratio.

How it works

You can begin by taking an approved in-person or online homeownership class. Then you’ll contact an approved lender, who will guide you through the qualification process.

VHDA Plus Second Mortgage

Features

  • No out-of-pocket down payment. The second mortgage covers your down payment and some additional closing costs. Qualified borrowers can borrow as much as 1.5% more than the sales price.
  • Higher income limits.

Eligibility

To access the program, borrowers must:

  • Qualify for a VHDA loan (either FHA or Fannie Mae with reduced or zero mortgage insurance), following the guidelines above. The program is not available outside of the VHDA program or on its VA loans or USDA Rural Housing Service loans.
  • Maintain a credit score of 620 or higher. For the maximum financing, borrowers must have a credit score of 680.
  • Be first-time buyers unless you are purchasing in a federal targeted area, designated areas in need of economic development, for revitalization.

How it works

This program pairs a VHDA loan with a second mortgage that helps with the down payment and closing costs. The second mortgage is structured as a 30-year, fixed-rate loan worth either 3.5% or 5% of the home’s purchase price, depending on the borrower’s credit score. The proceeds of the loan go toward the down payment and/or closing costs.

The VHDA Plus Second Mortgage is only available with VHDA loans, so you’ll need to work with an approved lender to apply. They’ll guide you through the process of getting a VHDA loan and let you know if you qualify for the second mortgage component. To start the application process, you can contact an approved lender in your area from this list.

VHDA Down Payment Assistance Grant

Features

  • Cash grant that can be used for the down payment on a VHDA loan. The grant is worth 2% of the sales price for Fannie Mae loans or 2.5% on FHA loans.
  • May not be used toward closing costs.

Eligibility

To receive the grant, borrowers must:

  • Meet VHDA loan requirements following the guidelines above.
  • Choose a VHDA loan through the conventional or FHA loan program. VA loans and USDA Rural Housing Service loans do not qualify.
  • Not choose the VHDA Plus Second Mortgage for down payment funds.

How it works

The VHDA Down Payment Assistance Grant pairs with the VHDA loan, described above. The grant does not need to be repaid.

The grant covers 2% of the overall sale price if you get a conventional VHDA loan and 2.5% with a FHA loan. But to qualify, borrowers must also put up 1% of the loan price as a down payment with their own money.

To start the application process, you can contact an approved VHDA lender in your area from this list.

VHDA Closing Cost Assistance Grant

Features

  • Cash grant of up to 2% of the sales price on VHDA loans through the USDA or VA loan programs. Money goes toward closing costs or funding fees.

Eligibility

To qualify, borrowers must:

  • Meet VHDA loan requirements following the guidelines above.
  • Choose a VHDA loan through the VA or USDA Rural Housing Service program.

How it works

The VHDA Closing Cost Assistance Grant is only available with VHDA loans through the USDA or VA loan programs. These often don’t require a down payment, so the grant applies toward closing costs.

To start the application process, you can contact an approved VHDA lender in your area from this list.

VHDA mortgage credit certificate

Features

  • Tax credit giving a dollar-for-dollar reduction of your federal income tax bill, equal to 20% of your annual mortgage interest payment.
  • The other 80% of your interest payments may still be eligible for the mortgage interest tax deduction.
  • Certificate can be used for the entire time you own your house until you refinance or sell it, as long as you live in the home as your primary residence.
  • Can be combined with other VHDA loan programs and features.

Eligibility

To qualify, borrowers must:

  • Be a first-time homebuyer.
  • Meet the income and purchase price requirements of the VHDA program, described above.
  • Borrowers with non-VHDA loans may qualify for the mortgage credit certificate but must pay a fee of $750.

How it works

VHDA’s mortgage credit certificate is a tax credit against a homeowner’s federal income tax liability that can save first-time buyers money by reducing the amount of taxes they owe.

Borrowers need to complete a form with their lender when they apply for a loan to obtain a mortgage credit certificate. An MCC Commitment must also be issued before your loan closes. If you sell your home in the first nine years after the purchase, you may be subject to a federal recapture tax on your tax benefits.

To start the application process, you can contact an approved VHDA lender in your area from this list.

Virginia DHCD down payment and closing cost assistance

Features

  • Up to 10% of the sales price for down payment assistance as a conditional grant, based on the buyers’ needs.
  • Grant may be up to 20% in certain high-cost or economically depressed locations.
  • Some borrowers may be eligible for up to an additional $2,500 toward closing costs.

Eligibility

To qualify, borrowers must:

  • Earn less than income limits, which vary by location. Generally, they represent household incomes at or below 80 percent of area median income.
  • Complete homebuyer education counseling through a HUD-approved provider.

How it works

Virginia’s down payment and closing cost assistance funds are in the form of a deferred conditional grant, which must be repaid only if you move or refinance before a specified period that ranges from five to 15 years, depending on the amount of the grant. Buyers must also contribute 1% of the sales price toward the down payment from their own funds or $500 if they have a household income below 50 percent of their area median income.

Homebuyers must apply through a local nonprofit or government agency, which can be found here.

National first-time homebuyer programs

In addition to state programs that encourage homeownership, there are programs available nationwide to assist first-time homebuyers. To find out more about national programs, read the LendingTree guide to first-time homebuyer programs.

 

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