How to Buy a House in Vermont: A Homebuyer’s Guide

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Edited byScott Strandberg

Updated: March 31, 2023

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The average value of a home in Vermont is $374K, increasing by approximately 17% from the previous year. Homebuyers in the state — first-timers or otherwise — should note that Vermont homes are more expensive than the national average of $358K. Additionally, growth in Vermont median home prices is faster than the national average, which was roughly 14% over the past year.

Understanding the homebuying process is the key to achieving homeownership. In this guide, MoneyGeek details how to buy a house in Vermont without falling into crippling debt. We broke down how to choose an ideal location, get pre-approved for a mortgage, conduct a home inspection and more.

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Choose an Ideal Location

Because location is a significant factor that affects the cost of homes, choosing where you want to live is critical if you want to save on expenses. For instance, the median home price in Burlington is $488K, whereas a house in Montpelier has an average value of $404K.

Additionally, it’s important to evaluate other factors to determine the best place to buy a house in Vermont. These include neighborhood culture, cost of living and access to amenities.

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WORK WITH A REAL ESTATE AGENT

When buying a house in Vermont, it’s advisable to work with a real estate agent to find the best deal possible for your particular needs and budget. An agent can usually provide market information that you can’t get from just conducting your own research.

You can find a real estate agent by asking your friends and family for recommendations. Come up with a shortlist and verify their credentials to narrow down your options. Look out for the following qualities when choosing an agent:

  • Communication and negotiation skills
  • Knowledge of the local housing market
  • Honesty and integrity

Also, check their references to see if they have a track record of positive client experiences. This can help save you the headaches while looking for the best place to buy a house in Vermont.

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CALCULATE THE COST OF LIVING

If you’re looking for the cheapest place to buy a house in Vermont, the overall cost of living is a critical factor you must consider in addition to the price of the home.

Take note of the costs of the following expenses when choosing your ideal location:

  • Food
  • Utilities
  • Education
  • Transportation
  • Rent or mortgage
  • Income and property taxes
  • Auto and health insurance premiums

MoneyGeek has a cost of living calculator that can help you determine how much you’ll pay for various expenses when you move to a different location. Our tool also allows you to compare the cost of living across a number of cities in the U.S.

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CONSIDER AFFORDABLE NEIGHBORHOODS

Although Vermont is a somewhat expensive place to live, you can still save on various expenses by looking for affordable neighborhoods in the state. Consider suburbs or rural areas if you want to spend less, as they often have a lower cost of living than city centers. However, expect limited access to social amenities like hospitals, schools and shopping malls.

Some of Vermont’s affordable areas include Rutland City and Barre City. Ultimately, it’s best to examine each location to determine if it can meet both your standards and budget.

Calculate Mortgage Rates

Mortgage rates often change based on the type of home loan you choose. Individual factors like your credit score, debt-to-income ratio and annual income can also significantly affect your rate. It’s best to shop around and compare lenders to find the best mortgage rates for your profile.

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SEE YOUR MORTGAGE OPTIONS

There are different types of mortgages available for Vermont homebuyers, and all of them carry varying interest rates. Note that your mortgage rate will depend on your lender and borrower profiles. Generally, having excellent credit can help you secure more favorable loan terms.

In the list below, MoneyGeek enumerates the average rates for different mortgage options:

When choosing a mortgage type, it’s important to remember that some of them have eligibility requirements you must meet. For instance, you can only qualify for a USDA loan if you plan on purchasing a property in an eligible rural area, while VA loans are strictly for military personnel.

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USE A MORTGAGE CALCULATOR

Getting a mortgage estimate can help you establish a budget before buying a house in Vermont. This way, you can determine if you can afford the monthly mortgage payments without falling into unmanageable debt.

If you’re unsure about what type of home loan to get, MoneyGeek has an FHA vs. conventional loan calculator that can help you compare the two mortgage programs. We also explored when to best use either mortgage option in different scenarios.

Once you have your estimated mortgage rate, the next step is to find a lender and get a mortgage pre-approval. Compare multiple options to find the best one for your particular needs and budget.

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KNOW YOUR QUALIFICATIONS

Your financial profile not only determines the type of mortgage you qualify for but also impacts the interest rate you will receive. Generally, lenders consider the following individual factors when evaluating your mortgage application:

  • Credit score: The higher your credit score, the lower your mortgage rate will be (and vice versa).
  • Debt-to-income (DTI) ratio: Lenders use your DTI ratio to check how much of your income goes toward your existing debts.
  • Down payment: Putting 20% or more down on a home purchase can usually get you lower interest rates and more affordable monthly loan payments while also avoiding private mortgage insurance (PMI).
  • Gross income: Your income indicates your likelihood and capability of repaying the loan.

Prepare Down Payment Requirements

Before you can buy a house in Vermont, you need to provide a down payment equal to a certain percentage of the purchase price. How much you put down on a home can greatly affect the cost of your loan. Some mortgage programs require at least 20% down to avoid private mortgage insurance (PMI), while others allow as little as a 3.5% down payment. A couple of programs don’t even require a down payment at all!

