If 2023 is the year you have decided to say goodbye to your landlord and hello to owning your own home, you may be feeling a bit discouraged. Especially if your price point isn’t in the $300,000 or above range! Yes, prices have gone up a lot since the pandemic and now the interest rates are high. Even though interest rates are starting to drop slightly, the average price of a home hasn’t and that can make for some discouragement on the part of most of the first time home buyers I work with in the Richmond area.
I took a quick look this morning at what prices are in the area! For the City of Richmond, Henrico County and Chesterfield County (the areas I normally work), there were 319 homes that sold between January 1, 2023 and January 22, 2023! That is not a lot of homes – but of these 319 homes that sold, only 35 were priced below $200,000 and another 91 homes were priced between $210,000 and $300,000! So if you are looking for a home that is under $300,000 in the city of Richmond, Henrico and Chesterfield County, it is going to be tough. So what are your options?
In city of Richmond, Henrico and Chesterfield Counties, there were only 67 condos & townhomes sold between January 1, 2023 and January 22, 2023. 10 were priced under $200,000 and another 25 were priced between $201,000 and $300,000. Remember – your first home doesn’t need to be your forever home! But it is a way to take that first step towards home ownership!
But if buying a condo or townhome is not an option for you, then the next place to check out is on the lending side! There are loan options out there that won’t require a 20% down payment – loans that only require 3% or 3 1/2% are out there, but that means you still have to have about 6% or more to use towards the purchase of a home – and that means you may still need to have around $12,000 to $18,000 to use towards that first home! For many buyers, this is out of reach! So below are listed some other options to look at!
OPTIONS TO HELP YOU WITH YOUR FIRST HOME PURCHASE!
There are a lot of loan options available to you to help you buy that first home! But not all lenders offer the same programs and not all Realtors are familiar with those lenders and those loan programs. So you want to talk to a Realtor who specializes in first time home buyer options as they will be the ones who will be able to help you sort through the maze of lending options. As someone who has specialized in working with first time home buyers for the majority of my 26+ years in real estate, I have made it my mission to educate first time home buyers on their loan options. Below is a great list of programs you may be able to take advantage of.
HOME OWNERSHIP DOWN PAYMENT & CLOSING COSTS ASSISTANCE PROGRAM
This is a down payment assistance program (or grant program) that can help home buyers whose income is at or below 80% of the area’s median income. In the Richmond area, that income for a 1 person household will range from $21,150 to $56,400. Buyers who qualify for this program may receive up to 10% or 15% of their purchase price towards the down payment as well as up to $2500 to use towards the payment of closing costs such as the attorney’s fee, etc. For this program there are 2 providers: the Petersburg RHA and Housing Opportunities Made Equal or HOME.
VIRGINIA HOUSING DEVELOPMENT AUTHORITY (NOW CALLED VIRGINIA HOUSING)
Virginia Housing will sell bonds to raise money to have attractive loans and grant programs for first time home buyers. The loans they offer are FHA, Conventional, Conventional with no MI and VA. Although Virginia Housing does not make loans itself, they partner with a number of lenders locally to offer these loans to first time homebuyers. In addition to loans, Virginia Housing also offers grant funds that can be used in conjunction with the loans, making this a great buy for a first time home buyer. As with all grant programs, there is a loan limit as well as a sales limit. For the Richmond area, if the household has 2 or fewer people in it, the income limit is $98,400 (if the buyer does not get the grant funds) or $78,700 (if the buyer does get grant funds). The maximum sales price is $425,000. Virginia Housing also offers the Mortgage Credit Certificate, which is a great way to reduce your federal income taxes. With the MCC, you get a credit against the federal taxes owed, not a deduction. For more information on what Virginia Housing can offer, the Virginia Housing website has some great information in it!
FEDERAL HOME LOAN BANK OF ATLANTA GRANT FUNDS
Each year, member banks of the Federal Home Loan Bank of Atlanta receive money that those banks can then use to allow first time home buyers to receive grants that can be used towards their down payment. There is an income limit of 80% of the annual median income, which is currently around $56,400 in the Richmond area. The grant money that a first time home buyer may be able to get could be as high as $12,500. Not all banks in the Richmond area will offer this grant so make sure you ask your lender if they do offer it as it is a great program to help first time home buyers get the down payment they may need to buy a house.
SOUTHSIDE COMMUNITY DEVELOPMENT AND HOUSING GRANT FUNDS
Southside Community offers a few interesting programs. They offer grants to first time home buyers in the City of Richmond and Henrico County who have a credit score of at least 640, at least $2,000 in savings and an annual income of around $40,000. Southside Community also builds affordable homes for first time homebuyers in various parts of the City of Richmond. If you want to check out what they have to offer, visit their website here.
FIRST TIME HOMEBUYER SAVING ACCOUNT IN VIRGINIA
I am not sure how many people are aware of this program in Virginia, but in 2014 the state assembly approved allowing first time home buyers to set up a savings account that would allow them to save up to $50,000 to be used towards the cost of closing on a new home. The interest and capital gains they would get on that savings account would be free from Virginia state income taxes. To set this up, you would want to talk to your bank. But I have had several people who were getting married and wanting to buy their first home use this as a way to put aside money specifically for them to use when they are ready to buy their first home. Here is a great site to check this out.
MAGGIE WALKER LAND TRUST
The Maggie Walker Land Trust is an interesting concept here in the Richmond area. In 2018 the city of Richmond appointed the Maggie Walker Land Trust, a non profit, to act as a land bank to acquire vacant and tax delinquent properties. This non profit would then rehab these homes and make them available to first time home buyers in the city of Richmond. This is set up where the buyer pays to the Land Trust a yearly rent on the land the house sits on of around $100/year. Because of this, not all lenders are able to provide financing on these homes. But there are several in the area (C&F Mortgage, Towne Bank Mortgage, Virginia Credit Union, Fulton Mortgage to name a few) are able to provide financing. There are income and other qualifications, but this is a great way for first time home buyers to get into parts of the city of Richmond as well as Chesterfield County and Henrico County that would otherwise be unaffordable – areas like the VCU area, Jackson Ward, etc. all have had homes sold there that were under the Maggie Walker Land Trust. Here is their website to check it out.
ProjectHOMES is a local non profit who will go in and either rehab a home or build a new home in various areas of the city of Richmond. These homes are then offered to first time homebuyers. As with many of these programs, there is an income limit. ProjectHOMES is careful in making sure that the homes they build fit in with the historic nature of the neighborhood they are built in. For more information on this non-profit, feel free to visit their website here.
BANKS OFFERING THEIR OWN GRANT PROGRAMS
Many banks have now started offering their own down payment assistance programs. You may want to check out what your bank has to offer. For instance:
- Bank of America: they have 2 different grant programs available: one grant is up to $7500 that doesn’t need repayment and can be used towards closing costs, including buying down the interest rate, while another grant of up to $10,000 can be used towards the down payment in select areas.
- Truist: has another grant program available for up to $7500
- Fulton Mortgage: has several programs such as the Fulton Community Combo, the Community First Door Program, their Closing Cost Assistance program as well as grants from the First Home Loan Bank of Pittsburgh.
- Chase: has a Chase DreaMaker program
These are just a few of the options available for you out there if you are thinking of buying a home, but are not sure if you can do it. If you want to sit down and talk, let me know and we can discuss. Feel free to let me know if you have any questions I can answer! Have a great day!