Virginia Mortgage Rates

Living in Virginia

They say Virginia is for lovers, and it’s easy to see why. From Chesapeake Bay to Shenandoah National Park, the state is green, scenic and bustling with things to do, whether it’s hiking 540 miles of the Appalachian Trail, exploring colonial Williamsburg or taking in the iconic Blue Ridge Parkway.

If you’re considering a move to Virginia, expect rising prices and competition for homes in many parts of the state. Overall, Virginia’s economy remains strong, and the state has seen five years of consistent job growth, especially for jobs in the professional and technical services sector.

Statewide, the pace of home sales in Virginia has slowed, and price rises have softened. In April, the median price for a home was $300,000, up 3% from the year before, according to Virginia REALTORS. In the eastern area, around Chesapeake Bay, the median sales price fell 6% in April compared to a year ago. But that was the only area that saw a decline. Home prices have risen steadily in all other regional markets in the state.

Low inventory levels seem to be prompting the price hikes. According to Virginia REALTORS, over the past year the number of active listings in the state has shrunk 9%. Meanwhile, homes are spending less time on the market, an average of 53 days, two fewer than the same time last year.

The rules and costs of buying a home in Virginia

Virginia, like most states, has regulations and rules for home sales and protecting the rights of buyers. If you’re planning to buy a home in the state, be aware of the following in particular:

Property disclosure

In Virginia, the law requires only minimal property disclosures from sellers. Sellers are required to sign a “buyer beware” form that allows them to avoid disclosing information about the condition of the home or improvements, as well as anything that pertains to adjacent parcels, historic district ordinances, nearby resource protection areas, sexual offenders and the presence of stormwater basins and wastewater systems. Sellers are also allowed to avoid disclosing any knowledge of special flood hazard areas, conservation measures or other easements, and whether the property is subject to community development measures.

In Virginia, the Residential Property Disclosure Act, does require sellers to provide some information to prospective buyers that might affect a purchase decision. It requires sellers to disclose the presence of defective drywall within the home, nearby military air installations, pending building or zoning violations, tourism initiatives in the area and whether the drug methamphetamine was ever manufactured on the home’s site.

Judicial and non-judicial foreclosure state

Virginia allows for non-judicial foreclosures, meaning the process doesn’t have to take place in the courts.

In a non-judicial foreclosure, the sale of the property is handled outside the courtroom. The multi-step process requires the lender to post public notice of an impending foreclosure sale — and then give the homeowner a chance to respond before auctioning the home. In Virginia, homeowners, by law, are allowed 14 days from the time they receive a foreclosure notice to catch up on missed mortgage payments.

Equitable distribution state

Virginia is an equitable distribution state, which means marital property is required to be divided fairly and equitably in a divorce. In Virginia, courts take into account factors such as the monetary contributions each spouse brought to the marriage, the health of each party and the tax consequences of splitting up certain assets and debts.

This is different from a community property state, where a couple’s assets and debts are required to be split 50/50. Still, in Virginia, courts are required to divide up a couple’s property according to whether it’s marital or separate property. The property may also be part-marital and part-separate; for example when a mortgage is in both names and is paid off with marital funds but at least some of the purchase was funded with assets held separately by one spouse.

Escrow state

Virginia is an escrow state, which means a buyer is not required to have an attorney present at closing. Instead, buyers and sellers can decide on an appropriate closing agent, which can include a state-licensed attorney, a title insurance company, a real estate broker licensed by the Virginia Real Estate Board or a financial institution authorized by law to do business in the state. Virginia doesn’t allow closings to be handled by anyone who might have been part of a home purchase or sale. This includes the buyer, seller, lender and borrower.

Taxes

Whenever property is sold, states and local municipalities usually require either buyers or sellers to pay transfer taxes. In Virginia, the state imposes a recordation tax, now equal to 25 cents for every $100 of the transaction. Any city or county may also impose a recordation tax equal to one-third of the state’s fee. Finally, Virginia code imposes a grantor’s tax of 50 cents for every $500 of the transaction.

According to Tax-Rates.org, the median property tax in Virginia is now $1,862 per year, which means the state ranks 21st in the amount of property tax it collects. Still, some Virginia residents pay considerably more. For example, the median tax in Falls Church City outside Washington, D.C., is now $6,005, one of the highest such taxes in the U.S., according to Tax-Rates.org. By contrast, residents in Buchanan County in far western Virginia pay an average of just $284 per year.

By law, any city, county or town in Virginia can decide if it wants to offer a property tax exemption for elderly or disabled residents. Statewide, Virginia offers an exemption program for certain veterans and surviving spouses. To learn more, go here.

Conforming loan limits

In most Virginia counties, the maximum conforming loan limit is now $484,350 for a single-family loan, the standard amount that applies to most of the U.S. Because of the high expense of local housing, some counties, such as Fairfax, Fredericksburg and Prince William, now have a $726,525 loan limit. As with other states, you can expect a higher limit in Virginia if you buy a multifamily home.

Two government-sponsored entities, Fannie Mae and Freddie Mac, buy conforming loans from lenders as a way to make the mortgage market safer and more affordable.

