Buying your first home can often be a daunting process. There are so many options to explore and new terminology to understand.
In March, I led a live webinar with a local Realtor on homebuying for young professionals. At the end of the webinar, we held a Q&A session. As expected, the questions came fast and furious because so many young adults want to own a home but don’t know where to start.
Here are four of the best questions I fielded:
1. What are the income limits for VHDA programs?
A loan from the Virginia Housing and Development Authority is a great choice for first-time homebuyers because VHDA has options that help with the down payment. However, in most cases there are household income limit restrictions to qualify for these programs.
In most of Hampton Roads, the household income for two or fewer people must be less than $83,200 for a loan. For a household of three or more, the income must be less than $97,000.
To qualify for one of VHDA’s homebuying assistance grants, the household income for two or fewer people must be less than $66,500. For a household of three or more, the income must be less than $77,600.
2. Do you have to be a first-time homebuyer to qualify for VHDA loans?
Most of the VHDA loan programs and grants require you to be a first-time homebuyer, including the Plus Second Mortgage program (where you finance the down payment into the loan).
VHDA defines a first-time homebuyer as someone who has not owned or occupied a house as primary residence in the last three years. However, VHDA will waive the three-year rule if you plan to purchase in a “targeted area” where the state wants to boost homeownership. See the VHDA website for more specifics.
You’re also not required to be a first-time homebuyer on the VHDA Fannie Mae conventional loan, which requires 3 percent down payment.
3. Can I use a VHDA grant for home improvements?
No, but the VHDA does offer two types of grants.
The first is a down payment assistance grant, which covers 2 to 2.5 percent of the purchase price based on the loan program (either FHA or conventional). The other is a closing cost assistance grant, which covers 2 percent of the purchase price on VA and USDA loans to go toward closing costs only. These loan programs typically don’t require a down payment.
There are other non-VHDA loan programs (e.g.: FHA 203K and Conventional renovation loans) in which you can include renovation costs into the loan.
4. Are closing costs included in the financing of purchasing a home or are they paid as a lump sum?
The VHDA Plus Second Mortgage option allows you to borrow the down payment and some closing costs. To include closing costs fees, you are required to have a 680 or higher credit score.
What questions do you have about the homebuying process? Email me and ask. The Q&A session is always open.
Shikma Rubin is a loan officer at Tidewater Home Funding in Chesapeake. Have mortgage questions? You can reach her at srubin@tidewaterhomefunding.com or 757-490-4726.