The average price of a house in Virginia
in 2021 was $328,640, which is about 12% cheaper than the national average. While the median cost of a home is relatively low in the state, a lot of the real estate is very expensive. Virginia, sometimes called the Old Dominion, is one of the most exciting places to buy a house in the United States. Proximity to Washington D.C. and a booming economy mean that jobs are plentiful. Virginia is also rich in history and natural splendor.
Virginia is also a strong seller’s market, meaning houses are in high demand. This is causing real estate prices to rise rapidly.
If you do decide to buy a home in Virginia, you’ll need to understand how its competitive housing market works. Home insurance super app Jerry
is here with a guide to everything you’ll need to know. RECOMMENDEDNo spam or unwanted phone calls · No long forms
Figure out your finances
Your first step when buying a house should always be to evaluate your finances. This will let you know what sort of house you can afford.
You’ll need to take into account your credit score, your debt-to-income (DTI) ratio, what sort of down payment you can afford, and the additional costs that accompany buying a house in Virginia.
Get copies of your bank statements, some scratch paper, and a calculator. It’s time for some math homework.
Check your credit score
Your credit score is the most important factor in determining what sort of mortgage you’ll qualify for. Before you do anything else, you’ll need to check your credit score. The easiest way to do this is to use one of the free online credit reporting services, such as Credit Karma.
An ideal credit score will be somewhere between 670 and 739. A credit score in this range is considered strong and will help you get the best possible mortgage. If your credit score is below 670, don’t panic. You can usually still get approved for a conventional mortgage as long as your credit is still at least 620.
Now, if your credit score is below 620, you are probably going to have a pretty tough time purchasing a home in Virginia. You may want to hold off on buying a home until you can raise your credit.
But buying a home with a lower-than-average credit score isn’t impossible. If you still want to move forward with the home buying process, you do have a few options.
Here are a few resources that homebuyers with low credit might find useful:
Calculate your debt-to-income (DTI) ratio
Your debt-to-income ratio (or DTI) is the ratio between your income and your expenses. It lets lenders know how much disposable income you have each month. To calculate your DTI, add up all your recurring monthly payments and then divide by your total income before taxes.
Payments to incorporate when calculating your DTI include:
Current mortgage or rent payments
When you calculate your DTI, your answer will be a small decimal point number. Move the decimal point over two places to convert it into a percent. For example, if you got 0.35, your DTI is 35%.
Lower DTIs indicate more financial stability and higher amounts of disposable income, meaning you’ll have an easier time getting approved for a mortgage. Ideally, you want to have a DTI at or below 36%.
If your DTI is above 50%, you’ll have a very difficult time buying a house, especially in Virginia where real estate costs tend to be high. The only ways to improve your DTI are increasing your income, lowering your monthly expenses, or both. You may have to postpone your purchase until you can lower your DTI.
Determine your down payment
Another key factor that will affect what type of house you can afford is your down payment.
Even with a mortgage in place, you’ll be expected to pay at least 20% of the house’s total value out of pocket. Check your savings and assets to estimate what size of down payment you’ll be able to make.
If you are not able to make a 20% down payment, you’re going to have some difficulty purchasing a house in Virginia. But there are a couple of things you could try:
Apply for a mortgage through the FHA. They will sometimes grant mortgages to individuals for as little as 3.5% down.
Consider buying mortgage insurance. Some lenders will allow a down payment below 20% if you have mortgage insurance.
Veterans and active-duty military personnel also have the option to apply for a home loan through the Veterans Administration (VA) which can have a down payment of as low as 0%.
Prepare for closing costs and other fees
Buying a home comes with several other charges and fees which you’ll have to pay before you can close on a house. These expenses are collectively referred to as closing costs.
Virginia homebuyers can usually expect to pay between 1.55% and 2.06% of the home’s value in closing costs. According to data from ClosingCorp, the average total closing cost in Virginia in 2021 was $6,185.83 after taxes.
Closing costs in Virginia will usually include:
Mortgage insurance premium
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Look for homeowners insurance
While homeowners insurance is not a legal requirement in Virginia, most mortgage lenders will require you to purchaseit as a condition of your mortgage.
Even if your lender does not require it, you should strongly consider purchasing insurance. A house is a huge investment and it is important to make sure you keep it protected.
The average cost of homeowner’s insurance in Virginia is $1,013 annually, which is fairly cheap compared to the national average of $1,477. Make sure that you compare prices from three or more different providers before choosing one.
Finding the right coverage can be tedious and time-consuming. That’s why your friendly neighborhood insurance super app Jerry
does the work for you. Download the free app and enter a bit of basic information. Jerry will get quotes from top insurance providers in as little as 45 seconds! Key Takeaway The first and most important step in the home buying process is to form a clear idea of your financial situation. Before you start shopping for a house, calculate your credit score, DTI, estimated down payment, and potential closing costs.
