Situation
First-time buyer, Virginia
Virginia Housing down payment assistance, the Mortgage Credit Certificate, and the household income caps that decide which of them you can actually use.
The honest bitAssistance is not free money. Most of these programmes price a quarter to half a point above market, so the question is always whether the help you receive today outweighs the rate you carry for years.
What this programme actually is
Virginia Housing runs the state's first-time buyer programmes. The parts that matter to a buyer are the down payment assistance grant, the second-lien Plus loan, and the Mortgage Credit Certificate. Each has its own income cap, its own sales price cap, and its own effect on your rate.
The Mortgage Credit Certificate is the one most buyers have never heard of and the one most likely to be worth real money. It converts a portion of your annual mortgage interest into a dollar-for-dollar federal tax credit that continues for as long as you hold the loan and live in the home. Unlike the interest deduction, it works whether or not you itemise.
Assistance and the MCC can sometimes be combined, and sometimes cannot. It depends on the loan type underneath, the income cap being tested and whether the assistance is a grant or a lien. I run the four-way comparison on paper before anyone commits, because the wrong combination can cost more than it saves.
First-time buyer, VirginiaWhat is included when I run it
- A four-way comparison: no assistance, grant, second lien, and MCC, priced on the same day
- Household income tested the way the agency tests it, which is not the same as qualifying income
- Sales price cap checked by locality before you tour houses that cannot work
- Homebuyer education enrolment and the certificate tracked to closing
- MCC application filed with the loan, since it cannot be added afterwards
- Recapture tax explained in writing before you sign anything
How the file moves
- 01Eligibility screenThree-year ownership test, household income, and locality price cap, in that order.
- 02Programme comparisonWe model each option over five, seven and ten years, because most people do not keep the loan for thirty.
- 03Education certificateThe free online course. Start it the week we begin, not the week before closing.
- 04ReservationAgency funds are reserved per file. Assistance programmes do run out mid-year.
- 05UnderwritingTwo underwrites in effect: the lender's and the agency's compliance review.
- 06ClosingA second lien, if used, is recorded alongside the first and shows on the title commitment.
Why people choose it
Cash to close is the real barrier
Most first-time buyers in Richmond qualify on income long before they have the down payment. That is the problem these programmes solve.
The MCC pays every year
A credit of up to 10% of annual mortgage interest, for as long as the loan and occupancy last.
Grant funds are not repaid
Unlike the Plus second lien, the grant carries no repayment and no lien.
Education is genuinely useful
The course covers escrow, insurance and budgeting. Buyers who take it early ask better questions.
What moves your price
| Factor | How it behaves |
|---|---|
| Household income | Counted for everyone who will live in the home in some programmes, not just borrowers. |
| Locality | Caps differ by MSA and by county. Richmond, Hampton Roads and Northern Virginia are not the same. |
| Rate premium | Assistance loans price above market. Budget a quarter to half a point. |
| Recapture tax | Selling at a gain within nine years can trigger a federal recapture. Most buyers never owe it, but you should know. |
Answers
First-time buyer, Virginia: common questions
Something not covered here? Call (804) 555-0146 and ask.
Yes, if you have had no ownership interest in a primary residence for the last three years. Owning a rental you never lived in is treated differently, so ask.
Sometimes. It depends on the underlying loan type and which income cap is being tested. We run the combination test before you apply, because an MCC cannot be added after closing.
Neither exactly. Agency compliance uses household income, which can include an adult occupant who is not on the loan. It is the single most common reason a file fails compliance review.
A federal provision that can claw back part of the subsidy if you sell at a significant gain within nine years and your income has risen well above the original limit. In practice very few borrowers owe anything.
Is this the right programme for you
Twenty-five minutes on the phone will settle it. If a different programme is cheaper for your file, I will say so.
Three wholesale quotes on the same day's pricing, before you choose.