Everything You Need to Know About Home Loans in Virginia

Getting a home loan is one of the most important financial decisions you’ll make. If you’re looking to buy a home in Virginia, it pays to understand all your mortgage options

I’ve taken out a few mortgages in my day And in this post, I’ll share everything I’ve learned about home loans in Virginia – to help you make the best choice for your situation

Let’s get started!

How Do Mortgage Rates in Virginia Compare?

The first thing you’ll want to know is – how do mortgage rates in the Old Dominion compare to national averages?

The good news is, Virginia mortgage rates are very competitive.

As of February 2023, the average 30-year fixed mortgage rate in Virginia was around 6.09%. That’s almost identical to the national average of 6.12%.

Rates on other common mortgage products like 15-year fixed, 5/1 adjustable-rate mortgages (ARMs), and VA loans are also right in line with national benchmarks.

In other words, Virginia is a great place to get a home loan right now. Local lenders offer rates that are on par with what you’ll find anywhere in the U.S.

Now let’s explore the most popular mortgage options for Virginia homebuyers.

Conventional Loans in Virginia

Conventional home loans are the most common type for Virginia borrowers.

These mortgages meet the underwriting requirements set by Fannie Mae and Freddie Mac. That makes them more flexible than government-backed loans like FHA and VA.

About two-thirds of buyers in Virginia use conventional financing. And there are two main options:

1. Fixed-Rate Mortgages

Fixed-rate mortgages (FRMs) offer predictable monthly payments that don’t change. The interest rate stays the same for the full loan term – whether that’s 15, 20, or 30 years.

30-year FRMs are most popular in Virginia. But shorter terms like 15-year and 10-year FRMs are available too.

The main pros of fixed-rate loans are:

• Interest rates are low – Compared to adjustable-rate mortgages, FRMs offer better rates right now. The 30-year average is around 6%.

• Payments are stable – Your principal and interest payment will be the same each month for the life of the loan.

• Easy to budget – Fixed payments make it simple to plan your monthly housing costs years into the future.

Just keep in mind, shorter term FRMs come with higher monthly payments. But you’ll pay less interest over the life of the loan.

2. Adjustable-Rate Mortgages

With ARMs, the interest rate starts fixed for a period of 5, 7, or 10 years. After that, it adjusts periodically based on an index like the Prime rate.

In Virginia, 5/1 and 7/1 ARMs are most common:

• 5/1 ARM – Fixed for 5 years, then adjusts every year
• 7/1 ARM – Fixed for 7 years, then adjusts every year

ARMs come with lower rates at first. But there’s interest rate risk when the fixed period ends. Your payments could go up significantly if rates are higher at adjustment time.

That said, ARMs can make sense if you plan to move before the fixed period expires. Just be sure you can afford higher payments down the road.

FHA Loans in Virginia

FHA home loans are backed by the Federal Housing Administration. They’re popular with first-time buyers and borrowers with lower credit scores.

Here are some key advantages of FHA mortgages in Virginia:

• Low down payments – You can qualify with just 3.5% down. On a $300,000 home, that’s only $10,500.

• Lenient credit requirements – FHA approves borrowers with credit scores as low as 580. And there’s more flexibility with debt-to-income ratios.

• Low mortgage insurance – FHA loans require mortgage insurance no matter your down payment size. But premiums are low compared to conventional loans.

So if you don’t have much saved for a down payment, an FHA loan can help you buy sooner. Just keep in mind, these mortgages come with an upfront mortgage insurance premium and monthly premiums.

VA Loans in Virginia

VA home loans are backed by the Department of Veterans Affairs. They’re only available to active duty military, veterans, reservists, and qualifying spouses.

But if you’re eligible, a VA mortgage can be a great deal in Virginia. Here’s why:

• No down payment required – That’s right, you can get a mortgage with 0% down if your DTI ratio checks out. This helps eligible buyers purchase with barely any cash.

• No monthly mortgage insurance – Veterans don’t have to pay monthly MI on VA loans, regardless of down payment size. That saves money long-term.

• Flexible credit requirements – VA lending guidelines are fairly lenient for credit scores and debt-to-income ratios.

• Lower interest rates – On average, VA mortgage rates are about 0.5% lower than conventional loans.

In short, VA financing can be a huge help if you’re buying in an expensive area like Northern Virginia.

Jumbo Loans in Virginia

Jumbo mortgages fund luxury home purchases above conforming loan limits. For 2023, that’s $726,200 in most Virginia counties.

These giant mortgages start at $726,201 and go up to $2 million or more.

Jumbos work much like conventional loans – with both fixed and adjustable rates available. But you’ll need excellent credit and a larger down payment, usually at least 20%.

While jumbo interest rates are a little higher, they can still be very competitive. And a jumbo loan may be your only option for purchasing a luxury property in an area like Arlington or Alexandria.

USDA Loans in Virginia

Don’t overlook USDA home loans if you’re buying in a rural part of the state.

USDA mortgages are aimed at low to moderate income borrowers purchasing in “non-urban” areas.

The big perks are:

• 100% financing – No down payment required on purchases up to $647,200 in Virginia
• Low rates and fees – Competitive interest rates and low origination fees
• Flexible credit – Can qualify with a 620 FICO score

USDA loans are a nice option for eligible buyers in southern Virginia or the Shenandoah Valley. I definitely recommend looking into them if you’re searching for homes in those areas.

Refinancing Your Mortgage in Virginia

If you already own a home, refinancing could lower your interest rate and monthly payment. It’s worth considering if you meet some of the below criteria:

• Your credit score has improved significantly since you got your existing loan
• You can reduce your interest rate by 1% or more
• You plan to stay in your home long-term
• The loan breakeven point is within a few years

Run the numbers to see if refinancing makes sense with your situation. Many Virginia homeowners have saved hundreds per month by refinancing over the past couple years.

You can refinance into any type of mortgage – including conventional, VA, FHA, USDA, and jumbo loans. The most popular option is refinancing into a fixed-rate loan to lock in a super low rate for decades.

7 Tips for Getting the Best Mortgage Rate in Virginia

Ready to move forward with a home loan? Here are my top 7 tips for scoring the lowest mortgage rate in Virginia:

1. Shop with multiple lenders – Compare loan estimates from 3+ lenders. You could save 0.25% or more on your rate by getting quotes from a few different places.

2. Improve your credit – Shoot for a credit score of at least 740. Pay down debts, correct errors on your report, and don’t apply for new credit prior to applying.

3. Lower your debt-to-income ratio – Lenders like to see your DTI at 36% or lower. Pay down revolving debts like credit cards to help get under this threshold.

4. Make a larger down payment – Putting down 20% or more gives you the best rates on conventional loans. But even 5-10% down can help shave 0.5% off your interest.

5. Get preapproved – Being preapproved shows sellers you’re a serious buyer. Plus, it locks in a rate for 60-90 days.

6. Consider discount points – Paying points upfront reduces your interest rate over the life of the loan. This can be worth it if you plan to stay put for several years.

7. Lock your rate – Lock in your rate as soon as you’re under contract on a home. This prevents your rate from rising before closing. Be sure to lock for 30-45 days.

Follow these tips,