You might find yourself in a situation where you make pretty good money, your expenses aren't insane, but you're still challenged as to why your savings account isn't growing at the rate that you'd like it to be.
It's very common here in Northern Virginia. Full stop, there's a lot of economic opportunity here with many well paying jobs, but at the end of the day, it's also a high cost-of-living area. In other words, the housing ain't cheap. Let's take a look at what's been happening with house prices in Alexandria VA over the past five years, specifically townhomes.
I chose to look at the data for Alexandria VA townhomes (and duplexes) because there are a lot of high-rise condos with high condo fees, and I didn't want to include those numbers even though many condos in Alexandria VA can be purchased as starter homes. But when we focus on townhomes, we see that back in December 2015 the median sales price was $588,700 and today it's up to $715,750. So as you can see, housing is not cheap here in Alexandria VA.
One of the biggest myths is that you need 20% down to purchase a home. If we take November 2020's median sales price of $715,750, 20% of that is $143,150. When I'm working with first-time home buyers, I can tell you that rarely do they have this much money lying around, yet, we're still able to find them a great home. Let's take a look at some additional stats for 2020:
Look at the red arrows in the graphic above. You'll see that 68 buyers bought homes with FHA loans (a required minimum of 3.5%), 329 buyers bought homes with VA loans (a down payment of zero dollars unless you are buying a luxury home), and 20 buyers used Other financing, which is sometimes VHDA financing specific to first-time home buyers. So year-to-date in Alexandria VA home sales for 2020, over 400 buyers likely bought a home with much less than 20% down.
According to NAR, in 2019 first-time buyers made an average down payment of 6%. If you are looking a homes for sale in Alexandria in the first-time buyer price range of $300,000 then that's a down payment of $9,000, again much more palatable when going up against the median sales price.
Down payment assistance can be in the form of a grant, a loan with market or below market interest rates, or a mortgage credit certificate (also called an MCC). These funds have already been allocated to help buyers cover their down payment and sometimes closing costs. For example, if you're currently paying $2000 per month in rent with good payment history, then odds are, you can afford a mortgage payment of $2000 per month, but you may not have tens of thousands of dollars in the bank to cover your down payment plus your closing costs. Grants don't have to be repaid, and special loans or mortgages are repaid monthly when you make your mortgage payment.
Right now we are in a sellers market in Alexandria VA. That means that there are more buyers in the market than there are houses for sale, and sellers hold all the cards when it comes to negotiating. Buyers are in competition with each other so there's little, if any, negotiation on sales price and closing costs. Take a look at how closely homes in Alexandria VA have been selling in relation to their original list price.
Throughout 2020, Alexandria VA sellers have been getting close to their original asking price. A glimmer of hope for buyers in October with 99.3% and again in November with 98.5%, but overall, homes aren't being sold at deep discounts like in the 2008 Recession and housing crash. The days of shaving a little off the sales price and getting the seller to pay all of your closing costs are long gone, so if you qualify for a home, but you don't have enough money saved and you need closing cost help, this is where down payment assistance comes to the rescue. You offer remains competitive because you don't have to include seller closing costs. You're a bona fide buyer because you've gone through the mortgage approval process and your lender has confirmed that you qualify for the applicable program.
There are many first-time homebuyer programs for Virginia residents, and since Alexandria VA falls under the Northern Virginia region, there is greater flexibility with sales prices as well as income. You'll find that each program has its own specifics, so the very best way to see what you are eligible for is to use my connector tool below.
As an Alexandria VA Buyer Agent I know how exhausting it is to constantly search online for the best resources, only to find that a program as either expired, or you're simply looking on an outdated page or website. This tool is built specifically for down payment assistance, and it is the hub for programs across the state and across the country. So you don't have to click every link on Google, scour multiple websites, and write down information on another post-it note. Part of the value that I bring to the table is taking the time and stress out of the process, and helping you find money that you likely wouldn't find yourself.