Considering a 2-1 Buydown? Try an ARM Instead


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With the cost of homes up 10% since last year in Shenandoah County, and interest rates continuing to rise, many buyers are exploring options for reducing the compounding impact of high interest rates on already high home prices. Many are considering 2-1 buydown mortgages, where interest is prepaid, temporarily lowering your monthly payments, before returning your official interest rate after two years.

On the surface, during times of higher interest rates, getting a 2-1 Buydown mortgage might make sense—especially if you expect your income to rise in the future, as your interest rate rises. Unfortunately, with a 2-1 buydown, those high interest rates we experience today will be permanent for the remaining life of your loan after just two years. And the Federal Reserve has recently indicated that they may begin to lower the Fed Funds rate in 2024, which often means lower interest rates down the line.

A popular alternative to 2-1 temporary buydowns is the adjustable-rate mortgage (ARM). Like a temporary buydown, you will start with a lower rate for a set duration (the most popular introductory rate length is 5 years), then reset to the market rate down the line, fluctuating each year thereafter. When rates are high but are likely to fall, these mortgage products can be a smart economic choice. But when does it make sense to get an ARM over a 2-1 buydown on a conventional thirty-year loan? In this blog we will break down the differences between 2-1 buydown mortgages and ARMs and discuss advantages and disadvantages, to help you make an informed decision on which mortgage products would be the best choice for you.

Banker hands keys to open hand with agreement signed on desk

What is a 2-1 buydown mortgage?

A 2-1 buydown mortgage is simply a fixed-rate mortgage where part of the interest is prepaid for the first two years, temporarily lowering monthly payments. The seller, builder, or in some cases the buyer pays to have the payment effectively reduced during this time, usually by depositing the prepayment in an escrow account. When funds for the buyback come from the seller or builder, it’s considered a ‘seller assist’.

Even if you take advantage of a 2-1 buydown mortgage, it’s important to note that everything else about the loan remains the same: your down payment amount will not change, you will need to have sufficient income to qualify for the full payment (the one that kicks in at year 3) at the time of application, and other closing costs (which average 1.74% for the buyer in the state of Virginia), will be unaffected by the buydown. And not every mortgage product can be used in conjunction with a 2-1 buydown. While conventional, 30-year fixed rate loans (‘conforming loans’) are prime candidates for a temporary buydown, if you are pursuing a nonconforming home loan product, like a VA or FHA loan, you’ll need to speak to your lender to see if it qualifies. And most lenders will only accept buydowns on fixed-rate loans—in other words, you can’t combine them with an ARM.

So, how exactly does a 2-1 buydown work?

Usually, a builder or seller uses a temporary buydown as an incentive for buyers to purchase a home, paying a lump sum into an escrow account to cover the difference in monthly payments for years one and two. Less often, a buyer with extra cash will utilize a buydown to reduce their monthly payments, though buyers often purchase ‘discount points’ for a permanent buydown (where the actual rate is reduced for the life of the loan), instead.

In the first year the monthly payment is what it would be if your mortgage rate was 2% less than the actual interest rate. In the second year, this prepayment is equal to a 1% rate reduction. In years three through the rest of the mortgage, the payment reverts to what you would pay with your actual interest rate. For example, if you have a mortgage with a 7% interest rate, in the first year your payment would be equal to a payment with a rate of 5% (i.e., 2% reduction). In the second year, it would equal that of a 6% mortgage interest rate (i.e., a 1% reduction). And in year three, your payment would rise and remain at the official 7% rate.


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How does an ARM work?

With an adjustable-rate mortgage your interest is locked in at a low rate initially. Then, after a set term, it will fluctuate each year thereafter, based on market rates. While the numbers in a temporary buydown refer to the reduction of interest points in year one (2 percentage points) and year two (1 percentage point), the first number in an ARM refers to how many years your rate is locked, and the second number refers to how often it can change after that. A 3-1 ARM is locked for 3 years, but after that period it can change once per year based on market rates. Likewise, a 5-1 ARM is locked for 5 years, and a 7-1 ARM is locked for 7. The most common form of ARM is the 5-1 ARM.

When interest rates are low, an ARM might be considered a more risky mortgage product. This is because instead of locking in a low interest rate for the life of the loan, borrowers get an even lower rate for a few years, but then are at risk for large increases in monthly payments, should market rates go up. If rates go up significantly, your mortgage could become unaffordable for you. And if you choose to refinance, you’ll have to refinance at higher rates, even if you choose another ARM.

However, when interest rates are high, ARMs make a lot more sense. Not only do you lock in an initial rate that’s lower than the market rate—potentially saving you a lot of money on interest—future interest rates are less likely to increase too much over your initial rate. After the introductory period is up (or sooner!), you can also consider refinancing your loan if rates come down significantly.

Let’s take a look at a sample 5-1 ARM scenario compared to a 2-1 buydown mortgage to see how much you could save in the first five years.

Our homebuyer is interested in purchasing a house with a budget of $300,000—just shy of the recent median listing home price of $302,500 in Shenandoah County, VA. She is comparing two potential options: a 5-1 ARM at a rate of 5.5%, and a 2-1 buydown mortgage at a 6.5% interest rate. She plans on putting 20% ($60,000) down.

With a 5-1 ARM, her monthly payments would be set at $1,363 for the first five years of her loan. Total payments including interest and principal during this time would equal $81,780. After the initial five-year period, her rate will fluctuate annually based on the current market rate, or she could choose to refinance to a permanent lower rate if available.

With the 2-1 buydown mortgage, in the first year her mortgage payment would be $1,216 each month, rising to $1,363 in year two, and settling into $1,517 in the third year. Her total principal and interest payments for this five-year period would equal $85,560. Keep in mind that the ultimate higher monthly payment will continue through the life of the loan.


Home is under construction

Benefits of a 5-1 ARM over a 2-1 Buydown Mortgage

In addition to saving money on overall loan interest and loan payments, 5-1 ARMs can have other advantages over temporary buydowns. Here are a few ways you can benefit from utilizing a 5-1 (or other) ARM:

  • Reduced monthly payments for a longer term. As we mentioned above, the biggest benefit of a 5-1 ARM is that you will receive a reduced interest rate for a full five years (60 months), before your mortgage sets to the current market rate. With a 2-1 buydown, your rate climbs after the first year, before hitting the full interest rate at year 2.
  • Greater stability in the near term. While ARMs will fluctuate more often after the first five years than a 2-1 buydown, in those first five years of your loan your rate and monthly payment won’t change. As you are recouping the savings you put toward your down payment, closing, and moving costs, not having to worry about rising rates within the first year can be helpful to buyers—especially those who are just starting out.
  • More money for other expenses.  The first few years are when homeowners typically invest the most in their new housing. In fact, according to a survey by the National Association of Home Builders, in the first year alone homeowners spend over $13,000, with an additional $7,000 in year two.
  • Reduced impact of high interest. Especially with today’s record high rates, even a temporary interest reduction can help you offset your first few years of homeownership and replenish those savings you spent on your down payment and closing costs. However, if you have reason to believe interest rates will come down in the future, that can lead to even further savings—particularly if the alternative is locking in a high-interest 30-year mortgage.
  • No pressure to secure seller assist financing. A 2-1 buydown requires securing some sort of seller assist financing from the current owner or builder—and they are often used to attract buyers in slow markets. But in tight, competitive markets, you have a much lower chance of scoring this perk—and they sometimes come at the tradeoff of a higher price for the home itself. With a 5-1 ARM, you are in control. You can get a 5-1 ARM in any housing market, and aren’t reliant on the seller or builder to get your initial reduced interest rate.

Dangers of the 2-1 Buydown Mortgage

While 2-1 buydown mortgages do have a similar benefit in reducing your initial monthly payments, they do come with some potential pitfalls. If you go down the path of a temporary buydown, these are some things to watch out for:

  • Getting too comfortable with lower monthly payments. While you do need to be approved for the actual interest rate and payments with a 2-1 buydown, if you get used to the lower payments in year one—and even in year two—it can be hard to adjust your spending levels when your payments rise in the third year, putting you at risk of overspending or not being able to afford your payments.
  • Refinancing doesn’t pan out. If you get a 2-1 mortgage thinking you will refinance before your higher rate kicks in down the line, keep in mind that refinancing isn’t a guarantee. Rates could be just as high, or not low enough to offset the cost of restarting a new, 30 year loan with a new amortization schedule and all new closing costs. Additionally, refinancing may require another down payment, depending on your lender and the appreciation of your home. All these factors can be a deterrent for borrowers, meaning refinancing isn’t always something you can count on.
  • Still need to pay PMI on top of payment increase. PMI (private mortgage insurance) is required for home loans where the borrower has not paid off 20% of the home’s value. If you don’t put 20% down at closing, this fee (usually up to about 1.5% of your loan) will be part of your monthly payment. Many people getting 2-1 buydowns who don’t put 20% down may hope to hit that mark within the first few years, eliminating their monthly PMI by the time their higher rate and higher payments kick in. But if you don’t, keep in mind your PMI fee will be added on top of your note rate increase. If you are getting a monetary seller assist, it may make more sense to use those funds to increase your down payment instead (more on this below).
  • Rates could come down. This is perhaps the biggest drawback of 2-1 buydown mortgages when you utilize them when interest rates are high. If rates come down, your locked rate could be much higher than the new current market rate, meaning an ARM would have been a better choice.

