The Green Mountain State is a nature lover’s paradise with forests, lakes, and mountains. Along with its natural beauty, it’s also the safest state in the country.
No wonder then that the housing market has heated up: Home prices have risen 15.3% in the past year (May 2021-May 2022), according to Redfin, a real estate brokerage that analyzes housing market data.
Home buyers can find the Vermont market challenging, since there are 40.8% fewer homes for sale now than there were in 2021. And they go fairly quick: In 2021,a home was on the market for a median of 56 days. In 2022, the median dropped to 39 days.
The good news is, if you’re a first time home buyer in Vermont, there are state and federal programs to help you purchase your home. This home buying guide can help walk you through the process.
Who Is Considered a First-Time Homebuyer in Vermont?
You qualify if you’ve never owned a home, of course, but you are also considered a first-time homeowner in Vermont if you haven’t owned a house in the last three years. In addition, the U.S. Department of Housing and Urban Development (HUD) considers you a first-time home buyer if you’re a single parent who has only owned a home with a partner while married, or a displaced homemaker who has only owned a home with a spouse. Be sure to check with any home buying assistance program you’re considering, because requirements can differ.
5 Vermont Programs for First-Time Homebuyers
There are several state programs for the first time home buyer in Vermont. Many are designed for people with low incomes or those who don’t have good credit scores. The Vermont Housing Finance Agency (VHFA) offers a number of them.
1. VHFA: MOVE and MOVE MCC
To qualify, you must meet purchase price and income limits and have a minimum credit score of 640.
2. VHFA: ADVANTAGE
Applicants must meet the First-Time Homebuyer Program requirements.
3. VHFA: ASSIST Down Payment and Closing Cost Assistance
To qualify, borrowers and non-borrowing spouses must be first-time homebuyers.
4. VHFA: Mortgage Credit Certificate (MCC)
5. Champlain Housing Trust (CHT)
To qualify, you must be purchasing a property in Old North End, Lakeside, or King Street Neighborhoods. The property must be two, three, or four units, and must be your primary residence. For more information, contact Todd Rawlings, Housing Program Manager, at 802-652-4209 or email@example.com.
To determine how much a loan will cost you each month, use our mortgage calculator.
How to Apply to Vermont Programs for First-Time Homebuyers
You can choose from many types of mortgage loans. You can also apply to the programs we’ve discussed for the first-time home buyer in Vermont. Just be sure to check the requirements before applying. Many ask you to connect with a partnering lender to apply for the program.
Federal Programs for First-Time Homebuyers
Several federal government programs are designed for people who have low credit scores or limited cash for a down payment. Although most of these programs are available to repeat homeowners, they can be especially helpful to people who are buying a first home or who haven’t owned a home in several years.
These mortgages are generally for single-family homes, two- to four-unit properties that will be owner occupied, approved condos, townhomes, planned unit developments, and some manufactured homes.
Federal Housing Administration (FHA) Loans
Gift money for the down payment is allowed from certain donors and will be documented in a gift letter for the mortgage.
FHA loans always require mortgage insurance: a 1.75% upfront fee and annual premiums for the life of the loan, unless you make a down payment of at least 10%, which allows the removal of mortgage insurance after 11 years. You can learn more about FHA loans in general and FHA lending limits in Vermont by county here.
Freddie Mac Home Possible Mortgages
The Home Possible mortgage is for buyers who have a credit score of at least 660.
Once you pay 20% of your loan, the Home Possible mortgage insurance will be canceled, which will lower your mortgage payments.
Fannie Mae HomeReady Mortgages
Fannie Mae HomeReady Mortgages allow down payments as low as 3% for low-income borrowers. Applicants generally need a credit score of at least 620; pricing may be better for credit scores of 680 and above. Like the Freddie Mac program, HomeReady loans allow flexibility for down payment financing, such as gifts and grants.
For income limits, a comparison to an FHA loan, and other information, go to this Fannie Mae site.
Fannie Mae Standard 97 LTV Loan
Unlike an FHA loan, the 97 LTV loan has no upfront mortgage insurance fee and does have cancellable mortgage insurance. The loan is for just one-unit single-family homes, co-ops, condos, and planned unit developments.