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Get preapproved for a mortgage
Once you’ve evaluated your financial situation, it’s time to get preapproved for a mortgage. The order of things might seem a bit backward, but you should apply for your mortgage before you find a house.
When you do go shopping for a house, you’ll need to make offers, consider counter offers, and otherwise negotiate with sellers. Having mortgage preapproval will let you know exactly how much you can spend which will be invaluable when haggling.
Without preapproval, you’ll just be guessing at what numbers you can offer. Most people selling their homes won’t even show you the property unless you have proof of preapproval.
Applying for a mortgage is pretty similar to applying for any loan. Just follow these steps:
Provide the potential lender with your Social Security Number
Supply all required information including banking information, employment history, property and assets, and any debts or financial obligations
Complete the mortgage application
Keep in mind that mortgage applications require a hard credit check, so repeatedly applying can actually damage your credit. Don’t apply for a mortgage loan until you are sure you’re ready to buy a house.
How to pick the right mortgage in Virginia
When choosing a mortgage, always compare offers from multiple lenders before deciding on one. The two most important factors to consider are the loan term and interest rate.
Most lenders offer mortgages with terms of either 15 or 30 years. A longer-term loan might be easier to afford month-to-month, but it will be more expensive in the long run. With a long-term loan, you’ll have a higher interest rate and end up paying more interest overall.
In Virginia, a 30-year mortgage will usually have an interest rate of about 3.5%, while a 15-year mortgage will tend to be closer to 2.5% or lower. If you can afford the higher monthly payments, a short-term loan will save you money in the long run.
Look for a house
So, you’ve got all your financials in order and been preapproved for a mortgage. Now it’s time to find your dream home!
Check online to see what houses are on the market. Zillow and Redfin are great resources when searching for a new home.
Pick your city or neighborhood
It’s common knowledge that location is everything when it comes to real estate. Picking the right city in Virginia is one of the most important decisions you’ll make during your home buying process.
It’s a good idea to have a few potential locations in mind. Do some research on them. Get a sense of the town you’re considering. What is the culture like? How are the schools? What are real estate prices like in the area?
If you’re looking for the most affordable home prices, Covington, Pulaski, and Big Stone Gap offer some of the least expensive real estate in Virginia.
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Buyer’s market vs. seller’s market
What sort of deal you are able to get on a home depends on if it is in a buyer’s market or a seller’s market. You’ll need to figure out which kind of area your chosen home is in so that you can successfully negotiate with the seller.
Here’s a quick overview of the two market types:
A buyer’s market has more supply than demand. More people want to sell their house than there are buyers. This situation helps the buyer because the seller will be more eager to make a deal.
A seller’s market has more demand than supply. More people want to buy houses than there are properties for sale. This situation means the seller has the advantage since buyers will need to compete with one another for any available homes.
To find out if your new house is in a buyer’s or a seller’s market, look at recent home sales in the area. If houses tend to sell quickly and for close to their asking price, you’re in a seller’s market. If houses sit for a long time and sell for significantly less than their asking price, you’re in a buyer’s market.
Virginia is currently a strong seller’s market, so competition for houses will be steep. You probably won’t have much luck making offers below the asking price, and houses probably won’t last more than two weeks on the market before selling.
Find a real estate agent
Buying a house is complicated and time-consuming. It can be easy to miss out on houses or overpay if you don’t have a keen sense of the real estate market. That’s why most homebuyers choose to hire a real estate agent.
Real estate agents are professionals who specialize in the homebuying process. If you find an agent that knows the market well, they can save you a lot of time and money. Make sure you choose an agent that has a lot of experience with the area you’re moving into and who communicates promptly.
Make an offer
The final step in the process is to make an offer on the house. If you decided to hire a real estate agent, they will help you decide exactly what size of an offer to make.
The seller may reject your offer, or they might make a counteroffer. If the two of you are able to agree on a figure, you’re all set. Get ready for your new life as a homeowner!
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How to save on homeowners insurance
Buying a house is a huge expense. Once you get into your new home, you’ll find that there are a lot of smaller expenses as well. Maintenance and upkeep of a house are constant expenses. One of the major monthly costs you’ll have is your homeowners insurance
payment. Fortunately, this is also an area where you can probably save some money. The best way to ensure you’re not overpaying on home insurance is to compare rates from three or more insurance providers. Even if you did this when you purchased your home, you’ll want to periodically check to see if the available rates have changed.
As always, the insurance comparison app Jerry
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