How do I know if mortgage rates will change?

Mortgage rates are in constant flux, and it’s impossible to predict with complete accuracy what rates will be down the line. However, there are some economic predictors including historical rates that can give us a general idea in some circumstances.

Inflation can have a significant impact on mortgage rates. That’s because when interest is low, people tend to spend more, which can result in higher levels of price inflation on goods as demand exceeds supply. The Federal Reserve’s FOMC (Federal Open Markets Committee) sets monetary policy to maintain low (or acceptable) levels of inflation—typically targeting 2-3%. The Federal Reserve takes measures to counter excessive inflation by raising their borrowing rates for overnight deposits (banks borrow from other banks’ deposited overnight reserves) during periods of high inflation. This in turn influences the rates that banks set for their own lending. Higher interest rates for consumers on home loans, auto loans, and other forms of credit ultimately slows consumer spending, bringing down inflation.

What does this mean for borrowers? Eventually, inflation will slow, prices will stabilize, and the Federal Reserve will once again lower interest rates. If rates are high due in part to inflation (as they are now), you can expect that they will likely come down again in the future. As we mentioned earlier, there seem to be strong indicators that the Federal Reserve will do just that in 2024.

Graph of mortgage rates and inflation from 1974 to 2021

But inflation isn’t the only thing that we can track to help predict future rates. Mortgage rates are affected by two other items: supply-and-demand in your residential housing market and the 10-year Treasury rate.

When fewer people are buying homes in your regional market, rates may decrease (marginally) to encourage new home purchases. That’s not to say there will be drastic interest rate differences across the country—but smaller regional differences are quite common. As Housing Wire shows, interest rates can vary across states by up to .2% on average, with Virginia having rates that tend to fall on the lower end. When local markets cool, expect lower rates to follow.

The 10-year Treasury rate can have an even greater effect on mortgage rates. Treasury notes are just one of many securities investments people can make, and are often chosen because they tend to carry very little risk. Mortgage-backed securities on the other hand, tend to offer higher yields, but carry more risk. As yields for 10-year Treasury notes rise in the face of inflation, investors for mortgage-backed securities will want to earn even more because of the associated risk. And to fulfill the demand for higher yields, interest rates will increase, to provide that additional money. In the near future, Treasury rates are expected to continue to rise. However, once inflation is under control, Treasury yields will likely fall once more, and with them, mortgage rates.

All of these economic factors can be difficult to follow and predict. The best thing to do is speak to a financial professional before making a decision on the right loan product. Although changes in rates are never guaranteed, if you believe interest rates will fall in the coming years, that might incentivize getting an ARM over a fixed-rate mortgage product.

Three Alternative Ways to Use Sellers Assist Money

If you are lucky enough to swing a seller concession, don’t feel limited to a temporary interest buydown—even if that is what the seller or builder initially offers you. There are a number of other options out there that might make greater financial sense in the loan run, including:

  1. Increasing your down payment. Even if you choose an ARM mortgage, you can utilize a seller assist to reduce your out of pocket closing costs. You can transfer the savings on closing costs to a larger down payment to additionally reduce your monthly mortgage payments and maybe even avoid PMI altogether.
  2. Using funds to offset moving costs, furnishings, and minor renovations. If you already have a sufficient down payment, but find your savings depleted after purchasing your home, you may want to use the seller assist to offset the many expenses you’ll encounter moving, furnishing your new house, and making small renovations to make it feel like a home.
  3. Purchasing discount points to permanently lower your interest rate. 2-1 buydowns are temporary reductions in interest rates. However, you can purchase discount points to permanently reduce interest rates—especially when rates are high. The cost of a discount is typically 1% of your loan amount, and lowers your interest rate .25 percentage points.


Older couple smiling at banker

Is an Adjustable Rate Mortgage right for you?

Interested in learning more about ARMs? Reach out to a mortgage professional at F&M Bank today to find out if an adjustable rate mortgage makes sense for you. Our lenders can discuss all the options available to you given your specific situation, provide hypothetical amortization schedules, and help you decide what home loan product is the best choice for you to get you in your new home.

* Results are hypothetical and may not be accurate. This is not a commitment to lend nor a preapproval. Consult a financial professional for full details. Hypothetical payment scenarios do not include taxes and insurance, which will result in a higher payment.


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Financing Modular and Manufactured Homes in VA

Driving through the countryside of Shenandoah Valley, you’ve probably passed many manufactured and modular homes without realizing that these homes were not traditionally-built. With improvements over quality and style over the years, this form of housing has become an increasingly popular alternative to traditional homes. In fact, last year there were more than 1,000 new manufactured homes shipped to the state.


Median home price in Virginia is $350,000


With quick turnaround times for new construction and low costs—merely a fraction of site-built homes—systems-built homes create valuable affordable housing opportunities for first-time home buyers, retirees, and anyone on a budget looking to find a quality home in the face of rising costs. But if you’ve decided that a manufactured residence might be the right choice for you and your family, you may be wondering how to finance your new home. Although it can sometimes be as straightforward as financing a traditional home, that’s now always the case. In this post we’ll discuss what exactly modular and manufactured homes are, why they can make good cost-effective housing choices, and different ways buyers can finance their homes, depending on their needs as well as the nature of their home. Keep reading to learn more!

What are Modular and Manufactured Homes?

Modular homes and manufactured houses are types of prefabricated construction in which homes are built off-site. These are homes that are built on assembly lines in plants or factories and transported to their permanent location. Both types of housing can save you time and money if you are looking for a new home, and fulfill an important need in the housing market. But what’s the difference between the two?

What is a manufactured home?

Previously called mobile homes, these are prefabricated homes that at one point were built on a chassis with wheels, designed to be moved from place to place—in other words, to be ‘mobile’. In 1976, HUD began to require certain safety standards for mobile homes, including a permanent chassis, at which point the term ‘manufactured’ replaced the term ‘mobile.’ Although manufactured homes can be moved, they are now usually kept in one place, and attached to permanent foundations. In fact, moving a manufactured home after installation can make it ineligible for financing (more on this below).

Manufactured homes usually come in three sizes: single-wide (750-1,050 square feet), double-wide (1,067-2,300 square feet), and triple-wide (size varies, based on configuration). While older manufactured homes suffered from high utility bills due to poor airflow and insulation, new homes can have upgraded features that make them feel and function much like a traditional home. As mentioned above, a major benefit of buying a manufactured home is the cost, making them a great option in affordable housing for older adults on a budget, low-income families, and those looking to save money without sacrificing amenities in a tight housing market. In fact,  manufactured housing costs about a third of traditional housing in Virginia, on average: $117,000 vs. over $350,000.


Average cost of a modular or manufactured home is $117,000


Why is manufactured housing such a bargain? The building of these homes has become so efficient that they are able to avoid a lot of the labor and specialized material costs associated with building onsite. As Mark Bowersox (EVP of Industry Relations at the Manufactured Housing Institute) has explained, “In manufactured housing plants, the home moves down a planned path while specialized tradesmen complete each step. There are no delays in searching for suitable subcontractors or tradesman prioritizing other jobs.” Manufactured housing plants can buy materials in large quantities, further saving on costs.

What is a modular home?

Modular homes are a type of manufactured housing that are built—in modules—off site, and then assembled at their final location, on a permanent foundation. In addition to being known as ‘modular homes’, they are called by many other names, including ‘factory-built,’ ‘systems-built,’ and ‘prefab.’

While it might be easy to spot a double-wide or single-wide manufactured home, it’s often hard to tell the difference between a modular home and a traditionally-built house. Unlike other manufactured houses (which have their own building codes specific for manufactured housing), “modular homes are constructed to the same state, local or regional building codes as site-built homes,” as HUD explains.

Modular homes will also save you time and money: they cost 10-20% less than site-built homes and can normally be built from start to finish in less than four months.

What financing options are available for manufactured and modular homes?

If you are interested in purchasing a new manufactured home or modular home, you might assume you can pay for your home with a conventional mortgage. And while this is sometimes the case, financing for manufactured homes can also be a little bit more complicated than that. On the other hand, there are certain financing options available to manufactured homebuyers that are not available to those purchasing traditional homes. Here are some of your options:

Construction Loans for Modular and Manufactured Homes

Construction loans, which are short-term loans that finance the building of new houses, can make a lot of sense for when you are building your modular home. The typical construction loan chosen for modular and manufactured homes is the ‘construction-to-permanent loan,’ which converts to a traditional 30-year mortgage once the manufactured home or modular home is transported to and/or assembled at its permanent location. These loans don’t just cover the cost of purchasing the home—because they are paid out in intervals, as needed, you can use them for covering all the stages of building: buying the land, preparing the site, laying the foundation, running utilities, landscaping, and transporting and assembling the home itself. For more about our construction financing for manufactured homes, visit our Modular Home Loans page.

