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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 0.42% and 1.27% 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 your property taxes will be. 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 $750,000. 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.

The average annual premium for Virginia homeowners insurance is $1,903, according to data from insurance.com. 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.

A financial advisor can help you understand how homeownership fits into your overall financial goals. Financial advisors can also help with investing and financial planning - including retirement, taxes, insurance and more - to make sure you are preparing for the future.

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 anywhere from 1.05% to 4.01% of your home's purchase price to cover closing costs.

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 include the U.S. Census Bureau, 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 licensing 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 $200 to $550, 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 about $25. 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 8.6 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  almost 460,000 residents. After that, it’s Norfolk, Chesapeake and Richmond, the state capital. Richmond has about 226,000 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.

According to recent data from the Census Bureau, the median home value in Virginia is $330,600, rising steadily since 2012. Virginia has one home foreclosures per approximately 27,000, according to December 2020 data from RealtyTrac.

If you’re interested in living in Virginia and commuting to Washington, D.C., be prepared to pay a hefty chunk of change. According to recent Census Bureau data, Arlington’s median home value is $755,800 and its neighbor Alexandria, is at $579,100. Wondering how much the biggest city will set you back? The $295,900 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 $263,000 - not bad for the state capital.

Local Economic Factors in Virginia

One of the biggest draws to Virginia is its proximity to the nation’s capital. With plenty of D.C. suburbs to choose from, many homeowners can find work opportunities that are based in the city.

Virginia also has a large military presence, with more than 25 military installations throughout the state. In addition to that, there are a number of government contractors that operate in Virginia who also contribute to employment opportunities. According to the Bureau of Labor Statistics, in December 2022 the state's unemployment rate was only 3.0% compared to the national average of 3.5%. Even at the height of the recession in 2010, when national unemployment hovered near 9.8%, Virginia stayed below the national average at 7.12%.

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 26% 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 income taxes are progressive, with rates ranging from 2.00% 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

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 (1% - 3.5%) for eligible VHDA loans. You will need to meet certain criteria such as minimum credit scores and a maximum debt-to-income ratio of 50%. 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.