First-Time Home Buyers In Vermont (VT): Programs And Grants

Vermont is known for its forested natural beauty, tight-knit communities and vibrant cultural scene, making it an attractive place for many to call home. If you’re a first-time buyer in the Green Mountain State, plenty of programs and grants can make homeownership achievable.

Defining A First-Time Home Buyer In Vermont

The U.S. Department of Housing and Urban Development (HUD) has a fairly broad definition of “first-time home buyer.” This definition applies to home buyers in all 50 states, and Vermont is no exception. A Vermont first-time home buyer can be:

• An individual and their spouse who haven’t owned a principal residence in a 3-year period before their purchase.
• A single parent who’s only owned with a former spouse while married.
• A displaced homemaker who’s only owned with a former spouse.
• An individual who lives in a nonpermanent home.
• An individual who has only owned property that’s not in compliance with state, local or model building codes and that can’t be brought to code for less than the cost of constructing a permanent structure.

The home buying process will likely be the same whether you’re an experienced or first-time home buyer. First-time buyers, however, may have greater access to certain home loan and assistance programs.

Buying A House In Vermont

Vermont is a mix of rural areas, small towns and cities. If you prefer city amenities, Burlington and Barre are among the best places to live in Vermont. If the city isn’t for you, consider the upper-class rural town of Charlotte outside of Burlington. Or, move to Stowe – considered by some to be the ski capital of the East Coast.

Weather, cost of living and job opportunities are also important to consider if you’re thinking of moving to Vermont. Working with a real estate agent who knows the area well can help you find the best new home for you and your situation.

First-Time Home Buyer Loan Programs In Vermont

First-time home buyer programs and grants open the door to homeownership for many Vermont residents each year.

Among the popular loan programs are the ones discussed in detail next.

VHFA MOVE Program

The VHFA MOVE program is offered by the Vermont Housing Finance Agency (VHFA) through participating lenders. The MOVE program provides qualifying buyers with a 30-year fixed-rate mortgage at a competitive interest rate. The minimum down payment is 0% – 5%, depending on the lender, but down payment and closing cost assistance is available. Up to $825 savings on Vermont Property Transfer Tax at closing is also up for grabs.

To qualify for this program, buyers must:

• Have a minimum credit score of 640, although some lenders may require a higher minimum score.
• Have no ownership within the past 36 months if purchasing in Addison, Bennington, Chittenden, Grand Isle or Windsor County.
• Be within the VHFA income and purchase price limit.

VHFA MOVE MCC

The VHGA MOVE MCC also offers a 30-year fixed-rate mortgage loan with a minimum down payment of 0% – 5%, depending on the lender. Down payment and closing cost assistance is available. This program offers up to $825 in savings on Vermont Property Transfer Tax at closing, along with an annual federal tax credit of up to $2,000.

To qualify for this program, buyers must:

• Have a minimum credit score of 640, although some lenders may require a higher minimum credit score
• Have no ownership within the past 36 months if purchasing in Addison, Bennington, Chittenden, Grand Isle or Windsor County
• Be within the VHFA income and purchase price limit

VHFA ADVANTAGE

Buyers who don’t meet income limits for the VHFA’s other home buyer assistance programs may qualify for the VHFA ADVANTAGE loan. Qualifying buyers can get a 30-year fixed-rate mortgage loan with a minimum down payment of 0% – 5%, depending on the lender. Down payment and closing cost assistance is available, and buyers can get up to $825 in savings on Vermont Property Transfer Tax at closing.

Eligibility requirements for this program mandate that buyers must:

• Have a minimum credit score of 640, although some lenders may require a higher minimum score.
• Be within the income limit, which is $130,000 and $160,000, depending on your household size.
• Not surpass the purchase price limit of $475,000.

Champlain Housing Trust (CHT)

The Champlain Housing Trust is a Burlington, Vermont-based nonprofit community land trust dedicated to creating and preserving affordable housing in northwestern Vermont. It achieves this through various programs. One program, managed in collaboration with the Community & Economic Development Office, helps low- and moderate-income home buyers purchase multiunit properties in Burlington.

To qualify for the multi-unit housing program, borrowers must:

• Purchase a property in an eligible neighborhood (Old North End, Lakeside or King Street).
• Purchase a property that has 2 – 4 units.
• Use the property as a primary residence.
• Secure primary financing from the lender.
• Have a household income that’s no more than 80% of the median income for the city of Burlington.

Vermont First-Time Home Buyer Assistance And Grants

First-time home buyers in Vermont can access down payment assistance programs and grants through various organizations. Most of these homeownership programs – some of which are highlighted below – are targeted at low- and moderate-income Vermonters.

VHFA ASSIST Down Payment And Closing Cost Assistance

The VHFA down payment and closing cost assistance program, also known as ASSIST, has helped over 1,500 first-time home buyers in Vermont since 2015. This program provides closing cost and down payment assistance (DPA) in the amount of $10,000 – $15,000 to qualifying VHFA first mortgage applicants. This assistance comes in the form of a nonamortizing, 0% interest second mortgage. The DPA loan is repaid when the first mortgage is refinanced or the home is sold.