FHA Loans

FHA (Federal Housing Administration) Loans are great options for low- and moderate-income buyers who are looking to purchase a pre-existing home, as well as for those who will be buying land and purchasing a new systems-built house. As HUD clarifies on its Financing Manufactured Homes site, as long as the manufactured home was built after 1976 and meets certain guidelines, it can qualify for FHA loans up to $69,678 for the home and $23,226 for the lot. The requirements for qualification include meeting Model Manufactured Home Installation (MMHI) standards and local and state guidelines, and having a permanent foundation. FHA Loans are government-backed loans offered through your bank. To find out more, visit our FHA Home Loans page.

VA Loans


Eligible service members, vets, and military spouses can take advantage of 100% financing with flexible rates and terms.


VA Loans, offered by the Department of Veterans Affairs, are also government-backed loans available to eligible service members, veterans, and military spouses. These loans can offer financing up to 100% (no down payment) to be used for purchasing or refinancing a manufactured or modular home, with or without a lot, as well as purchasing a new lot for an existing home, and refinancing an existing home to also purchase a lot for it. There are some specific requirements for manufactured homes to qualify for a VA loan, though. While the home doesn’t necessarily need to be ‘permanently affixed’ (on a permanent foundation), the approval of manufactured homes which are not will be based on local guidelines. And, as with all homes, it still must pass the VA inspection process.

If you are an active or retired service member or spouse, you can save up to $500 at closing with our Loans for Local Heroes Home Loan Program. For more information about how to apply for a VA Loan through F&M Bank, check out our VA Mortgage Loans page.

USDA Rural Development Loans


USDA Loans are available to home buyers in qualifying geographic areas.


Low-income buyers who purchase a manufactured or modular home that meets USDA requirements may qualify for a Rural Development Loan through the U.S. Department of Agriculture (USDA). These homes must have a permanent foundation, be located in an eligible rural area on a site that meets state and local standards and be a new unit that’s at least 400 square feet. Many rural areas of Virginia qualify for USDA loans. Our USDA Rural Development Loans page has more details as well as pros and cons of using these loans to purchase your next home.

Conventional Mortgages

It is entirely possible to purchase a systems-built home using a conventional loan, if it has a permanent foundation and adequate living space, and was manufactured after 1976 (in other words, not a mobile home). Conventional loans typically have stricter lending requirements than government-backed loans, including a minimum credit score of 620-660 in most cases. However, if you and your home qualifies for a conventional loan, they tend to have less paperwork and lower interest rates, making them appealing to many buyers.

Ready to buy your new home?

If you’re looking to finance a manufactured home in Virginia, F&M Bank has you covered. We offer a variety of home loan options from FHA, USDA, and VA loans to conventional mortgages, as well as construction loans to help you streamline the process of purchasing a property and building your new home. Systems-built homes play a huge role in making quality housing affordable and accessible to residents all over Virginia. To learn more about how we can help, or to apply for financing for your new modular or manufactured home, stop by one of our locations throughout the Shenandoah Valley.

Guide to VHDA Mortgages for First-Time Homebuyers

Buying a home in Virginia is an exciting process that you have probably been looking forward to for years. If you are a first-time homebuyer, the process of choosing a mortgage lender, deciding on a mortgage type, and applying for a home loan may seem intimidating.

At F&M Bank and F&M Mortgage, we have been helping Virginians achieve their dreams of homeownership since 1908. It is our goal to make the home buying process as simple as possible so that you can focus on the fun part – moving into your new home.

F&M Mortgage is proud to offer Virginia Housing Development Authority (VHDA) loans to the members of our community. These specialty home loans are designed to decrease some of the financial barriers that keep many Virginians from achieving their dreams. In this article we will outline the different types of VHDA loans, their specific loan requirements, and the mortgage loan application process. Let’s find out if a Virginia Housing loan is right for you!

Relator showing house to couple

What is a VHDA loan?

The Virginia Housing Development Authority (VHDA) is a not for profit, public mortgage finance company. Founded in 1972 to help Virginians afford quality housing, the program operates using no state taxpayer money. The VHDA relies on the private purchase of Virginia Housing Development Authority bonds to fund its loan and grant programs. The VHDA focuses on providing loans to first-time homebuyers and developers who build quality rental housing. Virginia Housing is currently celebrating their 50th anniversary and has helped over 240,000 Virginia families afford homes.

How does a VHDA home loan work?

While VHDA loans are targeted for first-time homebuyers, some loans are appropriate for repeat homebuyers as well. In order to help the most people with the most need, VHDA eligibility includes an upper limit on both the borrower’s income and the home price. VHDA loans are designed for borrowers with low to moderate incomes. Virginia Housing loans are 30-year fixed-rate loans with a low 3 percent down payment requirement. The VHDA also offers grants to help Virginians afford their down payments and closing costs.

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What are the benefits of getting a VHDA home loan?

If buying a home seems financially out of reach, consider a VHDA home loan. F&M Mortgage offers VHDA loans because we support Virginia Housing’s proven track record of helping our community afford homeownership. Some benefits of a VHDA home loan include:

  • Predictable payments with a 30-year fixed interest rate
  • Small down payments
  • Free homebuyer classes
  • Pre-approval availability
  • Low credit score requirement

Who is eligible for a Virginia Housing loan?

VHDA loans are only available for borrowers who intend to use the home as their primary residence. If you are planning to buy a home as an investment property, second home, use the house for a business, or sublet part of the space, you will not qualify for a VHDA loan.

Borrowers cannot have a net worth greater than 50 percent of the intended home purchase price. Your net worth calculation does not include retirement savings, life insurance plans, or the value of your belongings. Any cash that will be used to help fund your down payment will not be calculated into your net worth.

Income limits as well as home price limits for VHDA loans vary by region across the state. A table outlining these limits can be found on the Virginia Housing website. The maximum VHDA loan limit for a home in the Charlottesville area is $375,000. The two-person maximum gross household income for that area is $90,000. Limits vary by county so check with your lender for more specific amounts.

How do I apply for a VHDA loan?

Only VHDA approved lenders can offer Virginia Housing loans to the community. Approved lenders must comply with strict policies and requirements in order to qualify. Staff must be qualified and experienced with VHDA loans, adhere to Virginia’s fair housing policy, and demonstrate a proven track record of performance. F&M Bank is proud to be an approved VHDA lender.

To apply for a VHDA loan, stop by any F&M Bank location or apply online. To apply online:

The VHDA requires all applicants to complete their homebuyer education class before the loan can be approved. The class can be taken online or in a local classroom. This free class is available to anyone that wishes to learn more about the homebuying process and VHDA loans, even if you are not ready to apply for a loan.

Arrows with feet standing behind them

What are the different types of VHDA home loans?

 Virginia Housing Conventional

The Virginia Housing Conventional loan is available to both first-time and repeat homebuyers. Borrowers may use the loan to make a home purchase or fund a limited cash-out refinance. The Virginia Housing Conventional loan is a 30-year fixed-rate loan offering the lowest conventional mortgage insurance rates possible. Eligibility includes a minimum credit score of 640, 3 percent down payment, and maximum 45 percent debt-to-income ratio.

Virginia Housing Conventional – No Mortgage Insurance (NMI)

For borrowers with a higher credit score, the VHDA offers their conventional loan with no mortgage insurance. To qualify for the Virginia Housing Conventional – NMI loan borrowers must have a minimum credit score of 660.

Virginia Housing Plus Second Mortgage

If you need help funding your down payment and closing costs, you may consider a Virginia Housing Plus Second Mortgage loan. This option is technically two separate loans – one to pay for your new house and a second mortgage to cover your down payment. Both mortgages are 30-year fixed-rate loans with no prepayment penalties.

Only available to first-time homebuyers, this loan can cover your entire down payment amount as well as your home. At closing, borrowers must have 1 percent of the home purchase price available as cash. Borrowers with a higher credit score (680 or above) can also finance part of their closing costs in the second mortgage. The maximum second mortgage amount is 3 to 5 percent of the home purchase price.

Women holding Check

Virginia Housing Loan Combo

If you are looking to get the most out of a VHDA loan, ask your F&M Mortgage Lenders if you qualify for a loan combo. The Virginia Housing Loan Combo bundles your VHDA loan with a down payment assistance grant and mortgage credit certificate (MCC) homebuyer tax credit.

Apply Today for a Virginia Housing Mortgage

Ready to get pre-approved for a VHDA loan? F&M Bank is an approved VHDA lender. Call us today for help choosing the right Virginia Housing loan. You can also start our online mortgage application or apply in person at your nearest branch.

F&M Mortgage, a division of F&M Bank, has been helping Virginians become homeowners in the Shenandoah Valley for more than a century. Don’t let the mortgage process overwhelm you. Our Mortgage Advisors pride themselves on offering friendly, personalized service, with the kind of local expertise you only find in people who live and work in your community. With VDHA pre approval you can start shopping for the house of your dreams in northern Virginia.

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Understanding and Navigating a Volatile Housing Market in Virginia

The current economic climate is a challenge for everyone, especially if you’ve been thinking about buying a new home. Housing market volatility in Virginia is nothing unusual and is being reflected in states across the country. But despite the panic that you see in media outlets, there’s good reason to stay calm in the middle of this storm.

