First Time Home Buyers Guide For Virginia

Homeownership is woven into the fabric of the American dream, but the process can seem daunting to first-time homebuyers. As your community bank and mortgage lender, F&M Bank and F&M Mortgage are here to help. In this comprehensive guide we break down everything you need to know about buying your first home in Virginia, from costs to mortgage loan options and the major steps in the process. If you have questions as you read, feel free to reach out to our friendly and experienced team of mortgage lenders. We’re here to help!

How Much Does It Cost To Buy and Own a Home In Virginia?

The median home price in Harrisonburg, VA us $203,700, which is lower than the median home price for the state of Virginia at $269,900.

Real estate has always been a local business, and this is especially true in Virginia, where home costs vary widely depending on the region and metro area. Here in the Shenandoah Valley, the median home price for Harrisonburg is $203,700. Your down payment will depend on the type of home loan you apply for. At F&M Mortgage, we offer everything from no-down-payment mortgage loans to low-down-payment options and conventional mortgages with a 10-20 percent down payment. In general, the more you can put down, the lower your monthly payment will be. For most home loans, you’ll need to pay Private Mortgage Insurance premiums each month if you put less than 20 percent down. However, there are plenty of options for aspiring homeowners who can’t come up with a big down payment.

Closing costs are the second expense associated with buying a home. These vary as well, but in general, you can expect to pay between $4,000-$9,000. Your lender will share a breakdown of closing costs with you beforehand so you know how much you need. If you have concerns about coming up with both a down payment and closing costs, don’t worry. We’ll cover closing cost assistance programs below.

Once you’ve bought your home, your biggest expense will be your monthly mortgage payment, which encompasses the loan payment of principal and interest, as well as your property tax and home insurance premium. To continue with our Harrisonburg example, the real estate tax rate is .86 cents per hundred of assessed value. This works out to fairly low property taxes; for example, if you need to pay $1,253 in annual real estate taxes, this is only about an extra $100 each month added to your mortgage payment. Remember that the assessed value of your home is usually less than what you bought it for. When it comes to home insurance premiums, you can expect to pay about $35 per month per $100,000 of home value.

Now that you understand the basic costs of buying and owning a home, it may be more affordable than you thought. Let’s look at federal and state programs to help first-time buyers obtain home loans and down payment or closing cost assistance. 

Federal Programs for First Time Buyers

First time home buyers have access to state programs, tax breaks, and federally backed loans if they don't have the usual minimum down payment ideally 20% of the purchase for a conventional loan.

Since 1934, when the Federal Housing Administration (FHA) was created to help Americans obtain home financing in the aftermath of the Great Depression, the federal government has launched a variety of initiatives to make homeownership more accessible. 

Within the context of federal home loan programs, a first-time buyer doesn’t necessarily have to be someone who has never owned a home before. We’ll cover the eligibility requirements for each program below. As you’ll see when we get to Virginia programs for first-time buyers, there are instances where federal and state home loans and home buying assistance work in tandem. 

FHA Loans
This is the original federal home loan program and it is open to anyone who meets the eligibility requirements. An FHA mortgage is a great option if you’re looking for a low-down-payment home loan. Depending on your FICO credit score, you may qualify for the maximum 96.5 percent financing, meaning you’d only need to make a 3.5 percent down payment. For our $203,700 median home price, 3.5 percent would be $7,130. That’s much easier to save for than a full 20 percent down payment of $40,000. 

Benefits of an FHA Mortgage Loan

  • Flexible credit approval
  • Low down payment 
  • Low closing costs 
  • Available for 1-4 unit properties
  • Can be used for manufactured and modular homes

FHA Loans and Mortgage Insurance
FHA loans are great for homebuyers who can’t afford a larger down payment or whose credit score might disqualify them from obtaining a conventional loan. In return for this flexibility, FHA borrowers pay an upfront mortgage insurance premium of 1.75 percent of the loan amount. You’ll also pay an annual mortgage insurance premium of 0.45 percent to 1.05 percent, divided by 12 and paid each month as part of your mortgage payment. The FHA mortgage insurance premium is for the life of your loan unless you refinance into a conventional mortgage.

VA Loans
Established in 1944 with the GI Bill of Rights, VA loans are available to current service members, veterans, and certain surviving spouses. The VA home loan program is very generous, with up to 100 percent financing, no mortgage insurance premiums, and low closing costs. The only added cost is a VA fee of 1.25 percent to 2.4 percent of the home’s value.

Benefits of a VA Mortgage Loan

  • Low or no down payment
  • No mortgage insurance requirement
  • Low closing costs

To learn more about VA loans, check out our comprehensive guide.