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DETERMINE DOWN PAYMENT REQUIREMENTS

Depending on the type of mortgage you choose, your down payment requirements may change. A conventional loan typically requires a 20% down payment if you don’t want to buy private mortgage insurance, whereas FHA loans allow you to have as little as 3.5% money down.

On the other hand, government-backed loan programs such as USDA and VA loans don’t necessitate a down payment. However, you must meet their eligibility requirements to take advantage of this unique perk. For instance, you must be an active service member or a veteran to qualify for a VA loan with no money down.

Remember that your down payment affects the loan terms you receive. You’re more likely to get lower interest rates if you have a large down payment.

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CALCULATE MORTGAGE INSURANCE

You might need to buy private mortgage insurance (PMI) based on how much you put down on a home. PMI protects your lender if you default on your loan.

If you’re financing a home with a conventional loan and less than a 20% down payment, you will be required to purchase PMI. On the other hand, FHA loans don’t require PMI for low down payments of 3.5%. Instead, they require an upfront mortgage insurance premium (MIP).

Similarly, USDA loans require a guarantee fee instead of PMI. This fee is usually included in your monthly loan payment and paid to USDA by your lender. Meanwhile, VA loans don’t require mortgage insurance.

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DOWN PAYMENT ASSISTANCE PROGRAMS

Because not everyone can afford to save up for a 20% down payment, there are down payment assistance programs available for first-time homebuyers in Vermont as well as repeat buyers. Some of these include:

  • ASSIST Down Payment and Closing Cost Assistance: Depending on your income, you can borrow up to $15,000 in loans from the Vermont Housing Finance Agency to use for your down payment and closing costs.
  • Mortgage Credit Certificate (MCC): You can get a tax credit of up to $2,000 each year from the VHFA to decrease the federal tax burden included in your annual mortgage interest payments.
  • VHFA MOVE and ADVANTAGE Programs: With these loan programs through the VHFA, you can purchase a home with a down payment of just 0% to 5%. In addition, the VHFA offers additional down payment and closing cost assistance through these programs.

Get Pre-Approved for a Mortgage

Getting pre-approved for a mortgage is a crucial step in buying a house in Vermont. It can help you shop for homes within your budget and make stronger offers. Additionally, a mortgage pre-approval often informs sellers that you are a serious buyer.

Keep in mind that pre-approval is not interchangeable with prequalification. A pre-approval means your lender is willing to loan you a specified amount at a given rate, whereas prequalification only means you are qualified for a loan.

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GATHER NECESSARY DOCUMENTS

Essentially, a mortgage pre-approval is like a trial run of a mortgage application. As such, you need to prepare all the documents that provide your personal and financial details, including:

  • W-2 forms
  • Tax returns
  • Pay stubs
  • Bank account statements
  • Driver's license
  • Social Security number

Note that you may have to submit additional documentation, especially if you’re self-employed. It’s best to find out what documents are required in advance so you can prepare them as soon as possible.

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TIME YOUR PRE-APPROVAL

Depending on the lender, it may take up to 10 business days to get a mortgage pre-approval. If you’re qualified for a loan, you will be issued a pre-approval letter indicating the maximum amount you’re eligible to borrow.

You can use this letter when shopping for Vermont properties. That said, it’s only good for 90 days at most, so make sure to put in an offer on a home during that timeframe. If not, you can ask your lender to renew your pre-approval letter after it expires.

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RECEIVE PRE-APPROVAL LETTER

Generally, your mortgage lender will evaluate your application and pull your credit report to check your eligibility. You will receive a pre-approval letter if the lender thinks you are qualified for a mortgage. This goes a step further than prequalification because the pre-approval contains much more vital information, such as the maximum amount of money the lender is willing to loan you.

Since there’s no limit to the number of pre-approvals you can request, it’s possible to get pre-approval letters from different lenders. However, lenders usually perform hard credit checks when deciding whether to pre-approve you, which can bring down your credit score.

Furthermore, pre-approval letters tend to have an expiration date lasting around 90 days. It’s best to make a bid on a home during that time period, so you won’t have to request a renewal from your lender.

Conduct a Home Inspection

Before buying your dream home in Vermont, it’s essential to have a third-party professional inspect the property. A home inspection informs you about the house’s current condition and if there are issues below the surface that you may have missed. Knowing these particular details can guide you on whether to proceed with the home purchase.

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CONTACT A LICENSED INSPECTOR

Hiring a professional and licensed home inspector can save you money in the long run. By inspecting the property, they can evaluate its overall condition and point out any specific issues that should be addressed. Your real estate agent can be a great source of information for home inspector leads. You can also ask a friend or a family member for recommendations.