Having some understanding of how the market operates and what your options are when it comes to purchasing a house can help to ease uncertainty and fear. Plenty of prospective buyers are out there, navigating the current Virginia housing market conditions to find their dream home. If you’re hoping to do the same in 2022, this guide will help to prepare you for the rocky, but exciting, road ahead.

Stability in the housing market

Real estate is a common way that individuals will invest their money to see their savings grow over time.

When you’re looking for ways to invest your money and see your savings grow, real estate is usually one of your best options. It’s less volatile than the stock market and, according to a survey by Gallup, has been the most favored long-term investment option for Americans over the last eight years.

If you’re planning to buy a home for your family rather than a rental property, you’re likely planning to stay put in one location for a number of years. In that time, the market will naturally shift up and down, but once you’re in your new home, you can ride out the storms until the seas are a little calmer.

With all that in mind, the biggest question that you need to ask is if you feel that you’re financially ready to buy a property. If you feel confident in your “yes”, moving ahead with a home purchase can be one of the most worthwhile investments that you’ll ever make.

Understand your financial security and readiness to buy a home

Assessing your financial stability is an important first step when determining whether or not you are ready to buy a house.

So how do you determine whether you’re ready for this big step? You need to think about a few key areas before making your decision and meeting with a realtor.

If you’re a first time buyer and used to moving around different rental properties, you should seriously think about whether or not you’re prepared to have a long-term home in one location.

Look at the bigger picture of your life as you assess this – are you happy in your current job or the place you’re living and working in? Do you have social commitments nearby that you want to continue with? Putting down roots is a big step so don’t skip over this.

You also need to think about the practicalities of buying a home. Do you have a steady source of income to make your monthly mortgage payments and any maintenance that your home requires? Do you have savings built up for the closing costs and a down payment on a property?

For many first time buyers, the expenses that come with buying a house can come as a surprise. Take a look at our First Time Home Buyers Guide to give you an idea of what to expect.

Share your needs and wants with your realtor

Working with your realtor can help you find a home that is the best fit for your needs.

You’ve made the decision that buying a home is the right move for you and you’re ready to start house-hunting. But is it a good time to buy a house in the Shenandoah Valley? We think so. Your realtor can give you a good picture of the Virginia housing market conditions at the time you’re looking to buy. Make use of their expert knowledge about the local area to find a home that’s right for you.

Be honest and upfront with your realtor about your preferences and any constraints that you have. The market is moving quickly these days, so wasting time on houses that aren’t right for you can quickly see you missing out on the ones that could be your dream home.

A good realtor will find properties within your desired parameters and can give you advice on what’s available for your budget or price range in the area that you’re searching in. No matter the property size or location that you’re searching in, your realtor is there to support and guide you through this process.

Prepare the necessary documentation

Be sure to collect the necessary documents that a mortgage lender will need to access in order to approve your loan.

Before you get too far into your home search, take the time to prepare all of your legal and financial documents for your mortgage pre-approval. Pre-approval can save significant time when you’re trying to get a home loan and allows you to be pre-qualified before you start making offers on properties.


There are certain documents that all lenders need to see to process your loan package. On your first visit to F&M Bank, you should bring:

  • Originals and copies of your photo ID
  • One month of pay stubs and proof of employment
  • Your Federal Income Tax return for the previous two years
  • W2s and 1099s (if applicable) for the previous two years
  • Checking, savings, or other asset account statements for the previous two years


Other documents may be required depending on your individual situation.

Stay flexible in the search process

In a volatile housing market, staying flexible in your search criteria and offer details can be an effective way to win your dream home.

With housing market volatility in Virginia making properties fly off the shelves within weeks, or even days, it’s important to understand that you may need to make some compromises on your list of “wants.” In a seller’s market, inventory is low but demand for houses is high, which can make for stiff competition among competitive buyers.

To be in with a chance of having an offer accepted, you’ll need to make a strong offer that’s within your budget. Other buyers will be planning to do the same, so you need to make your offer as tempting and hard to refuse as possible. Ask your lender and realtor for guidance here.

As difficult as it may be, staying patient is crucial. You may lose out on a number of homes at the start of your search. Unfortunately, that’s common for many homebuyers in 2022. But the right property is out there and has your name written all over it!

Get expert financial support when buying a new home

At F&M Bank, we know that buying a home is one of the biggest decisions that you’ll ever make. That’s why our team of mortgage advisors are here to guide you through the process, whether it’s your first home or your fifth.

A good pre-approval is a great way to find out how much you can take out as a home loan and the best place to start to determine your budget. We strive to make your home buying experience as smooth and easy as possible. Contact us today to get started and to ask any questions that you might have. We’d be glad to help you find your dream home!

Six Keys to More Successful Investing

A successful investor maximizes gain and minimizes loss. Though there can be no guarantee that any investment strategy will be successful, and all investing involves risk, including the possible loss of principal, here are six basic principles that may help you invest more successfully.

Long-term compounding can help your nest egg grow

It’s the “rolling snowball” effect. Put simply, compounding pays you earnings on your reinvested earnings. The longer you leave your money at work for you, the more exciting the numbers get. For example, imagine an investment of $10,000 at an annual rate of return of 8 percent. In 20 years, assuming no withdrawals, your $10,000 investment would grow to $46,610. In 25 years, it would grow to $68,485, a 47 percent gain over the 20-year figure. After 30 years, your account would total $100,627. (Of course, this is a hypothetical example that does not reflect the performance of any specific investment.)

This simple example also assumes that no taxes are paid along the way, so all money stays invested. That would be the case in a tax-deferred individual retirement account or qualified retirement plan. The compounded earnings of deferred tax dollars are the main reason experts recommend fully funding all tax-advantaged retirement accounts and plans available to you.

While you should review your portfolio on a regular basis, the point is that money left alone in an investment offers the potential of a significant return over time. With time on your side, you don’t have to go for investment “home runs” to be successful.


Endure short-term pain for long-term gain

Riding out market volatility sounds simple, doesn’t it? But what if you’ve invested $10,000 in the stock market and the price of the stock drops like a stone one day? On paper, you’ve lost a bundle, offsetting the value of compounding you’re trying to achieve. It’s tough to stand pat.

There’s no denying it — the financial marketplace can be volatile. Still, it’s important to remember two things. First, the longer you stay with a diversified portfolio of investments, the more likely you are to reduce your risk and improve your opportunities for gain. Though past performance doesn’t guarantee future results, the long-term direction of the stock market has historically been up. Take your time horizon into account when establishing your investment game plan. For assets you’ll use soon, you may not have the time to wait out the market and should consider investments designed to protect your principal. Conversely, think long-term for goals that are many years away.

Second, during any given period of market or economic turmoil, some asset categories and some individual investments historically have been less volatile than others. Bond price swings, for example, have generally been less dramatic than stock prices. Though diversification alone cannot guarantee a profit or ensure against the possibility of loss, you can minimize your risk somewhat by diversifying your holdings among various classes of assets, as well as different types of assets within each class.


Spread your wealth through asset allocation

Asset allocation is the process by which you spread your dollars over several categories of investments, usually referred to as asset classes. The three most common asset classes are stocks, bonds, and cash or cash alternatives such as money market funds. You’ll also see the term “asset classes” used to refer to subcategories, such as aggressive growth stocks, long-term growth stocks, international stocks, government bonds (U.S., state, and local), high-quality corporate bonds, low-quality corporate bonds, and tax-free municipal bonds. A basic asset allocation would likely include at least stocks, bonds (or mutual funds of stocks and bonds), and cash or cash alternatives.

There are two main reasons why asset allocation is important. First, the mix of asset classes you own is a large factor — some say the biggest factor by far — in determining your overall investment portfolio performance. In other words, the basic decision about how to divide your money between stocks, bonds, and cash can be more important than your subsequent choice of specific investments.

Second, by dividing your investment dollars among asset classes that do not respond to the same market forces in the same way at the same time, you can help minimize the effects of market volatility while maximizing your chances of return in the long term. Ideally, if your investments in one class are performing poorly, assets in another class may be doing better. Any gains in the latter can help offset the losses in the former and help minimize their overall impact on your portfolio.


Consider your time horizon in your investment choices

In choosing an asset allocation, you’ll need to consider how quickly you might need to convert an investment into cash without loss of principal (your initial investment). Generally speaking, the sooner you’ll need your money, the wiser it is to keep it in investments whose prices remain relatively stable. You want to avoid a situation, for example, where you need to use money quickly that is tied up in an investment whose price is currently down.

Therefore, your investment choices should take into account how soon you’re planning to use your money. If you’ll need the money within the next one to three years, you may want to consider keeping it in a money market fund or other cash alternative whose aim is to protect your initial investment. Your rate of return may be lower than that possible with more volatile investments such as stocks, but you’ll breathe easier knowing that the principal you invested is relatively safe and quickly available, without concern over market conditions on a given day. Conversely, if you have a long time horizon — for example, if you’re investing for a retirement that’s many years away — you may be able to invest a greater percentage of your assets in something that might have more dramatic price changes but that might also have greater potential for long-term growth.

Note: Before investing in a mutual fund, consider its investment objectives, risks, charges, and expenses, all of which are outlined in the prospectus, available from the fund. Consider the information carefully before investing. Remember that an investment in a money market fund is not insured or guaranteed by the Federal Deposit Insurance Corporate or any other government agency. Although the fund seeks to preserve the value of your investment at $1 per share, it is possible to lose money by investing in the fund.