To qualify for this program, buyers must:

• Be true first-time home buyers.
• Have less than $30,000 in combined assets.
• Already be part of a VHFA Move, Move MCC or Advantage Mortgage Program.
• Not be taking out a VA (Department of Veterans Affairs) loan.

Mortgage Credit Certificate (MCC)

The mortgage credit certificate (MCC) is a dollar-for-dollar federal tax credit that eligible homeowners can claim on a portion of the mortgage interest they pay per year, up to $2,000. Any remaining mortgage interest can be calculated as an itemized deduction. This program was designed to help lower‐income first-time buyers afford homeownership.

The amount of the credit varies depending on the state and the mortgage amount, but it can be up to 50% of the interest paid on the mortgage in Vermont. The MCC is also available with MOVE MCC or a non-VHFA mortgage offered by a VHFA participating lender.

To qualify for this program, buyers must:

• Be a first-time home buyer in Vermont, unless you’re a buyer or buyer’s spouse who meets the VHFA requirement for veterans.
• Not exceed income limits, which is $100,000 – $140,000, depending on your household’s size and the county you live in.
• Not exceed purchase price limits, which range from $400,000 to $450,000.

Loan Options For First-Time Home Buyers In Vermont

First-time home buyers in Vermont have access to a variety of loan programs. While conventional loans are the most common, a loan program backed by the federal government may be a better fit.

Conventional Loan

A conventional loan is a mortgage not backed by the federal government. Conventional loans can also be conforming, which means they meet Fannie Mae and Freddie Mac’s criteria for funding. When you apply for a conventional mortgage through a private lender, you must meet certain requirements to qualify for the loan.

Here are the requirements for a conventional mortgage loan:

• You’ll need a minimum credit score of 620.
• You must provide proof of a stable income.
• You must make a down payment of at least 3% of the purchase price of the home, but you can expect to pay private mortgage insurance (PMI) if you make a down payment of less than 20%.
• You need a back-end debt-to-income ratio (DTI) of 50% or less.
• If you plan to get a conforming mortgage, your loan must meet the conforming loan limit set by the Federal Housing Finance Agency (FHFA). Limits for single-family homes range from $766,550 – $1,149,825, as your limit will depend on whether you live in a low or high cost-of-living area.

FHA Loan

An FHA loan is a mortgage offered by private lenders but backed by the Federal Housing Administration (FHA), which is part of the U.S. Department of Housing and Urban Development (HUD). Because these loans are insured by the federal government, lenders can be more lenient with borrowing requirements. FHA loans are often ideal for first-time home buyers and those with a low to moderate income.

• Here are the requirements for an FHA loan:
• You’ll need a minimum credit score of 500 with a down payment of at least 10%. Or, you’ll need a minimum credit score of 580 with a 3.5% down payment.
• You must provide proof of a stable income.
• Your mortgage payments must not exceed 38% of your monthly income, and your total debt payments must be no more than 57%.
• You must pay an upfront mortgage insurance premium (MIP) worth 1.75% of the loan amount. You also must pay an annual MIP (on a monthly basis) that varies based on certain conditions of the loan.
• You must meet the FHA loan limit of $498,257 (in most of the U.S.) or $1,149,825 (in high-cost areas) for a one-unit property.
• You’ll need an FHA appraisal to ensure the property meets HUD guidelines and safety requirements.

USDA Loan

A USDA loan, officially known as the USDA Rural Development Guaranteed Housing Loan Program, is a mortgage backed by the U.S. Department of Agriculture (USDA). This type of home loan is only available to low- to moderate-income rural and suburban buyers who meet certain requirements. Eligible buyers can get a low-interest, zero down payment loan through USDA-approved lenders.

Here are the requirements for a USDA home loan:

• Most lenders require a minimum credit score of 640, but some buyers may qualify with a lower score.
• You must purchase a home in a USDA rural-designated area.
• You must meet income limits, which are designated by each county in Vermont.
• You must be without “decent, safe and sanitary” housing.
• You must be unable to obtain another kind of mortgage.

First-Time Home Buyer Vermont: FAQs

Here are answers to a few frequently asked questions by first-time home buyers in Vermont.

What credit score do I need to buy a house in Vermont?

Each loan program has its own requirements, but the standard requirement is for borrowers to have at least a 620 credit score. Government-backed loans, such as FHA and VA loans, sometimes allow for a lower minimum score.

How much is a down payment on a house in Vermont?

The minimum down payment depends on the type of mortgage. Buyers can make a down payment as low as 3% of the home purchase price with a conventional loan. It’s possible with both VA loans and USDA loans to complete a home purchase with as little as no money down.

Is there assistance for first-generation home buyers in Vermont?

The VHFA offers first-generation home buyers in Vermont a $15,000 grant for down payment assistance and closing costs. This grant can be combined with VHFA ASSIST to equal up to $30,000 in assistance.

Can Vermont first-time home buyers receive a tax credit?

Yes, the Vermont mortgage tax credit (MCC) can save you up to $2,000 per year over the life of your mortgage.

The Bottom Line

Many people choose to stay in or move to Vermont for its beautiful scenery and the overall quality of life that being a resident of the state can offer. Whether you’re a current resident or considering a change, a number of Vermont first-time home buyer assistance programs are available and may be worth looking into. If you’re ready to take the first step toward homeownership, begin the approval process with Rocket Mortgage^® today.