According to the International Association of Certified Home Inspectors, the home inspector should be able to provide you with a written report about the condition of the following parts of a home:

  • Roof
  • Exterior
  • Basement, foundation and crawlspace
  • Heating
  • Cooling
  • Plumbing
  • Electrical
  • Fireplace
  • Attic, insulation and ventilation
  • Doors, windows and interiors
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FOLLOW VERMONT-SPECIFIC INSPECTIONS

Home inspections are not required in Vermont, but certain localities and counties may have their own inspection laws. It’s best to confirm with your real estate agent about this. In any case, it’s still a wise decision to have your potential house inspected by a professional. You can gain valuable insight into the condition of the property, helping you make an informed decision about the home purchase.

If you’re concerned about specific issues, you can hire a specialty home inspector to conduct a foundation-specific inspection, pest inspection, radon testing or asbestos and lead testing. Note that special home inspections may cost you somewhere between $100 and $700.

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GO THROUGH APPRAISAL

A home appraisal is different from a home inspection in that it’s focused on determining the actual value of the house. The appraisal is done by a real estate appraiser, who will provide a thorough analysis of the property's worth based on their observations during the inspection.

Home appraisals are required when you’re financing a house using a mortgage. This is because lenders want to ensure they aren’t loaning you more money than the home is worth. A low appraisal can cause delays or even cancellation of the real estate transaction.

Close Your Mortgage Loan

Once the home inspection and appraisal are done, you can review the loan terms and proceed to close your mortgage loan. You may be required to pay closing costs during this process. If you need help with covering the fees, Vermont has the ASSIST closing cost assistance program that you may qualify for.

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SIGN ALL DOCUMENTS

Some of the important documents needed for closing a loan include:

  • Homeowners insurance policy: This can financially protect you against damages to your house’s physical structure and your personal belongings. It also protects you against liability for any accidents or injuries that happen to a guest on your property.
  • Title insurance policy and survey: This shows that the property has no liens and is free to occupy or legally own.

Make sure these documents are completed ahead of time. Also, review the fine print before signing the paperwork. As much as possible, you want to catch all the seemingly trivial details that can end up costing you more long-term.

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PAY CLOSING COSTS

Closing costs are the fees you incur when purchasing a home. These include:

  • Credit report fee: The amount you pay your lender for checking your credit report and score.
  • Escrow: Lenders set up and manage an account for property tax, homeowners insurance, mortgage insurance and annual funding fees.
  • Prepaid interest: This is the interest you pay on your mortgage before your loan term begins.
  • Interest rate points: You can pay an upfront fee in exchange for a lower interest rate on your loan.
  • Third-party fees: These are the fees you have to pay to third parties, including legal fees, appraisal fees, recording fees, title insurance premiums and homeowners insurance premiums.
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COMPLETE YOUR HOME PURCHASE

The journey to achieving homeownership in Vermont starts with choosing a location that’s ideal for your lifestyle and budget. Take note of its cost of living, neighborhood culture and social amenities to determine whether the location is suitable for you.

It’s also crucial to calculate mortgage rates and find which mortgage options you qualify for. Get a mortgage pre-approval once you’ve decided on a lender to give yourself an advantage when making offers on a home. Take care to prepare all the documents needed for closing and anticipate the fees you will incur when you finally purchase a home.

Becoming a homeowner is a huge responsibility. You should always stay on top of your finances and monthly mortgage payments to avoid falling into too much debt. Consider setting up automatic payments to avoid missing payment dates.

Vermont Homebuying Details

When planning to buy a home in Vermont, it's important to explore both conventional and government-backed mortgage options to determine which is better for your borrower profile. Additionally, you can qualify for Vermont homebuyer assistance programs if you are having trouble with your down payment or closing costs.

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The VHFA provides down payment loans of up to $15,000 based on income for first-time homebuyers in Vermont. It’s worth noting, however, that these loans are only available when paired with a VHFA Move, Move MCC or Advantage Mortgage Program.

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Through the VHFA, you can get a federal tax credit of up to $2,000 each year for your annual mortgage interest payments. That said, the agency’s MCCs are only available with Move MCC or a non-VHFA mortgage from a VHFA participating lender.

Frequently Asked Questions About Buying a Home in Vermont

MoneyGeek answered some commonly asked questions to help you learn more about how to buy a home in Vermont.

Before buying a house in Vermont, it’s critical to address certain concerns, such as the best location for your needs and budget, the type of mortgage you’re eligible for and how much down payment you can afford.

While it’s part of the American Dream, homeownership is not for everyone. Purchasing a home in Vermont can be a good idea if you’ve resolved your existing debts or put your finances in order.

Vermont has an average home value of $374K, higher than the national average of $358K. Pursuing homeownership in Vermont can be a wise decision if you have the financial capacity to afford the monthly mortgage payments and the state’s cost of living.

Typically, the amount of money you need to purchase a house in Vermont depends on the type of mortgage you qualify for.

The median property tax rate in Vermont is 1.83%.

MoneyGeek found that Rutland City and Barre City are two of the most affordable locations in Vermont for homeownership.

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