Dollar cost averaging: investing consistently and often

Dollar cost averaging is a method of accumulating shares of an investment by purchasing a fixed dollar amount at regularly scheduled intervals over an extended time. When the price is high, your fixed-dollar investment buys less; when prices are low, the same dollar investment will buy more shares. A regular, fixed-dollar investment should result in a lower average price per share than you would get buying a fixed number of shares at each investment interval. A workplace savings plan, such as a 401(k) plan that deducts the same amount from each paycheck and invests it through the plan, is one of the most well-known examples of dollar cost averaging in action.

Remember that, just as with any investment strategy, dollar cost averaging can’t guarantee you a profit or protect you against a loss if the market is declining. To maximize the potential effects of dollar cost averaging, you should also assess your ability to keep investing even when the market is down.

An alternative to dollar cost averaging would be trying to “time the market,” to predict how the price of the shares will fluctuate in the months ahead so you can make your full investment at the absolute lowest point. However, market timing is generally unprofitable guesswork. The discipline of regular investing is a much more manageable strategy, and it has the added benefit of automating the process.


Buy and hold, don’t buy and forget

Unless you plan to rely on luck, your portfolio’s long-term success will depend on periodically reviewing it. Maybe economic conditions have changed the prospects for a particular investment or an entire asset class. Also, your circumstances change over time, and your asset allocation will need to reflect those changes. For example, as you get closer to retirement, you might decide to increase your allocation to less volatile investments, or those that can provide a steady stream of income.

Another reason for periodic portfolio review: your various investments will likely appreciate at different rates, which will alter your asset allocation without any action on your part. For example, if you initially decided on an 80 percent to 20 percent mix of stock investments to bond investments, you might find that after several years the total value of your portfolio has become divided 88 percent to 12 percent (conversely, if stocks haven’t done well, you might have a 70-30 ratio of stocks to bonds in this hypothetical example). You need to review your portfolio periodically to see if you need to return to your original allocation.

To rebalance your portfolio, you would buy more of the asset class that’s lower than desired, possibly using some of the proceeds of the asset class that is now larger than you intended. Or you could retain your existing allocation but shift future investments into an asset class that you want to build up over time. But if you don’t review your holdings periodically, you won’t know whether a change is needed. Many people choose a specific date each year to do an annual review.


Contact us today for an assessment.


Prepared by Broadridge Investor Communications Solutions, Inc.

Investment and insurance products and services are offered through INFINEX INVESTMENTS, INC. Member FINRA/SIPC. Infinex and the bank are not affiliated. Products and services made available through Infinex are not insured by the FDIC or any other agency of the United States and are not deposits or obligations of nor guaranteed or insured by any bank or bank affiliate. These products are subject to investment risk, including the possible loss of value.




The Virginia Homebuyer’s Guide to New Construction

Are you having trouble finding a home for sale that checks all your boxes? If your timeline and budget are not terribly strict, then opting for new construction can be beneficial in many ways. Building instead of buying is an especially attractive option when the market is hot. Spare yourself the scarce inventory and bidding wars. Read more about new home construction in Virginia to see if it’s right for you!

Why Choose New Construction Over Previously Existing Homes?

Deciding between new construction and a pre-existing home on the market comes down to what best fits your needs. Below are some initial thoughts to get you started:

Before we dive into the nitty-gritty, let’s look at the top benefits of choosing new construction:

  • New construction means the home will be up to the latest home standards of today.
  • Avoid the repairs and other issues that you would run into with an older home.
  • You will be less likely to have maintenance issues soon after moving in.
  • You won’t have to deal with outdated practices, such as the use of lead-based paint in the home.
  • Newly built homes tend to be more energy efficient as well, which can save you money due to newer windows, insulation, HVAC equipment, appliances.
  • The cost may be similar or even less than bidding on an existing home, while getting everything brand new and how you want it.

Cost of Building vs. Buying a Home in VA

For many prospective homeowners, budget and cost are a primary factor in making their decision. Continue reading to learn more about what prices you can expect for new construction vs. existing homes.

To pick up on the last point, let’s look at where the Virginia real estate market stands now with average prices for building vs. buying a home.


Buying a home in Virginia

  • The typical home value in Virginia is $345,592, according to Zillow.
  • Virginia REALTORS® predicts that home prices will continue to rise in 2022 but at a more modest pace.
  • The inventory shortage is expected to continue through 2022 and beyond.


Building a home in Virginia

  • The typical price range to build a house is $117,718-$449,113, according to HomeAdvisor.
  • The price of building a new home is partly based on the cost of materials and labor, which can fluctuate. However, you also have some control over the total cost based on the floor plan and finishes you choose.
  • The Shenandoah Valley offers plenty of open space to build a new home on, so you don’t have to worry as much about inventory shortages.


Building a New Home Step by Step

Wondering what goes into building a new home? Our list below can help you understand each step in the process.

Choose between a manufactured or modular home vs. “stick-built” new construction. F&M Mortgage offers construction loans for both types of new housing. Manufactured housing offers the same choices of floor plan and materials, but the home is built in a factory and assembled on-site. If you choose stick-built, you can expect the process to play out in the following sequence:

  • Interview builders and contractors to find the right one for you. Ask family and friends for recommendations and read online reviews. Contractors in Virginia should be licensed under the Department of Professional and Occupational Regulation (DPOR). The state also publishes some great guides for consumers, such as “What to Look For (and Look OUT For) In a Contractor”.
  • Obtain F&M Mortgage offers short-term construction or build loans that we will help you refinance into a permanent mortgage after the house is finished.
  • Find a land lot to build on. Unless buying into a planned subdivision, you’ll need to purchase a lot for your new home.
  • Prepare the construction site. Now, your builder will get ready to begin construction by getting permits, leveling the ground, installing a temporary foundation, and more.
  • Complete the initial framing and foundations. It’s exciting to watch the shape of your home go up.
  • Install rough plumbing, electrical work, and an HVAC system.
  • Put in drywall and interior fixtures and trim. This is a fun stage as you see the counters, flooring, cabinets, etc.
  • Finish with exterior fixtures, driveway, and flooring. Watch the rest of your home come together exactly as you envisioned.
  • Walkthrough the home with your contractor to make sure everything is finished as you wanted it to be. Once you get the certificate of occupancy, you can move in.


Choose a mortgage lender who is experienced with new construction!

Choosing the right lender for your home construction loan is just as important as finding a builder. A local partner like F&M Bank can help guide you in the right direction. When you apply for a construction loan from F&M Mortgage, you can expect a seamless and user-friendly construction loan process.

Our Approved Builder Modular Construction Loan Program minimizes your construction loan costs and offers low down payment options to qualified borrowers. F&M Mortgage and our parent company F&M Bank will handle both the permanent financing and the construction funding. We will work closely with your builder to help ensure a smooth process.

F&M Mortgage has been offering full-service home mortgages to the Shenandoah Valley and beyond since 1999. Along with parent company F&M Bank, our professional mortgage advisors have loan options and mortgages to meet your residential and commercial lending needs.

Contact F&M Mortgage to make an appointment with an experienced advisor and get started now!

Guide to Navigating a Competitive Housing Market in the Shenandoah Valley

While Virginia’s housing market has cooled a bit recently, market conditions are still strong with relatively low inventory and rising prices. A hot real estate market is known as a “seller’s market,” where homeowners who list their properties have the upper hand in choosing from multiple bids and often get more than they listed the house for. So, how can homebuyers land their dream home in 2021 or get ready to look in 2022? Before you jump in and get burned, make sure you are prepared with our guide for how to buy a house in today’s housing market in the Shenandoah Valley.

Get pre-approved

In a competitive housing market, there are a few important things to keep in mind: Get your pre-approval done as soon as you can. Be ready to act fast, have a good and reliable insurance agent that will be ready to move, know what you are looking for in a home, and be prepared that things can get bumpy during these tumultuous times! Overall, just keep a positive attitude and be proactive! - Tina Lantz, Mortgage Advisor

Many real estate agents will request a pre-approval letter before they show you houses. This is because real estate agents, like everyone else, don’t want to waste their time. Getting pre-approved means you are a serious buyer who has sat down with a lender and had your credit history and income vetted.

The pre-approval process will also help you avoid wasting your own time. When you go to a lender to get pre-approved, they will provide a borrowing range with a certain ceiling. That lets you know what kind of price range you should be looking in, saving you the time and heartache of falling in love with a home you can’t afford.

Finally, sellers don’t want to waste their time on a buyer whose financing isn’t lined up in advance. Especially in a hot market when sellers may receive multiple offers, a pre-approval letter can make your offer more attractive to the seller.

Luckily, the pre-approval process is swift and convenient at F&M Mortgage. Contact one of our Mortgage Advisors to get pre-approved and we will help guide you through the home purchasing process.  We strive to make your experience as smooth and easy as possible.  We want to help bring you HOME.