Department of Veterans Affairs (VA) Loans
Regional loan centers are closed to the public, but you can contact the Department of Veterans Affairs for Vermont at NADL@va.gov.
Native American Veteran Direct Loans (NADLs)
U.S. Department of Agriculture (USDA) Loans
The USDA also directly issues loans to low- and very low-income people. For loan basics and income and property eligibility, head to this USDA site.
HUD Good Neighbor Next Door Program
First-Time Homebuyer Stats for 2022
- First-time homebuyers nationwide: 34% of all buyers
- Median age of first-time homebuyers in U.S. 33
- Average down payment in Vermont (20%): $75,800
- Average home price in Vermont (Redfin, June 2022):$397,000
- Average credit score of home buyer in Vermont: 736
Financing Tips for First-Time Homebuyers
- Traditional IRA withdrawals. The IRS allows qualifying first-time homebuyers a one-time, penalty-free withdrawal of up to $10,000 from their IRA if the money is used to buy, build, or rebuild a home. The IRS considers anyone who has not owned a primary residence in the past three years a first-time homebuyer. You will still owe income tax on the IRA withdrawal. If you’re married and your spouse has an IRA, they may also make a penalty-free withdrawal of $10,000 to purchase a home. The downside, of course, is that large withdrawals may jeopardize your retirement savings.
- Roth IRA withdrawals. Because Roth IRA contributions are made with after-tax money, the IRS allows tax- and penalty-free withdrawals of contributions for any reason as long as you’ve held the account for five years. You may also withdraw up to $10,000 in earnings from your Roth IRA without paying taxes or penalties if you are a qualifying first-time homebuyer and you have had the account for five years. With accounts held for less than five years, homebuyers will pay income tax on earnings withdrawn.
- 401(k) loans. If your employer allows borrowing from the 401(k) plan that it sponsors, you may consider taking a loan against the 401(k) account to help finance your home purchase. With most plans, you can borrow up to 50% of your 401(k) balance, up to $50,000, without incurring taxes or penalties. You pay interest on the loan, which is paid into your 401(k) account. You usually have to pay back the loan within five years, but if you’re using the money to buy a house, you may have up to 15 years to repay.
- State and local down payment assistance programs. Usually offered at the regional or county level, these programs provide flexible second mortgages for first-time buyers looking into how to afford a down payment.
- The mortgage credit certificate program. First-time homeowners and those who buy in targeted areas can claim a portion of their mortgage interest as a tax credit, up to $2,000. Any additional interest paid can still be used as an itemized deduction. To qualify for the credit, you must be a first-time homebuyer, live in the home, and meet income and purchase price requirements, which vary by state. If you refinance, the credit disappears, and if you sell the house before nine years, you may have to pay some of the tax credit back. There are fees associated with applying for and receiving the mortgage credit certificate that vary by state. Often the savings from the lifetime of the credit can outweigh these fees.
- Your employer. Your employer may offer access to lower-cost lenders and real estate agents in your area, as well as home buying education courses.
- Your lender. Always ask your lender about any first-time homebuyer grant or down payment assistance programs available from government, nonprofit, and community organizations in your area.
Use this home affordability calculator to understand how much you can afford to pay for a home in Vermont.
The housing market in Vermont can be challenging, but as a first time home buyer, there are many state and federal programs available that can help you achieve your goal.
Should I take first-time homebuyer classes?
Do first-time homebuyers with bad credit qualify for homeownership assistance?
Is there a first-time homebuyer tax credit in Vermont?
Is there a first-time veteran homebuyer assistance program in Vermont?
What credit score do I need for first-time homebuyer assistance in Vermont?
What is the average age of first-time homebuyers in Vermont?
SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC), and by SoFi Lending Corp. NMLS #1121636 , a lender licensed by the Department of Financial Protection and Innovation under the California Financing Law (License # 6054612) and by other states. For additional product-specific legal and licensing information, see SoFi. Equal Housing Lender.
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi for more information.
Third-Party Brand Mentions: No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.
External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
More from MediaFeed:
Home foreclosure rates are on the rise in these states
Featured Image Credit: SeanPavonePhoto/iStock.