Overview of Virginia Housing Market
Home prices in Virginia can exceed the national average by hundreds of thousands of dollars, largely due to its proximity to Washington, D.C. Virginia homeowners do save on property taxes, as the state’s effective tax rate is well below the national average.
National Mortgage Rates
Note, for purchase the minimum down payment on a $ home is , or $
Your Total Monthly Payment
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This is based on our recommendation that your total monthly spend for housing and debts should not exceed 36% of your monthly income.
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Factors in Your Virginia Mortgage Payment
One of the first things to add on to your mortgage payment on top of principal and interest are property taxes. Fortunately for Virginia homeowners, the state’s property taxes are well below the national average. County property tax rates in Virginia range anywhere between 0.4% to around 1.5% of your home’s assessed value. Your property is assessed for fair market value in two- to six-year cycles in Virginia. Cities are scheduled to reassess every two years and counties every four years. The closer you live to certain desirable areas such as the coast or Washington, D.C., the higher the property taxes. But overall, Virginia has relatively low property tax rates. One perk of homeownership is that owners are allowed to deduct the mortgage interest they pay when they file their federal income taxes (up to $1,000,000). Typically, homeowners can double their deductions by including mortgage interest on income taxes, as well. The same goes for Virginia, which tends to follow federal guidelines for itemized deductions.
Homeowners insurance in Virginia is in the top third of the most expensive premiums in the U.S. The average annual premium was $1,262 in 2017, which made it the 18th-most expensive in the U.S. If you’re planning on buying a home near the coastline, you’ll probably need to calculate the added cost of flood insurance on top of your homeowners insurance policy. Standard homeowners insurance doesn’t cover flooding, which if it happens, can cause thousands of dollars’ worth of damage.
Costs to Expect When Buying a Home in Virginia
Before your monthly payments start, you’ll have to pay a slew of additional costs on your mortgage closing day. Closing costs cover all sorts of administrative charges ranging from mortgage origination fees to credit reports, government recording fees and more. In Virginia, you’ll have to set aside roughly 2% to 4% of the purchase price to cover closing costs.
Closing Costs by County
|County||Avg. Closing Costs||Median Home Value||Closing Costs as % of Home Value|
|Buena Vista City||$3,477||$115,000||3.02%|
|Colonial Heights City||$4,059||$169,300||2.40%|
|Falls Church City||$10,060||$718,900||1.40%|
|Isle of Wight||$4,894||$243,000||2.01%|
|King and Queen||$3,917||$155,800||2.51%|
|Manassas Park City||$4,949||$248,300||1.99%|
|Newport News City||$4,308||$193,100||2.23%|
|Virginia Beach City||$5,069||$259,900||1.95%|
SmartAsset’s Closing Costs Study assumed a 30-year fixed-rate mortgage with a 20% down payment on each county’s median home value. We considered all applicable closing costs, including the mortgage tax, transfer tax and both fixed and variable fees. Once we calculated the typical closing costs in each county we divided that figure by the county’s median home value to find the closing costs as a percentage of home value figure. Sources: US Census Bureau 2015 5-Year American Community Survey, Bankrate and government websites.
Looking for a breakdown of the costs? First, before you even reach closing day, you’ll have to schedule a home inspection. It’s on you as the buyer to discover and property defects. A detailed seller’s disclosure won’t give you the full picture. With laws favoring the seller in Virginia, you’ll want to cross your t’s and dot your i’s before agreeing to buy a property.
In July 2017, Virginia transitioned from a voluntary certification program to mandatory licensure for all asbestos, lead and home inspectors. This means all inspectors are required to complete continuing professional education to maintain their license. Home inspections will cost you around $300 to $400, and will cost more for a home with larger square footage or less for smaller homes or condominiums. If you request additional tests, such as mold, termites, asbestos or radon, you’ll have to pay an additional fee for each service.
When it’s time for closing, you’ll have a number of fees owed directly to the mortgage lender. These cover origination points, broker fees, commitment fees, document preparation, processing, tax service and underwriting. Each lender will charge its own origination fees; there’s no standard measure for each cost. You’ll also pay your lender a funding fee if it’s a VA loan.