Let your real estate agent do the legwork

Work with a knowledgeable Real Estate agent, find a local lender that can educate you and guide you through the process, and submit all required documents in a timely manner so you can move into your home as estimated! - Vicky Harrison, Mortgage Advisor

Real estate agents have much more experience matching buyers with the right home than you do with buying a home. Talk to your agent about your wish list, must-haves, and overall goals for your new home. They just may be able to find you a diamond in the rough or a home that’s perfect for you but didn’t catch your eye. Real estate agents may also hear of homes that are about to come to market, giving you a head start on making an offer.

While today’s homebuyers can scroll endlessly through online listings, it’s not always productive. Letting your real estate agent do some or most of the legwork for you will free you up to focus on other aspects of the home buying process, such as collecting documents to submit with your mortgage application.

Required Supporting Documents for Your Mortgage Application

Be fully preapproved by a local lender and keep your loan documents current with your lender to head off any potential issues. Work with a seasoned real estate professional or one represented by a strong team that is well known and respected in your market. - Jon Ischinger, Senior Mortgage Advisor

Applying for a mortgage entails a thorough examination of your financial history and current situation. If you are buying the house with another person who will be on the mortgage loan, they will need to submit the same documentation such as:


    • Copy of your government-issued photo ID
    • Pay stubs from the past month
    • Two years of federal tax returns
    • Checking, savings, and other financial account statements from the past two months
    • And additional documents as needed


As much as possible, collect these documents in advance to speed up the pre-approval and application process and make it as efficient as possible. If you have questions about the application process, our own Tonja Showalter, Jonathan Ischinger, and other lenders in Harrisonburg can help you.

Should you waive the home inspection or not?

While lenders usually require a home appraisal before approving your mortgage loan, the home inspection is discretionary and up to you to schedule and pay for. In a hot and competitive real estate market, you may be tempted to waive the home inspection so the seller will be more likely to choose your offer over others. However, skipping the home inspection could be very expensive and inconvenient later if there are large or chronic issues that you’re unaware of before you buy the home.

That’s why a home inspection is such an important step. It protects you from buying a home with issues you’re not aware of, as well as potentially giving you leverage to negotiate the sales price lower if a large repair comes up during the inspection. For example, what if the heater is about a year away from needing to be replaced or the roof is old and could need replacing any day now? It’s better to do your due diligence rather than face the potentially expensive consequences.

Keep calm and carry on with persistence

In today's housing market, you may not end up securing a home with your first attempt. Persistence is key - stay the course and work with your realtor and lender to find the right opportunity.

In today’s market, every buyer needs to be flexible and open to making compromises. Maybe you can’t get everything you want but you can get most of what you want. Before you make an offer, figure out the strongest number you can present (within your budget).

Find a good real estate agent who is experienced and will take time to answer your questions. Ask friends and family for recommendations. The same thing goes for finding a lender—you want someone who speaks to you respectfully and will answer your phone calls and questions.

Looking for a mortgage advisor who speaks Spanish or Italian in Harrisonburg, VA? Contact our own Gervasio Amato or Veronica Amato, a bilingual mortgage advisor in Harrisonburg.

F&M Mortgage Can Help You Navigate the Housing Market!

Have an updated pre-qualification in hand with a local lender who is not only available from 9:00-5:00 Monday through Friday because if you need help or have a question, you will want to be working with a local lender that you can reach. - Veronica Amato, Senior Mortgage Advisor - Bilingual - English & Spanish

F&M Mortgage has been offering full-service home mortgages to the Shenandoah Valley and beyond since 1999. Along with parent company F&M Bank, our professional mortgage advisors offer personalized and friendly service to help you find the right loan options and mortgages to meet your residential and commercial lending needs. Considering new construction as an alternative to buying your home? Learn more about the pros and cons in our Guide to Construction Loans.

Contact F&M Mortgage to make an appointment with an experienced mortgage advisor and get started now! Looking for a mortgage advisor in Augusta County (Staunton), VA? Contact our own Tina Lantz.

Understanding a HELOC and How To Use It: A Guide For Shenandoah Valley Homeowners

Your home is an investment in many ways, and once you accrue equity in your home, you have it at your disposal for financial uses. If you’ve been wondering why apply for a HELOC, we’ll walk you through what a HELOC is, all the things you can use it for, and how to make the most out of your HELOC. Whether you’ve built home equity from paying down your mortgage and/or the appreciating value of your house within the market, you can benefit from your ownership of the home to finance projects and consolidate debt.

What is a HELOC?

A HELOC shares similarities with products such as credit cards, but it has its own unique benefits that make it an appealing solution for homeowners with lending needs.

A Home Equity Line of Credit (HELOC) is a revolving credit account, similar to a credit card, that provides a credit limit for a certain amount of time (the draw period). You only draw funds from the account when you need to, make payments on what you borrowed, and use the credit line again until the end of the draw period.


While a HELOC is similar to a credit card account, the primary difference between the two is what kind of interest rate you can get. Because HELOCs are secured by your home equity, you can get a much lower rate than you would with a credit card. So, financing home renovations and other large expenses with a HELOC is usually more affordable than using a credit card or personal loan. Depending on how much equity you have in your home, you may also be able to get a higher credit limit with your HELOC than with a credit card or personal loan.


The other attractive benefit of a HELOC is its flexibility. Unlike a Home Equity Loan, you don’t receive a lump sum that you have to use right away. In fact, some people use the HELOC as an emergency account. You can open it now and won’t owe anything until you first draw funds. Then you can use your HELOC as many times as you want to (up to the credit limit) through the draw period.

Using a HELOC for Home Renovation

Home Equity Lines of Credit are often used to finance projects that can improve the value of your home, such as home renovation.

Have you been dreaming of a brand new kitchen? Need to add an addition to your home to create office space or room for a new baby? A Home Equity Line of Credit is a convenient way to finance your home renovation.


  • Lower interest rates
  • Option to make interest-only payments
  • Possible tax deduction for interest paid on HELOC if the funds are used to buy, build or substantially improve your residence. Please consult your tax advisor regarding your particular situation.
  • Potential ROI when you sell your home from renovations financed through your HELOC
  • Variety of uses such as updating your home to meet your needs, improve energy efficiency, and more.
  • Great option for when you’re looking to sell your home but want to increase its value first

Using a HELOC For Debt Consolidation

If you are looking to consolidate debt from multiple sources, a HELOC could be a great option to centralize your payments in one place.

Are you drowning in credit card debt? Do you have so many different monthly debt payments, it’s hard to keep track?

Debt consolidation means taking out a new loan to pay off multiple debt accounts, such as credit card balances, personal loans, student loans, and more. Consolidating your debt with a HELOC could help you save money on interest and reduce the number of monthly bills you need to keep track of. And since HELOCs are so flexible, you may still have some credit left over to use on other things, or you can pay off your HELOC balance before using it again.

Using a HELOC For a Second Home or Investment Property

Whether you’re looking to purchase a vacation home or an investment property, you can use your HELOC to come up with a down payment on your second property and/or to make improvements and repairs to a second property you already own.

Financing Education Expenses

Whether you’re a parent with a child approaching college age, or an adult homeowner looking to return to school, a HELOC can also be used to pay for tuition and associated expenses with higher education, as well as private schools. Pay as you go and make interest-only payments if you need to keep your costs down while in school.

Paying Off Medical Debt

Whether you just got hit with a high medical bill, or you know an expensive surgery or treatment is coming up, you can use your HELOC as an emergency fund or to pay off medical debt. As mentioned earlier, HELOCs offer lower rates than credit cards, so it could be a more affordable way to pay your medical bills or any other large, unexpected expense that comes up. Preserve retirement savings and use your HELOC instead.

Tips For Getting The Most Out of Your HELOC

Review the tips below to further understand the best ways you can use and manage a home equity line of credit.

While there are many advantages to having a HELOC, you can get the most of your new Home Equity Line of Credit by following these tips:

  • Make on-time payments to avoid a late fee.
  • Pay more than just the interest due if possible.
  • Know when your HELOC draw period ends.
  • Review the terms of your HELOC and be mindful of fees.
  • Understand the closing costs associated with your HELOC.
  • Best used for smaller projects and expenses.
  • Try to use your HELOC, pay off what you borrow, and then use it again instead of maxing out your credit limit.

Apply for a HELOC From F&M Bank!

Looking for a HELOC lender in the Shenandoah valley? F&M Mortgage is a true local mortgage company that has served the community since 1999. Contact us to learn more or start the process of applying for a Home Equity Line of Credit. You can also apply online whenever you like, or visit your local branch office in Staunton, Harrisonburg, Winchester, or one of our locations in Augusta, Page, Rockingham, Frederick, or Shenandoah county to speak with a loan officer about your options.

Guide to Home Renovation Loans in the Shenandoah Valley

Do you have a home renovation project on your to-do list?

Whether you are preparing your home for sale or looking to improve your existing space, renovation financing can help you modernize your kitchen, update your bathroom, add an extra bedroom, and more. Renovation loans can also be obtained when you purchase a home that needs fixing up.

Here in the Shenandoah Valley, local real estate markets are heating up. You may have more equity in your home than you realize. Whether you’re still in the dreaming phase or ready to hire a contractor, let’s explore what renovation loans are and the different types of financing you can obtain.

What are renovation loans?

A renovation loan is a great option if you don't want to move, but do want more space in your home.

