Home Financing Options Analysis

1. Current Rate Environment & Loan Limits

As of mid-March 2026, Virginia 30-year fixed mortgage rates range from approximately 5.75% to 6.50% depending on the loan type, credit profile, and points purchased. The Richmond metro (Chesterfield, Henrico, New Kent, and City of Richmond) falls under the FHFA standard baseline—not the high-cost ceiling used in Northern Virginia.

Rates shown are indicative ranges based on multiple lender surveys as of March 10–14, 2026. Individual quotes will vary based on credit score, DTI, points, and lender.

2. Financing Options: FHA 3.5% Down Through 30% Down Jumbo

A. FHA — 3.5% Down Payment

FHA loans are government-insured mortgages designed for borrowers who cannot make large down payments. They accept credit scores as low as 580 for 3.5% down (or 500 with 10% down). However, they carry mandatory mortgage insurance—both an upfront premium (1.75% of the loan, typically financed) and an annual premium (0.50%–0.75% of the loan balance) that persists for the life of the loan when down payment is under 10%.

B. Conventional — 5% Down

Conventional loans backed by Fannie Mae/Freddie Mac allow as little as 3–5% down. Private mortgage insurance (PMI) is required below 20% equity and typically runs 0.3%–1.0% of the loan annually, depending on LTV and credit score. Unlike FHA's MIP, conventional PMI can be cancelled once the loan-to-value ratio reaches 78% through payments or appreciation.

C. Conventional — 10% Down

The pragmatic middle ground. At 10% down on a $750,000 purchase, the loan amount is $675,000—well within the $832,750 conforming limit. PMI is required but at a lower rate than 5% down scenarios, and lender-paid PMI (LPMI) options trade a slightly higher interest rate for the elimination of a separate PMI line item.

D. Conventional — 20% Down

The traditional benchmark. No PMI, lowest available interest rates, strongest offer positioning with sellers. For a $750,000 property, this means $150,000 down and a $600,000 mortgage—firmly within conforming territory with the best available pricing.

E. Conventional — 25–30% Down

Extra equity improves rate pricing marginally and strengthens reserve position. At 25% down on a $900,000 property, the loan amount is $675,000—still conforming. Only at purchase prices above approximately $1.04M with 20% down does the loan amount begin approaching the conforming limit.

F. Jumbo — For Loan Amounts Above $832,750

Jumbo loans are not backed by Fannie Mae or Freddie Mac, so lenders retain the risk. They typically require 10–20% down (some programs allow less), credit scores of 700+, DTI ratios under 43%, and 6–12 months of cash reserves. Jumbo rates have compressed in recent years and are sometimes competitive with conforming rates for strong borrowers, though underwriting is more involved and appraisal requirements are stricter.

3. Side-by-Side Comparison

Based on a $750,000 purchase price—the midpoint of the RAAM Tier 1 target range across Salisbury, Western Henrico, and upper New Kent:

*FHA at $750K would require a loan of ~$723K (including financed UFMIP), exceeding the Richmond MSA FHA limit of ~$673,900. FHA is not available at this price point. FHA works for properties up to approximately $698K in the Richmond metro.

4. Scenario Modeling by RAAM Price Tier

Tier 2: New Kent / Eastern Henrico — $600,000 Purchase

Tier 1: Salisbury / Midlothian — $800,000 Purchase

Upper Range: Western Henrico Premium — $1,000,000 Purchase

5. Total Cost of Financing Over 10 & 30 Years

Assuming a $750,000 purchase, comparing the viable options (FHA excluded at this price). Estimates include principal, interest, PMI/MIP, and upfront fees—but not property taxes, insurance, or HOA.

Estimates assume 6.30% rate for 10% down (with PMI cancellation around year 8), 6.25% for 20% down, and 6.20% for 25% down. Actual rates and PMI cancellation timing will depend on appreciation and payment patterns. These are illustrative calculations, not guaranteed projections.

6. Local Property Tax Context

Property taxes are a significant ongoing cost that varies by county. When comparing monthly housing costs across RAAM-approved areas, tax rates create meaningful differences:

Henrico and New Kent offer slightly lower tax burdens. The City of Richmond's higher rate is one reason urban properties carry a different cost profile—approximately $2,500–$3,000 more per year than comparable suburban locations. These costs are in addition to mortgage P&I and should be factored into total monthly housing budget calculations.

7. Strategic Recommendations by Price Band

8. FHA: When It Makes Sense & When It Doesn't

The Lifetime MIP Problem

For FHA loans with less than 10% down, mortgage insurance premium cannot be removed for the life of the loan. On a $580,000 FHA loan (for a $600K purchase), the annual MIP of 0.55% translates to roughly $266/month in year one. Over 30 years, even as the balance declines, cumulative MIP payments will exceed $65,000. A conventional loan with removable PMI eliminates this cost once 78% LTV is reached—typically within 7–10 years through payments and appreciation combined.

9. Jumbo Loans: Relevance to the Richmond Search

In the Richmond metro, jumbo territory begins when the loan amount exceeds $832,750. Given the RAAM target range of $500K–$1.0M with a general preference for the $650K–$850K band, jumbo financing is relevant only at the margin—specifically for premium Western Henrico or Salisbury properties that approach or exceed $1M.

Jumbo Qualification Requirements

10. Decision Framework