How Virginia Housing Can Help You Buy a Home

Hello Hampton Roads,

This past week I attended a great training session about Virginia Housing’s loan products and though I’ve worked with many home buyers using these loans, this training was a great refresher and I also learned some new things.  First, for those of you that don’t know Virginia Housing is the rebranded Virginia Housing Development Authority (VHDA) which has been making home ownership more affordable since 1972.  If you’re in the housing market in the state of Virginia you should pay attention to what they have to offer—if you qualify, its grant programs are literally giving away free money.

The grants fall under the category of specialty programs which in my opinion are the most beneficial to home buyers.  They are:

  • The Down Payment Assistance (DPA) Grant—Non-Repayable
  • The Closing Costs Assistance (CCA) Grant—Non-Repayable
  • The Second Lien (Plus 2nd Loan)—Repayable
  • The Mortgage Credit Certificate (MCC) Grant 

Please note that these specialty programs are for first-time home buyers, but Virginia Housing has other low down payment loans for non-first-time buyers.  To use the above mentioned specialty products, all borrowers must be first-time home buyers; a first-time home buyer is defined as someone who currently does not own a home or someone who has not had ownership interest in a primary residence over the past three years.  This definition has some flexibility, so if you owned a home but it was more than three years ago you’re considered a first-time home buyer or if you own investment property, but not a primary residence, you’re considered a first-time home buyer.

Let’s take a look at what these programs have to offer:

DPA Grant

Home buyers who use the DPA grant in conjunction with Virginia Housing’s FHA or Fannie Mae loans get 100% financing.  The purpose of the DPA grant is to help first-time home buyers who may not have enough for the down-payment receive grant funds to cover the balance of the down payment after a 1% contribution from the home buyer.  The grant is either 2.5% for an FHA loan or 2% for a Fannie Mae conventional loan.  For example, the buyer gets an FHA loan which is 3.5% down, he then contributes 1% leaving 2.5% left for the down payment.  The grant covers 2.5% and the loan covers the balance of the purchase price giving the buyer 100% financing. 

Some things to know are the following:

  • There are household income requirements—for 3 or more people in a household in Hampton Roads, the maximum allowable income is $84,300.00.
  • After living in the property for 1 year, the grant funds do not need to be paid back.
  • Grant stacking is allowed meaning you can combine this grant with others to get even more funds.

Having access to grant funds is like buying a home with equity!  In today’s market where so many homes are selling for over the asking price this is a nice benefit to have. 

CCA Grant

The CCA grant is designed to help those using a VA loan or RHS loan with closing costs assistance as both loans are already 0% down and 100% financing.  The maximum grant allowed is 2% of the purchase price or appraised value whichever is less.  These funds can be used towards closing costs, discount points, pre-paid costs, and the upfront funding fee for VA loans.  The CCA grant combined with these no down payment loans is truly an ideal way to purchase a home with 100% financing and little to no money out of pocket!

Some notable items are:

  • Household income limits apply—for 3 or more people in a household in Hampton Roads, the maximum allowable income is $84,300.00
  • No contribution from borrowers is required.
  • No repayment from borrowers is required. 

The Second Lien or Plus Loan

The Plus Loans offer another 100% financing option and up to 1.5% help with closing costs assistance for qualified buyers.  Unlike the DPA or CCA grant, this is a repayable loan and works with either an FHA loan or Conventional loan with or without mortgage insurance (MI).  Mortgage insurance is required when a buyer purchases a home for less than 20% down; in the case of FHA loans, the mortgage insurance is paid for the life of the loan whereas with conventional loans, MI payments can be stopped when the loan to value reaches 80%.

For this product, a buyer obtains either an FHA or Conventional loan and the lender provides a 2nd loan to cover the required down payment.  For the Plus loan, a buyer with a credit score of at least a 680 may qualify for Conventional No MI product thus eliminating MI.  Also the higher credit score allows the lender to provide an additional 1.5% with the loan that can be used to help with closing costs.

Here are some important things to note with this loan:

  • Standard income limits of up to $105,400.00 for 3 or more people in a household in Hampton Roads apply.  Only the borrower’s income will be counted towards the limit.
  • The 2nd loan has the same interest rate as the 1st mortgage and is also a 30 year fixed rate loan than can be paid off early without penalty.
  • A borrower must have 1% of the sales price in the transaction to be used for closing costs or prepaid costs or to be held as reserves, or a combination of both.  These funds can be the earnest money deposit, gifts, retirement funds, or retirement loans. 

The Mortgage Credit Certificate (MCC)

An MCC can save home owners thousands of dollars by reducing the amount of federal income taxes owed each year and is available at no charge to home owners who used Virginia Housing’s loan purchase products to buy a home.  The MCC gives a 10% credit of the annual mortgage interest paid for the life of the mortgage each and every year as long as the home owner lives in the home.  The tax credit can be used whether taxes are itemized or not and if taxes are itemized, the additional 90% is still a tax deduction.

Some important things to know about the MCC:

  • Non Virginia Housing’s housing programs may still be eligible for an MCC at the cost of $750.00.
  • In rare cases, a recapture tax may be owed if the home is sold for a profit within 9 years of the purchase date and the home owner had a rapid and significant income increase.

If a recapture tax is owed it is likely to be minimal and the benefits of the MCC far outweigh the possibility of a recapture tax.  For the majority of buyers it makes sense to take advantage of the MCC.

Are you interested in any of these speciality programs?
If you'd like to find out more about these programs and see if you can qualify, contact me for a quick chat:

Thanks for Reading,


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