USDA Loans
USDA mortgages fall under the US Department of Agriculture and are intended to encourage home purchases in rural and semi-rural areas. Depending on your credit score, you may not have to make a down payment on a USDA loan. USDA loan eligibility is also based on your household income, which can’t be more than 115 percent of the median income in your county. USDA borrowers must also first try and fail to obtain a conventional mortgage.

Benefits of a USDA Loan

  • No or low down payment
  • Flexible credit approval
  • Some suburban areas count as “semi-rural”

HUD’s Good Neighbor Next Door Program
If you are a law enforcement officer, primary school teacher, firefighter, or EMT, you may be eligible to purchase a single-family home in a designated revitalization area at a 50 percent discount off the list price. As long as you live in the property for at least three years, you won’t have to pay back the 50 percent discount. You can also sell the house for its full market value and keep the profit. Search for current listings here

Fannie Mae HomeReady
Designed for creditworthy low-income borrowers, the HomeReady mortgage permits down payments as low as 3 percent. Also, your down payment and closing cost money can come from a variety of sources, including grants. There is no minimum requirement for personal funds. And while you’ll need to pay for Private Mortgage Insurance (PMI), you can cancel it once you have at least 20 percent equity in the home. 

Freddie Mac Home Possible Loan
Like the HomeReady mortgage, the Freddie Mac Home Possible Loan offers a down payment as low as 3 percent. You also have flexibility with the sources of your down payment and closing cost funds. Home Possible borrowers can even have a co-borrower on the loan who doesn’t live in the same residence. Overall, the Home Possible mortgage is great for self-employed individuals as well as those working in the gig economy. 

Virginia-Specific Programs for First Time Home Buyers

VDHA loans require that the home must be your primary residence, to have a credit score of at least 620, and complete a homeownership education course.

The Virginia Housing Development Authority (VHDA) offers 30-year fixed-rate mortgages, forgivable down payment grants, and federal tax breaks to first-time homebuyers in the state. In this case, the first-time buyer simply means that you haven’t owned part or all of another house in the past three years. 

VHDA loans come with income and purchase price limits that are set by county. To qualify, you need a minimum 620 credit score, must be willing to make the house your primary residence and have to finish a homeownership education course first. 

VHDA Fannie Mae HFA Preferred No MI
This mortgage loan offers a low down payment of 3 percent and there is no mortgage insurance requirement. You can also use a VHDA Down Payment Assistance grant and Mortgage Credit Certificate to reduce the cash you need to pay upfront. 

“The VHDA has struck a special deal with Fannie Mae with this program, which is designed for first-time and repeat homebuyers with a credit score of at least 640. Down payment requirements start at just 3 percent. The affordable monthly payment and discounted upfront cost is great, but it’s the insurance benefit that really shines.”

VHDA FHA Plus Loan
If you’re interested in a standard FHA loan, but don’t have enough cash for the down payment, the VHDA FHA Plus Loan might be the best option for you. Obtain up to 100 percent financing with a second mortgage that covers your upfront closing costs and down payment. County income limits apply and the combined loan total cannot exceed VHDA’s home price limits.

VHDA Rural Housing Services (RHS)
This is the VHDA’s version of a USDA mortgage. If you wish to buy a single-family house in a qualified area, you can take advantage of 100 percent financing, low mortgage insurance premiums, and a discount on your federal tax bill. 

VHDA Down Payment Assistance Grant
This grant can be used in combination with a variety of mortgage loans. Get up to 2.5 percent of your home’s value to put toward your down payment. Qualified home buyers don’t have to repay the down payment assistance grant. 

VHDA Mortgage Credit Certificate
If you qualify for the VHDA’s down payment assistance grant, you can also file for the Mortgage Credit Certificate, which lets you claim 20 percent of your annual mortgage interest as a federal tax credit for the life of the loan. 

From Pre-Qualification to Closing: Understanding the Homebuying Process

Closing costs are an assortment of feeds that are paid by both buyers and sellers at the close of a real estate transaction.

One of the most important decisions you’ll make at the beginning of this process is finding the best lender. You want to look for local expertise, a long history of mortgage lending, and friendly service. This will help ensure a smooth and timely mortgage and home buying process. As a local lender serving the Shenandoah Valley, F&M Mortgage has been helping first-time buyers become homeowners since 1999. We offer a complete suite of conventional, VHDA, VA, USDA, FHA, and zero-down-payment Spark Loans.

