Vermont First-Time Home Buyer: 2022 Programs and Grants

What to know about buying a house in Vermont

Vermont home prices are rising at a rapid rate compared to many other states. And that can be a real challenge for first-time home buyers.

Fortunately, Vermont can offer assistance in the form of mortgages with below-market rates, valuable tax breaks, and down payment assistance for eligible buyers. Here’s how to get started.

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Vermont home buyer overview

In April 2022, the median listing price for a home in Vermont was $379,000, according to Redfin. That was up by 30.8% from a year earlier. By contrast, CoreLogic says prices nationwide rose by 20.9% over the same period.

Vermont home buyer stats

Average Home Sale Price in VT	$379,000
Minimum Down Payment in VT (3%)	$11,370
20% Down Payment in VT	$75,800
Average Credit Score in VT1	736
Maximum VT Home Buyer Loan2	$40,000 as a repayable loan from NeighborWorks

Down payment amounts are based on the state’s most recently available average home sale price. “Minimum” down payment assumes 3% down on a conventional mortgage with a minimum credit score of 620.

If you’re eligible for a VA loan (backed by the Department of Veterans Affairs) or a USDA loan (backed by the US Department of Agriculture), you may not need any down payment at all.

First-time home buyer loans in Vermont

If you’re a first-time home buyer in Vermont with a 20% down payment, you can get a conventional loan with a low interest rate. And you never have to pay for private mortgage insurance (PMI).

Of course, few first-time buyers have saved enough for 20% down. But the good news is, you don’t need that much. Not by a long shot.

Borrowers can often get into a new home with as little as 3% or even 0% down using one of these low-down-payment mortgage programs:

• Conventional 97: From Freddie Mac or Fannie Mae. 3% down payment and 620 minimum FICO score. You can usually stop paying mortgage insurance after a few years once you reach 20% home equity
• FHA loan: Backed by the Federal Housing Administration. 3.5% down and a 580 minimum credit score. But you’re on the hook for mortgage insurance until you refinance to a different type of mortgage, move, or pay off your loan
• VA loan: Only for veterans and service members. Zero down payment is required. Minimum credit score varies by lender but often 620. No ongoing mortgage insurance after closing. These are arguably the best mortgages available, so apply if you’re eligible
• USDA loan: For those on low-to-moderate incomes buying in designated rural areas. Zero down payment required. Credit score requirements vary by lender but often 640. Low mortgage insurance rates
• VHFA: May include below-market mortgage rates, tax breaks and down payment assistance. More information below

Note that government loan programs (including the FHA, VA, and USDA home loans) require you to buy a primary residence. That means you can’t use these loans for a vacation home or investment property.

Depending on the mortgage loan you choose, you could potentially get into your new house with minimal cash out of pocket. These programs even let you use gifted money or down payment assistance (DPA) to cover the down payment and closing costs.

If you’re unsure which program to choose for your first mortgage, your lender can help you find the right match based on your finances and home buying goals.

Vermont first-time home buyer programs

The Vermont Housing Finance Agency (VHFA) has two main mortgage programs for first-time buyers: MOVE and MOVE MCC.

• MOVE offers a highly competitive, below-market mortgage rate across many loan types. And you may get lower-than-normal mortgage insurance if you opt for a Fannie Mae or Freddie Mac loan
• MOVE MCC provides bigger tax breaks instead. MCC stands for mortgage credit certificate, which can save up to $2,000 annually on your federal tax bill. Learn more about MCCs here

Both programs also knock $825 off your Vermont property transfer tax. (Program details and savings are subject to change; check the relevant website before you apply.)

To be eligible, you’ll need to have an income that is below stated household income limits. And you’ll have to buy a home that is within purchase price limits. Check the income and purchase price limits webpage because these vary by area and family size.

You must also choose your lender from a list of companies approved by the VHFA. Indeed, the agency suggests that your first move should be to pick a lender from that list and ask for guidance.

Both these programs seem to offer genuinely valuable help. And to top it off, buyers using a VHFA mortgage may be in line for down payment assistance as well.

Vermont first-time home buyer grants

The VHFA doesn’t offer grants to first-time buyers. Instead, it can provide loans of up to $15,000 toward your down payment and closing costs.

However, those loans are highly attractive. They’re “silent” second mortgages, which means you pay 0% interest and make no monthly payments. You can forget it until your “property is sold, refinanced or mortgage is paid in full.”

Only at that point must you repay a single cent. And then you pay back only the sum you borrowed. Provided home prices continue to rise quickly in Vermont, $15,000 could be just a small fraction of your home equity by the time you’re ready to move or refinance.

The eligibility criteria for this assistance program are similar to those for a VHFA mortgage (above).

If you need to borrow more than VHFA allows, NeighborWorks of Western Vermont says it can provide, statewide, loans of up to $40,000 or a 20% down payment, whichever is the lesser. But these are hard loans that must be repaid in monthly installments over 15 years. And the interest rate will be 2% higher than your mortgage rate. Visit the website or call (802) 438-2303 to learn more.

Buying a home in Vermont’s major cities

Of Vermont’s three biggest cities, Rutland is by far the most affordable when it comes to home prices. However, home price inflation has been soaring there recently.

Burlington is the most costly of the three but its home prices rose more slowly than the statewide average between April 2021 and 2022. Remarkably, prices remained flat in South Burlington over that same period.

Burlington first-time home buyers

In April 2022, the median list price of homes in Burlington was $489,000. And prices had risen 15.1% year-over-year that month, according to Realtor.com.

If you want to buy a home at that median price, your down payment options might fall between:

• $14,700 for 3% down payment
• $97,800 for 20% down payment

The City of Burlington has a down payment assistance program that helps those wishing to buy a multiunit dwelling. You must live in one unit and rent out the other(s).

If you want a single-family home, the city’s website advises you to contact the Champlain Housing Trust, which provides a range of help to home buyers in Northwest Vermont. Call (802) 862-6244 or email [email protected] for more information.

South Burlington first-time home buyers

In April 2022, the median list price of homes in South Burlington was $399,500. Those prices had held flat over the year ending that month, according to Realtor.com.

If you want to buy a home at that median price, your down payment options might fall between:

• $11,990 for 3% down payment
• $79,900 for 20% down payment

We could find no trace of a down payment assistance program on the City of South Burlington’s website. But you could call (802) 846-4107 to see if we missed something.

Given that, like Burlington, South Burlington is in Chittenden County, you may be able to get help from the Champlain Housing Trust. See the last section for details.

Rutland first-time home buyers

In April 2022, the median list price of homes in Rutland was $244,500. That was an increase of 29.7% year-over-year, according to Realtor.com.

If you want to buy a home at that median price, your down payment options might fall between:

• $7,340 for 3% down payment
• $48,900 for 20% down payment

Again, we could find no trace of a down payment assistance program on the City of Rutland’s website. So you may have to fall back on the VHFA or NeighborWorks for help.

Where to find home buying help in Vermont

In addition to our selection, the U.S. Department of Housing and Urban Development (HUD) provides lists of statewide, regional, and local resources for home buyers in Vermont:

Statewide and regional Vermont first-time home buyer programs

Vermont first-time home buyer programs by city/town

What are today’s mortgage rates in Vermont?

You can see today’s live mortgage rates in Vermont here.

When you’re ready to start the home buying process, make sure you get personalized rate quotes from at least three mortgage lenders.

And don’t just look at advertised rates online; actually apply for preapproval and compare the interest rates and fees you’re offered. That’s the only way to know you’re getting the best deal possible on your new home loan.

¹Source: Experian.com 2022 study of 2021 data

²Based on a review of the state’s available DPA grants at the time this was written