There isn’t one type of home renovation or home improvement loan. We’ll explore the different options for renovation loans below; for now, all you need to know is that a home renovation loan is any type of financing used to renovate or improve your loan.

Why use a renovation loan?

There are many reasons to finance home renovations. Here are a few examples:

  • Take out a home renovation loan when you buy your house to make a fixer-upper livable.
  • It can be cheaper to finance an addition and other improvements to your existing home instead of covering the costs of selling it and buying a new one.
  • You may be able to sell your home quicker and for a higher price if you do a complete renovation first.

What can renovation loans be used for?

Renovation projects such as roof repairs, new siding, and updated windows will save you money in the long run and make your home a safer place.

There is almost no limit to what your home renovation financing can be used for. From cosmetic improvements to essential repairs, here are some ideas:

  • Roof repairs
  • New siding
  • Updated windows
  • New flooring
  • Installing/updating heating and cooling systems
  • Solar panels and other energy improvements
  • Mold remediation/waterproofing
  • New kitchen or bathroom that would add value to the house
  • Addition to add square footage/another bedroom
  • Get rid of termites and other unwanted pests

Home Renovation Costs in the Shenandoah Valley

Overall, the cost of a general home renovation project in Staunton, VA ranges from a minimum of $8,249 to a max cost of $65,998 with an average of $37,123.

In Harrisonburg, the range is $8,850 to $70,807 and the average is $39,828.

The average cost of a general home renovation project in Staunton, VA averages $37,123.

Let’s look at average costs for specific types of renovation projects:

Kitchen Remodel

  • The average cost in Staunton is $20,686.
  • The average cost in Harrisonburg is $21,283.


  • The average cost in Harrisonburg is $9,208.
  • The average cost in Staunton is $8,242.

Pool Installation

The average cost of inground pool installation is $8,192 in Harrisonburg and $7,242 in Staunton.

The Pros and Cons of Using Renovation Loans

As with any financing decision, there are both benefits and risks to taking on a renovation loan. Our experienced mortgage team can help you weigh the pros and cons of your own situation so you can find the best solution for your home renovation needs.

Weigh the pros and cons of your own situation so you can find the solution for your home renovation needs.


  • Structured payments
  • Begin your project right away
  • Home equity loans usually have fixed rates, meaning your monthly payment is likely to stay the same each month.
  • You can move any unused money from your loan to an interest-bearing account to earn interest.
  • Interest rates for HELOC are low–and usually lower than personal loans or credit cards.
  • The flexibility of choosing what renovation projects to use the loan for


  • If the market value of your home declines, you may end up owing more on your mortgage and home renovation loan than your house could theoretically sell for. However, this is less of a risk if you plan to stay in your home long-term.
  • A home equity loan is a secured loan against your house so if you stop making payments the bank can take possession of your house.
  • The process of applying for a home renovation loan can be as involved and lengthy as applying for a mortgage, depending on the type of financing you choose.

Renovation Loan Options

When it comes to renovation financing, homeowners have many options to choose from. For homeowners in the Shenandoah Valley, F&M Mortgage offers renovation loans with as little as 5% down payment. Are all loan options created equal? Here’s what you need to know:

  • Home Equity Lines of Credit (HELOC): For homeowners who have ongoing renovation projects. A HELOC is a revolving account that can be used, paid back, and used again. Must have enough equity in your home (the difference between its current market value and any mortgage balances you have).
  • Home Equity Loan: A term loan, usually with a fixed rate and predictable monthly payments. Best for homeowners who need to finance just one (bigger) renovation project and want to pay off what they owe over a long period of time. Must have enough equity in your home.
  • Personal Loans: A decent option for homeowners without enough equity to qualify a secured renovation loan. However, an unsecured personal loan will usually have a higher rate. Best for smaller, less expensive projects.
  • Credit Cards: We don’t recommend using credit cards to fund home renovation projects and purchases unless you can re-pay the amount owed within the same billing cycle.
  • Cash-Out Refinance: Replace your existing mortgage with a new loan and get up to 80% of your home’s market value back in cash. Recommended for home improvement projects that add value to your house, but can be used for anything, including non-renovation expenses like college tuition.
  • FHA Title-1 Loan: Specifically for home improvement, this type of financing allows borrowers to fund repairs and renovations. No home equity required when borrowing less than $7500. Borrow up to $25k for single family homes and $60k for multi-family homes.

New Purchase Renovation/Improvement Loans

A FHA 203k Rehab Loan requires only a 3.5% down payment and a 640 credit score for first-time buyers.

  • FHA 203k Rehab Loan: Requires only a 3.5% down payment and you can receive up to $35k for repairs and renovations. Minimum 640 credit score and available for first-time buyers or refinancing.
  • Fannie Mae HomeStyle Renovation Loan: A combination purchase and renovation loan that provides up to $25k for renovations and improvements.
  • Freddie Mac Renovation Mortgage: Provides permanent financing to replace Interim Construction Financing. Can be used for land purchases, site-built homes, and renovations/repairs to existing homes.
  • VA Renovation Loan: No down payment and no private mortgage insurance.

Virginia Laws and Regulations

Check with your local municipality regarding permitting requirements. Here are two statewide rules to keep in mind as well:

  • Must obtain a permit before starting most large home renovations, and the house must be inspected before obtaining a permit.
  • Must provide the state with building plans, contractor licenses, and other applicable documentation.

Apply for a home equity loan or HELOC today!

Visit a branch near you or Contact Us to get started on your Home Equity Line of Credit with Free Debit Card Today.

Current F&M Bank Customers – Send us a message in Online Banking or Mobile Banking to get started!


2021 Guide to Owning a Modular Home in the Shenandoah Valley

If you’re reading this, you’re probably interested in modular homes. Maybe you already know you want to build one or you’re still in the information-gathering stage. Wherever you are in the process, we cover it all in this exhaustive guide. From the benefits of owning a modular home, to what the process looks like, how to obtain financing, and more–F&M Mortgage’s friendly team of knowledgeable advisors is here to help. Our company has a division dedicated to modular construction financing and we have extensive local experience helping Shenandoah Valley residents build modular homes.

In this article, you will also find answers to frequently asked questions from local advisors and builders. If you have additional questions as you read, give us a call!

Modular Home Benefits

Modular Homes offer endless new home designs and most factories will allow you to use your customized plans, which is why modular is a popular way to build a home.

According to the Washington Post, modular homes have many admirers, including top architects and celebrities like Robert Redford. Among everyday home buyers, time is one of the most attractive benefits of going modular. Because the modules are constructed in a factory, the entire process is shorter than traditional construction. Additionally, modular home factories aren’t subject to weather and labor-related delays. Here are some more modular home benefits:

  • Factory Construction: Modular is just another way to build your home! Individual modules are built in a factory and assembled on site. This could save time and money. It also means the interior of your home is not exposed to the elements, reducing the risks of mold and mildew. Site-built homes are built almost entirely outside on your lot or piece of land.
  • Permanent Foundation: Similar to site-built homes you can build your modular home on a basement or crawl space.
  • Endless Design Possibilities: Choose from your builder’s catalog of home plans, add modifications to suit your needs, or ask about your customized home plans.
  • Appearance:Your modular home doesn’t have to have a “generic,” rectangular or box look. Instead, you can choose from traditional architecture styles and models like Cape Cod, Ranch, Two-Story, Colonial, Victorian, and more.
  • Quality: Modular construction is subject to its own rules and building codes, which may often be stricter than site-built construction. You can expect the highest quality and safety standards. Your modular home will also be inspected during the construction and after assembly to ensure compliance with local codes and ordinances. It will then be inspected by a state building inspector.
  • Energy Efficient: Many articles about modular homes tout the environmentally friendly construction process, which results in less waste than site-built construction. That may not be your top priority, but you’ll appreciate the cost savings on utility bills that modular homes often deliver. Because they are built so solidly, they can be more energy efficient than older homes as well as new site-built construction.
  • Cost: Because the factory-built process is more streamlined, with labor and materials already supplied, you can usually avoid the surprise expenses that often accumulate with site-built construction.
  • Real Estate Value: Modular and site-built homes are indistinguishable in appearance and both hold their appraisal value. Of course, fluctuations in your local real estate market can drive values up or down, but the modular nature of your home won’t be a factor.
  • Financing: Obtaining a loan for your modular home is usually as easy as a site-built home or purchase of an existing home. What’s different about modular and what construction lenders like is the limited risk of the build. Since most of the work is done in the factory and inspected, less can happen during the construction period and build of the home. It is important that a lender has a history of providing construction loans since there are a few more moving pieces than a home already built on a lot or in a development. The difference in new construction and what some say end loan or purchase loan, is that you may buy the land, design and build your home using a construction loan before it is really financed into a traditional mortgage loan. F&M Mortgage makes it easy with our unique modular programs. Find the perfect spot, land or piece of property, pick your design or home style and start your construction loan today. We work with your builder to make the entire process as smooth as possible.


An 1,800 square-foot modular home costs $240,000 on average

Of course, one of the biggest questions you’ll have when considering a modular home is how much it costs. According to HomeAdvisor, the national average is $240,000 for modular construction, with an overall range of $180,000-$360,000. You can enter your zip code and project details to get a more specific estimate. Harrisonburg-based Valley Homes offers free quotes when you know the style of your home, type of foundation, interest in adding a covered porch or deck, and garage. Here’s a complete list of factors that could contribute to the total cost of your modular home.