  • Get pre-qualified for a home loan. Pre-qualification letters carry more weight with sellers than pre-approvals. They demonstrate the seriousness of your intentions and vouch for your ability to get a mortgage.
  • Find a buyer’s agent to help in your home search. As with mortgage lenders, we recommend looking for someone with experience in the local real estate market and a specialization in working with buyers.
  • Fall in love with a house and make an offer. Once your offer is accepted, you will be “under contract” with the seller. Your mortgage lender will appraise the house and work through the underwriting process. You may be asked to provide additional documentation during this stage.
  • Get a home inspection. While this isn’t a requirement, it’s highly recommended. Paying for a home inspection will give you a complete and thorough report on the condition of just about everything in your house. If repairs are needed, you can renegotiate the purchase price with the seller.
  • Go to closing. The entire process can take anywhere from 4-6 weeks between the contract and the closing. Once the big day arrives, you can expect to sign a lot of paperwork and walk away with the keys to your new home. Congratulations!

Learn more about buying a home in the Shenandoah Valley!

Meet our experienced team of mortgage lenders and give us a call at 540-442-8583 to get answers to all of your home buying questions. Ready to apply for a mortgage loan? You can apply online or in any of our branch locations. Looking for more information about the Shenandoah Valley region of Virginia? Check out our relocation guides for Staunton and Augusta County and Harrisonburg and Rockingham County

F&M Bank: A Virginia Tradition Since 1908

Photo of Mark Hanna, President and CEO

An interview with Mark Hanna, President and CEO of F & M Bank Corp

Interview conducted by:
Bud Wayne, Editorial Executive, CEOCFO Magazine
Published – December 9, 2019
Re-published with permission

CEOCFO: Mr. Hanna, would you tell us about your role at F & M Bank Corp. and how it developed to where you are today as President and CEO?

Mr. Hanna: I joined the bank roughly two years ago on December 1st, 2017. The former CEO Dean Withers had announced his retirement and a search for his replacement was underway. At the time, I was in banking in the Hampton Roads area of Virginia. I had long worked with big banks and served as President and CEO of a de novo community bank, founded in 2005, that sold to another bank in 2014. After a period of working for the bank that had acquired my former company, I decided it was time for me to pursue some personal and career goals.

I knew Dean through a couple of banking organizations, so I reached out to him and expressed my interest in the opportunity. The board brought me in to interview along with several other candidates, and ultimately offered me the job. Dean stayed onboard for the first six months to help me through the transition. We had, and still do have, a close working relationship as he remains on F&M Bank’s board and is currently serving as our vice chair. Since then, the Leadership team and I have been working hard to guide and direct an organization that has 111 years of history for continued success in a dynamic banking environment.  

CEOCFO: Would you give us a little background and history of the bank and how it developed from its founding? Has the vision changed much from its founding vision?

Mr. Hanna: We go by F&M now; it originally started as Farmers & Merchants in 1908 in Timberville, Virginia in the Shenandoah Valley, to serve farmers and merchants in the immediate area. Where I sit today is less than a mile away from our original headquarters. We are in Rockingham County, Virginia which is the largest agricultural county in the commonwealth of Virginia. There is still a strong agricultural base in this area, but the community has grown and evolved over the years. Harrisonburg, one of the faster growing communities in the commonwealth, is less than fifteen miles away from Timberville. Harrisonburg is home to James Madison University, which has an undergraduate enrolment of almost 25,000 students and is one of the stronger economic centers of our community and in the Commonwealth of Virginia.

CEOCFO: Has the vision changed much from its founding vision?

Mr. Hanna: Yes, it has evolved but also remains very much the same. We are still here to serve the needs of the community and we bank small to midsized businesses that include agriculture, manufacturing, distribution, commercial real estate development, and residential real estate development and more. We also provide personal banking products for individuals, ranging from deposit accounts to home equity lines to any credit needs they may have. Over time we have developed an indirect dealer division for auto loans and a mortgage company – F&M Mortgage – for consumer mortgage loans. The bank itself has a strong portfolio of customized personal mortgage loans. It is a very popular product around here given that there are a lot of non-conforming properties such as larger tracts of land or family farms. We aim to provide the deposit, investment and loan products and services consumers in the Shenandoah Valley need.  

CEOCFO: Are you more of a business/commercial bank than a consumer bank? What is the mix and would you like to see that change?