Conforming loan limits determine the maximum amount you may be able to borrow in your area for a mortgage and still receive a good interest rate, especially if you have strong credit. If you plan to buy a home that costs more than the limit, you’ll need to take on a jumbo loan, where the rate is often higher.

Programs for homebuyers in Virginia

The Virginia Housing Development Authority (VHDA) offers a broad variety of programs that can help Virginia residents receive more affordable mortgages and possibly pay for down payments or closing costs. Depending on the county where you live, loan limits range from $251,900 to $500,000. Income limits also apply and depend on the size of your household and the combination of homebuyer programs you decide to use.

The following VHDA programs are worth noting in particular:

Fannie Mae HFA Preferred with Reduced Mortgage Insurance

This program provides a 30-year, fixed-rate loan to homebuyers for purchasing property with as little as 3% down, or 0.5% to 1% down with a VHDA down payment assistance grant. Those who qualify may also get reduced mortgage insurance payments. The loan can be paired with the VHDA Plus Second Mortgage or the mortgage credit certificate.

Eligibility requirements:

  • Available for first-time homebuyers and repeat buyers
  • 640 minimum credit score
  • Maximum 45% debt-to-income ratio
  • Conforming loan limits apply
  • Income limits apply

VHDA offers a similar loan program that requires no mortgage insurance payment at all: Fannie Mae 97% No Mortgage Insurance. To qualify, you’ll need a higher credit score, 660 or more.

Learn more

Down Payment Assistance Grant

This grant is good for 2% to 2.5% of the purchase price of your new home, and it’s meant to be used with a VHDA mortgage. Because it’s a grant, you don’t need to pay it back. You can also combine this program with VHDA’s mortgage credit certificate.

Eligibility requirements:

  • Must be primary residence
  • 1% down payment required
  • Income and loan limits apply
  • Must be a first-time homebuyer

Learn more

Closing Cost Assistance Grant

This grant provides qualified buyers closing cost assistance for up to 2% of a home’s purchase price and never needs to be paid back. It can also be paired with a VHDA mortgage credit certificate.

Eligibility requirements:

  • Must be paired with a Rural Housing Service (RHS) or Veterans Affairs (VA) home loan
  • Must be a first-time homebuyer or have not have owned a home in three years
  • Income and purchase price limits apply
  • Primary purchase only (no refinancing)

Learn more

VHDA Plus Second Mortgage

This program may help you avoid down payment costs entirely by pairing a VHDA first mortgage with a second mortgage based on 3% to 5% of the purchase price of your home. The second mortgage can also be paired with a VHDA mortgage credit certificate.

Eligibility requirements:

  • Minimum first mortgage loan-to-value of 90%
  • Borrower must have 1% of the purchase price saved in reserve at closing
  • Income and loan limits apply
  • Buyers with credit scores of 680 or higher may be able to finance some of their closing costs with the second loan
  • Loan is for purchase transactions only (no refinancing)
  • Homebuyer education course required

Learn more

Mortgage credit certificate

This certificate offers a chance to reduce your monthly mortgage payments by receiving a federal tax credit for up to 20% of the mortgage interest you pay. The credit is good as long as you continue to live in the home. You can pair this program with the VHDA Plus Second Mortgage program or the down payment assistance grant.

Eligibility requirements:

  • Must be a first-time homebuyer or have not owned a home for at least three years (this requirement is waived if you’re buying in a federally designated target area)
  • Home must be a primary residence
  • Income and loan limits apply

Learn more

Rate shopping tips

If you hope to buy a home in Virginia, you can take steps to ensure you are getting an interest rate and loan terms that work best for you. Take the following tips into account as you start to shop:

Contact at least three lenders on the same day

Make sure to shop around with at least three lenders on the same day since mortgage rates change daily and sometimes more often. For the best comparison, be sure to cast a wide search by comparing rates from smaller lenders and credit unions as well as large national banks.

Give each lender the same information

To make a true apples-to-apples comparison, be sure you’re providing lenders with the exact same information. At first, they’ll want information such as the loan amount you’d like, the size of a potential down payment, the type of loan (e.g., conventional, FHA or VA), and loan terms (e.g., a 30-year, fixed-rate loan). Also, know your credit score early on as it will play a big role in the type of mortgage you’re offered. When you apply for a loan, you’ll need to provide information to help document it, such as proof of income, bank and credit card statements and tax records.

Add up all lender fees and closing costs

Lenders charge fees to process and close your mortgage, but the fees can vary dramatically from one lender to the next, so compare them carefully to size up the total cost of your loan. Look for application fees, attorney fees, recording fees, other underwriting costs and the cost of points if you decide to use them to obtain a lower mortgage rate. Keep in mind that federal law requires lenders to disclose all fees before any loan — including a mortgage — can move forward.

Know the best time to lock in your rate

Once you qualify for a mortgage, it’s smart to consider locking in your mortgage rate with your lender. Locking your rate will ensure you won’t pay more if market rates rise while your loan is being processed.

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