  • Land: As with new construction, you need to own the land or maybe you have land from family where your modular home will be assembled. If you don’t already have a lot or piece of land, you’ll need to buy one. According to a Zillow search of land for sale in the Harrisonburg area, most lots are priced between $100,000-$200,000.
  • Site Improvements and Permits: Your builder and his contractors build a contract of costs associated with the development of the land for the home. Not only are they licensed to do so they are up to date on building requirements locally.
  • Home Plan: The size of your home and the number of upgrades to the interior and exterior will factor into the total cost.


Modular Home Construction Process

Our guide to Building a Home in the Shenandoah Valley contains information that is also relevant to the modular construction and building process. For example, the section on finding a plot of land is the same, as well as some of the interior work (such as drywall) that happens after your modular home is assembled on site.

Overall, it takes about three-four months from contract signing to move-in readiness. Watch the entire process unfold, from floor plan to finished home, in this video from Valley Custom Homes. Use our checklist below to plan for each step on your calendar:

  • Talk to and get approved by a construction loan officer.
  • Find and hire your builder.
  • Find a piece of land.
  • Select a home plan and customize the details.
  • Sign a contract with your builder.
  • Construction Loan Closes and site improvements begin.
  • Home is constructed in a factory.
  • Portions of the loan, called draws, are disbursed to pay for work completed.
  • Carriers with several modules will be delivered and set on your land, where they are assembled.
  • Interior work commences: drywall, electricity, plumbing, and flooring.
  • Exterior finishes are finished or some are construction at site.
  • Any extras such as a garage or porch are constructed.
  • Final Draw is released to builder.
  • Your home is inspected and you are granted a certificate of occupancy.
  • Final Draw is released to the builder.
  • Time to move in!

Questions for an Advisor

Insights from Yana Billet, Director of Sales, Systems Built Division

What is the difference between construction loans and other home loans?
It’s an entirely different process and risk involved. Construction loans allow you to borrow money before the home is built and funding (draws) is disbursed on completed work to a builder during the construction process. Construction loans allow you to build and make the home yours, and it guarantees new with one owner. Other home loans allow you to borrow money to purchase existing homes.

Does my lot need to be paid off to apply for a construction loan?

A lot loan can be paid off as part of the construction loan. It is actually better to purchase the land at the same time you start your construction loan so you only carry one loan at one time and only have one construction closing. That said, if you do own the lot, construction loans should pay off the lot loan or remainder of what is borrowed at construction closing, to only have one loan.

When in the process is a down payment required for a construction loan?

Most lenders would prefer to have some “skin in the game”, so they will require down payment when the loan closes. If it is a construction to permanent loan, down payment is required at close of the construction loan and before construction begins.

At what point should I consider a construction loan during my home search?

At any point if you have or can find land.

How has the pandemic impacted construction lending?

Prices have increased and materials are more difficult to get. For other home loans, prices are up as well. It is a seller’s market.


Questions for a Builder

Insights from Jesse Rutherford, Protech Home Builder, Custom Modular Homes

What should I consider when deciding to hire a builder?

When a client is asking for specific options or features in the purchase of their new home, it is critical to have a contractor that documents changes and itemizes each particular activity required for the completion of the home. Of course, communication is key! Ask your builder if they utilize an online system to upload documents and facilitate communication. Many builders are adding all comments, documents, contracts, change orders, and the project timeline to an online portal for the client! As we move forward into the 2020s, builders having these available to their client are going to be critical.

What are my responsibilities during the construction process?

Make sure you give your builder as many documents (soil reports), plats, easements (electric, county water, utilities) and requirements (covenants) related to your land as possible. It’s important that we have all the info related to your property so that we can make sure we aren’t missing any details that may come up while building your home!

Do you recommend purchasing a house plan online or working directly with an architect?

I recommend doing what you feel most comfortable with! Most home sales are done directly online. However, with an architect, we can get some specific details down that may be overlooked when selling off of an online version.

Do all decisions need to be finalized before construction begins?

They certainly do not, but you should have 90% of what needs to be done figured out before the construction process begins. If you make too many changes during construction, it could result in a lot of out-of-pocket money for change orders!

On average, how long does the construction process take?

We try to start the foundation 30 days before the home is complete from the factory. After that, there aren’t too many complex items, and it typically takes around 90 days to finish. Of course, this is always contingent on weather, labor, and supply availability as well as building official requirements.

How has the pandemic impacted the construction process?

It has never been a better time to buy a home than today! Interest rates are at all-time lows, and it is hard to get much closer to 0%. The main impacts are time frames of supply. We often find ourselves making sure that certain materials are purchased well in advance because of the backlog, but homes across the commonwealth are going up every day!


Insights from Paul Sofia, Masterpiece Homes of the Carolinas

What should I consider when deciding to hire a builder?

Find out what is included in their pricing and ask about their experience. Address your concerns.

What are my responsibilities during the construction process?  

Responsibility lies with the builder during the construction process. The buyer just needs to be patient because it is a process. Delays do happen, especially with weather.

Do you recommend purchasing a house plan online or working directly with an architect? 

An architect is extremely expensive.  There are thousands of plans online that a manufacturer can duplicate through their engineering department.

Do all decisions need to be finalized before construction begins?

Absolutely, especially when dealing with the agreed price! Changes can be made after the fact if both parties sign an addendum.

On average, how long does the construction process take?

Currently, depending on the manufacturer, 8-12 months.

How has the pandemic impacted the construction process?

Costs have increased as well as turn times.


Insights from Walter Cleaton, Home Solutions

What should I consider when deciding to hire a builder?

You should always consider the amount of time a builder has been in construction. Is he licensed and insured to do the work needed? What can your local building official tell you about the builder? A reputable and licensed builder may not always be the cheapest, but should always provide the best work, craftsmanship and experience.

What are my responsibilities during the construction process?

You should take the time to review the home, the options, and all added amenities in person with your builder. Meet with your builder on site, to determine spacing and position of the home. As the buyer, be understanding of weather and unforeseen circumstances, that a builder cannot control. When asked, be prompt in your opinions, documentation, and decision making. Timely communication is the buyer’s greatest responsibility.

Do you recommend purchasing a house plan online or working directly with an architect?

Most plans online will be changed and altered at some point by the buyer. Not all plans online will or can be built to satisfy all codes in every state. If possible, you are usually better served by sitting down with a builder or architect to design your home. Everything done in person is usually better. Nothing beats eye to eye comparison.

Do all decisions need to be finalized before construction begins?

Any decision that can be made prior to construction, and especially a contract, is always better for all parties. Change orders can be discussed and made after construction begins, but if known in the beginning, it will usually save everyone time and money.

On average, how long does the construction process take?

All projects will vary in the time it takes to complete, depending on the size and details of the proposed construction. Weather and the availability of materials can and will play a huge role in the time it takes to complete a project. Basements vs foundations, single story vs two story, etc. Will always be a factor in the time to complete. There is no set time on any project to complete. A builder can only give an approximate timeline, or a worst-case scenario. There is not magical date or timeline that every home should be built or ready by.

How has the pandemic impacted the construction process?

The pandemic has greatly impacted the construction process. Shortages of materials and components, due to depleted work forces, has put the construction industry behind greatly. Companies losing workers due to quarantine has hit the labor force hard. Most construction materials and components have been impacted in some way. The original stockpile of these items have been depleted, and catching up or staying up with demand, with a depleted work force, has caused strain on the construction industry.

Additional Helpful Resources

Ready to start the process of finding a builder and designing your modular home? Here are some local resources.

  • F&M Mortgage: professional construction lending experts.
  • Protech Home Builder: A custom Modular Home Virginia builder that specializes in highly energy-efficient home at a great value at an affordable price.
  • Masterpiece Homes of the Carolinas: Provides both site-built homes and modular homes in Charlotte, NC.
  • Home Solutions: Turn-Key, custom-built, high quality, time-saving housing
  • Shenandoah Valley Builder’s Association: Find reputable local home builders and other home improvement professionals in your community.
  • Valley Custom Homes: Harrisonburg-based builder specializing in modular homes.
  • Clayton Homes of Harrisonburg: Another local option for modular home construction.
  • Pats Manor Homes of Harrisonburg: Another local option for modular home construction.
  • ModCoachBlog: a great national resource with articles, updates and who’s who in the modular world of building.

Financing Options

F&M is your local partner in modular home financing. From purchasing a land lot to construction, and an eventual traditional mortgage, we can help you enjoy a smooth financing process from start to finish. Our Approved Builder Modular Construction Loan Program reduces your construction loan costs and qualified borrowers can take advantage of low down payment options. F&M is proud to be an approved lender for federally guaranteed loans such as FHAVAUSDA, and VHDA. You may be able to use these home loans to finance part or all of your modular home costs. We also offer bridge loans for people who need to finance a new home purchase while waiting for their existing house to sell. Apply online or contact our lending team with any questions you have about modular home financing.

Shenandoah Valley's Modular Home Lender