Mr. Hanna: I think it is split about 50/50. We do a lot of both. We have a full menu of personal services.  We have a strong loan portfolio of what we call “shelf mortgage loans” which are non-conforming mortgages and we also offer a variety of conforming mortgage products through F&M Mortgage.  We also provide a variety of services to many different for-profit and not-for-profit entities. F&M has historically provided significant financial and volunteer support for charitable organizations in our communities and this year we launched a new, comprehensive suite of banking services – which even includes training for their employees and directors – to support these organizations with their financial needs.    

CEOCFO: How big a part is mortgage lending for you and is it in the commercial or consumer side of the business?

Mr. Hanna: We serve both the commercial and consumer sides of mortgage lending. With the small to midsize commercial focus that we have, we do a lot of commercial mortgages, those are all portfolio and we service all our loans in-house. We have the separate division, F&M Mortgage, that is very active in the consumer market with conforming loans which traditionally offer the lowest rates and longest terms.

CEOCFO: What role does wealth management play in your strategy? Is this more for customer relations?

Mr. Hanna: We have a phenomenal investment division with very knowledgeable and high-performing financial advisors. We strive to serve the full spectrum of our clients’ financial needs, so we are happy to leverage the trust that we create with their banking relationship to help them with their short-term and long-term investment needs. Being around since 1908 in our communities, clients trust that we will continue to serve their best interests today and for future generations.  

CEOCFO: What are some of the things you are doing in the area of customer satisfaction and customer retention?

Mr. Hanna: As a community bank we are about $815 million in assets. Client service is everything and if we fail to provide superior client service, we commoditize ourselves. We survey customers during the onboarding process to determine what they thought of our process, the people that they dealt with, and the products that they were offered. We also host community and client focus groups to help us identify opportunities and consumer needs. Throughout the year we do a lot of things to remain engaged with our clients. We host a variety of client appreciation events that include free document shredding days and special events geared towards kids such as free photos with Santa around the holidays. We also partner with local universities. In 2018 we had the largest tailgate in the history of James Madison University football. Once we learned of this, we had to go out this year and beat our own record. It will be tough, but we will try to keep setting the goal higher in 2020. James Madison has had a very successful football team so those client appreciation events have been extremely well attended and are a great way for our clients to network with leaders in our community.

One of the things that we take very seriously is giving back to our communities. We are a very benevolent organization that gives back and supports many causes. Sometimes we work through our clients to support charities that are important to them, which contributes to our service and retention. We have a symbiotic relationship with the Shenandoah Valley. As these communities prosper, the bank tends to flourish. Likewise, if the bank is growing and strong, we re-circulate everything from deposits, to dividends, to shareholder wealth back into the communities. That certainly has a multiplier effect which serves to grow our local economies.

CEOCFO: The world seems to be taken over by the millennial generation and now the generation Xers, who are more into technology. Do you offer the technology and FinTech products that they are looking for?

Mr. Hanna: Yes, and that is a challenge, but we do. The budget to be at the cutting-edge of new technology is overwhelming. We are probably what I would classify as a technology follower. We work with multiple vendors to provide all the bells and whistles, but we try not to make the large R&D bets in developing new technologies. We like to determine what technologies our clients want and invest heavily in those areas.

Getting back to the millennial generation, one of the things that we embrace is social media to promote the bank, to interact with our clients, and to interface with our communities. We are very active there. As you look at millennials – and this does not necessarily relate to technology – but one of the things that we recognize is that millennials tend to look for organizations with strong values that are active in their communities, making their communities better. These are attributes that F&M has embraced for 111 years and have really helped us connect with millennials and generation Xers at the local level.

CEOCFO: Would you tell us about the communities that you serve in Virginia. Are they more rural or urban? What are some of the businesses in the area and the employment availability for residents? Do they depend more on D.C. for employment or local businesses? And do they support their local banks?

Mr. Hanna: We are not far from the D.C. suburbs, but I would not say that our economy is heavily driven by D.C. There are folks that commute to the D.C. area but most of our economy is locally based. Two of the counties we serve, Rockingham County and Augusta County are number 1 and 2, respectively, in Virginia in terms of agricultural production in the state. Agriculture drives a significant amount of ancillary businesses that includes businesses such as veterinary services, feed, storage, processing, equipment sales and service, livestock auctioning, transportation and more.

We have a few small urban cities such as Harrisonburg and Staunton in our footprint that are fairly well diversified in terms of industries represented. Neither are large cities but they are both vibrant and growing. Harrisonburg has been impacted by James Madison University, which has been one of the fastest-growing universities in the state and in the Southeast. The University has grown to almost 25 thousand undergraduates. As it has grown, the amount of new infrastructure on and around the campus has certainly been a large contributor to our local economy. Staunton is also a city with a strong economy, a business-friendly environment, and affordable tax rates. Several well-known companies like Hershey and ComSonics have relocated or expanded there. We are fortunate to have several other Fortune 500 businesses like Molson Coors and WalMart Distribution in our footprint as well. We find that other locally based companies often support local banks like us due to our knowledge of the local markets, the flexibility we can provide and our focus on service and relationships.