It doesn’t stop there. You’re required to pay for your credit report (around $30), flood certification and possible survey and appraisal fees. If you hire an attorney to review the contract, you’ll owe him or her a piece of the pie. Another fee is title insurance. Title insurance covers problems or hidden risks that affect your ownership rights. Most lenders require buyers to buy a policy to insure the mortgage loan. Buyers have the option to add an additional policy to cover the difference between the loan and the home value.
Finally, you’ll pay taxes on the real estate transfer. State recordation tax is $0.25/$100 or 0.25% for amounts under $10 million and is usually paid by the buyer. Another fee is grantor tax, which can be calculated as 0.1% or $0.50/$500, whichever is greater. This fee is usually paid for by the seller. The state also collects a deed recording fee of $20. Some areas of Virginia have additional local recordation taxes as well.
Details of Virginia Housing Market
Virginia is the 12th-most populous state in the U.S. with an estimated 8.4 million residents, according to the U.S. Census Bureau. The state takes up about 42,800 square miles, and is close in size to Tennessee. The northern and eastern edges of the state hold most of the population. Virginia Beach is the largest city in Virginia with roughly 450,000 residents. After that, it’s Norfolk, Chesapeake and Richmond, the state capital. Richmond has about 223,000 residents and is one of the oldest cities in the nation, as Virginia itself was one of the original 13 colonies. One of the state’s nicknames is “Mother of Presidents,” with eight U.S. presidents hailing from Virginia.
Taking a look into the real estate scene in the state, Virginia ranked 20th for healthiest and 31st for affordability in SmartAsset’s Healthiest Housing Markets study. The median home value as of August 2017 was $245,900, rising steadily since 2012. Virginia has 2.7 homes foreclosed per 10,000, which is higher than the national average of 1.6. It could be due to the financial crisis in 2007 - 2008, when home values fell 20% and many homeowners failed to make mortgage payments.
If you’re interested in living in Virginia and commuting to Washington, D.C., be prepared to pay a hefty chunk of change. Arlington’s median home value as of August 2017 was $649,400 and its neighbor Alexandria, isn’t much better at $524,200. Wondering how much the biggest city will set you back? The $261,300 median home value in Virginia Beach seems relatively affordable compared to its neighbors in the north. And if you’re looking for more savings, Richmond comes in at $210,300 – not bad for the state capital. (All figures as of August 2017 and from Zillow.)
As for how long on average a house was on the market, according to Zillow data, Virginia came in at an average 93 days in 2016. About 79.3% of homes sold for a gain in 2015 and in 2016, the number increased to 79.9%. Curious how long the average Virginia homeowner spends in their home? With this state, it’s about 16 years.
Local Economic Factors in Virginia
One of the biggest draws to Virginia is the proximity to the nation’s capital. With plenty of D.C. suburbs to choose from, many homeowners commute to the city for work. From 2010 to 2016, the state gained 410,767 people, almost 200,000 more than Maryland, its northern neighbor which only gained 242,661 in the same time frame.
Virginia also has a large military presence, with over 25 military installations throughout the state. In addition to that, there are a number of government contractors that operate in Virginia that also contribute to employment opportunities. According to the Bureau of Labor Statistics, in June 2017 the unemployment rate was only 3.7% compared to the national average of 4.4%. Even in 2010 at the height of the recession when national unemployment hovered near 9.8%, Virginia stayed below the national average at 7.3%.
Depending on where you’re looking to buy a home, there will be different factors to look at. You can use a cost of living calculator to determine how your current area compares to a city in Virginia. For example, if you’re relocating from Seattle, Washington by yourself and have an income of $85,000, your cost of living will be 25% higher in Alexandria, Virginia, on average or only 8% more in Richmond. Most of the difference between Washington state and Virginia is the tax burden you’ll face in the Commonwealth.
Virginia has a progressive income tax system, with rates ranging from 2% to 5.75%.