CEOCFO: How many branches do you have and are you looking to grow that number in the near future?

Mr. Hanna: We currently have 14 retail bank branches, three F&M Mortgage offices, three VS Title offices and our Dealer Division offices. Timing is everything, so as we sit here today, we look to be opportunistic in our growth. We recently added our fourteenth branch in August of this year. That was the last of five branches added to our footprint through de novo expansion. De novo growth occurs when we open a new banking office with zero assets and try to grow the business from the ground up. We opened five new branches reaching into the southern part of our footprint, primarily in the Augusta County market, between June of 2015 and August of 2019.

We have been aggressive in trying to grow our infrastructure but as of today, we are more in an absorption role as we aim to aggressively leverage those investments and get the returns that we were looking for. Should an opportunity present itself, there are other segments of our community where we would like to expand with either physical retail facilities or through a loan production office. Although we are not actively seeking new investments at this time, we will continue to keep our ear to the ground.

CEOCFO: What is your management style? Are you more hands on or depending on your officers?

Mr. Hanna: I like to be out working with our team and meeting with our clients. I enjoy getting to know both our clients and our associates.  We have a great staff here at the bank and I delegate to the folks who are well equipped to handle different situations. The way banking is today, I don’t honestly believe anyone can be an expert in all the different functional areas we have to oversee. On a daily basis, F&M has to manage existing and emerging technologies, regulatory compliance, loan underwriting, portfolio diversification, liquidity, asset and liability pricing just to name a few. All this needs to be done behind the scenes so that we can focus our client-facing teammates on maintaining dynamic sales and client retention efforts. One person cannot keep up with it all, so I rely heavily on F&M’s Leadership Team as well as our Board of Directors.

CEOCFO: Do you have a Chief Security Officer?

Mr. Hanna: We do! We have an information technology department and an information security officer that is independent from IT who identifies risks and establishes protocol to keep our Bank and client information secure. It takes a lot when you consider all the potential threats coming at us like Ransomware, malware, phishing attacks and so on. In addition to technology, we have to actively manage risks that may be presented to us through our vendors and facilities. Bank security is a huge and growing area.

CEOCFO: What do you look for in your tellers, bankers, lenders and support staff?

Mr. Hanna: We are a relationship business. We have to provide outstanding, unrivaled customer service and a lot of that is cultivating relationships, knowing our clients, serving their needs and being there for them in good times and bad. A lot of what we look for are people who have a passion for serving the needs of their clients as well as their communities. Outside of that there is a growing list of technical skills and knowledge required to run a bank in 2019. It used to be that we could train our associates in the skills it took to run a Bank but more and more we have to recruit specific technical skills.  

CEOCFO: How did your bank manage to survive the TARP period?

Mr. Hanna: We have been a strong and high-performing financial institution for many years. While the opportunity was available, the bank was well capitalized and chose not to take preferred shares through the TARP program. We had a capital base to draw from and continued to run a strong, well-capitalized bank during those difficult years. Like every organization that I know of, we encountered our share of challenges, but overall, F&M came through that period stronger than most.  

CEOCFO: What is your current funding position? Is reaching out to investors an important role for you as CEO?

Mr. Hanna: We are very well-capitalized, so we are not actively trying to attract new capital. That said, we do reach out to current and new investors to create interest in F&M, to communicate our performance, and to create transparency around any challenges or opportunities we face. Over the years, F&M stock has done well. Currently, we are not enamored with our stock performance but we have undertaken some changes to better position our organization for the future. My belief has been if you are transparent with your investors and they understand your challenges and opportunities, hopefully they will remain patient and buy-in to the path forward.

CEOCFO: In closing, what sets F & M Bank apart from other local banks and why are you important to the fabric of the community?

Mr. Hanna: I think this includes a lot of what we have talked about. F&M Bank is the only publicly owned company still headquartered in Harrisonburg and Rockingham County, Virginia. We take that seriously and I think the community embraces that. Our clients and community members understand the long, rich partnership that F&M Bank has had with the Shenandoah Valley and the communities we serve. F&M has maintained a positive reputation since 1908 serving the needs of our clients and the community. We have been an integral contributor to the growth of the Shenandoah Valley and we hope to be involved in the continued development of these communities for another 111 years to come.