Mortgage Legal Issues in Virginia
Potential homeowners should take a look at Virginia’s Residential Property Disclosure laws, particularly to find what homeowners are required by law to disclose. Of course, a thorough home inspection can help buyers become aware of certain issues with a property, but there are some differences between states as to what an owner has to disclose to a buyer. For example, in Virginia, owners are not required to disclose whether a property is located in one or more special flood hazard areas. According to Virginia laws, “purchasers are advised to exercise whatever due diligence they deem necessary.” The same goes for a number of potential property downsides such as proximity to sexual offenders, adjacent property zoning status and dam break inundation zones. In Virginia, the owner doesn’t disclose any of that information, so it’s up to you to do your research. Virginia is a “caveat emptor,” also known as a “buyer beware” state. It’s up to you to uncover any defects with the property prior to purchasing.
When you buy a home with a mortgage in Virginia, you get what’s called a deed of trust. The document identifies the original loan amount, legal procedures and more. It contains three parties, the trustor (the homebuyer who’s borrowing money), the trustee (usually a title company) and the beneficiary, which is the lender. If the lender includes a “power of sale” in the deed of trust, it means the foreclosure process can be initiated non-judicially. The lender can use the “trustee,” or third party to auction the home. It’s not considered a homeowner-friendly procedure. Additionally, Virginia made the news in 2010 for its speedy foreclosures, which only require 14-day notice.
Virginia Mortgage Resources
|Resource||Problem or Issue||Who Qualifies||Website|
|Virginia Housing Development Authority||Provides homeownership education, housing counseling, mortgage credit certificates and down payment assistance.||Eligible first-time homebuyers who complete a homebuyer education course.||http://www.vhda.com/Homebuyers/Pages/homebuyers.aspx#.V5qQjpMrJ2Y|
|Virginia Department of Housing and Community Development||Provides down payment assistance (of up to 10 percent of the purchase price) and up to $2,500 in closing cost assistance.||Eligible homebuyers who complete a homeownership education course.||http://www.dhcd.virginia.gov/index.php/housing-programs-and-assistance/68-down-payment-assistance-dpa.html|
|USDA Rural Development - Single family loans||Offers payment assistance to increase an applicant’s repayment ability.||Applicants must be without decent, safe and sanitary housing; Be unable to obtain a loan from other resources on terms and conditions that can reasonably be expected to meet; Agree to occupy the property as your primary residence; Have the legal capacity to incur a loan obligation; Meet citizenship or eligible noncitizen requirements; Not be suspended or debarred from participation in federal programs.||http://www.rd.usda.gov/programs-services/all-programs/single-family-housing-programs|
|Home Affordable Refinance Program||Refinancing.||Single-family homes and condos that fit within lending loan limits.||http://www.harp.gov/|
There are a variety of ways potential Virginia homeowners can use state and national programs to help reduce the financial load of buying a house.
One resource is the Virginia Housing Development Authority (VHDA), which offers homeownership education, mortgage credit certificates for first-time homebuyers, down payment assistance grants and housing counselors. On top of all the online resources, you can also find VHDA in-person homebuyer education in a variety of cities. If you can’t find one near you, online and TV show versions are available.
The VHDA down payment assistance program can help first-time homebuyers with a percentage of the purchase price (2% - 2.5%) for eligible VHDA loans. You will need to meet certain criteria such as minimum credit scores and a maximum debt-to-income ratio of 45%. To learn more you can visit the VHDA website.
Another resource available to homebuyers is the Virginia Department of Housing and Community Development (DHCD). You’ll find a large cache of information ranging from a landlord tenant handbook, which is helpful if you plan on renting out your property, to details regarding a livable homes tax credit, to the down payment assistance (DPA) program. If you’re interested in the latter, you need to be a first-time homebuyer at or below 80% of the area median income.
If you’re looking to buy in a rural area, Virginia is eligible for the United States Department of Agriculture Rural Development (USDA) program. The property must be in an eligible rural area and you have to have a low or moderate income to qualify. To find out more, you can read the program criteria found on the website.
And if you’re looking for more information about life in the Old Dominion, we have you covered. Check out Virginia’s cost of living, where you can learn more about healthcare, transportation costs, food prices and more.
Finally, if you’re moving from out-of-state, we have a list of 15 helpful tips you should know before moving to Virginia.