How to Buy a House in Vermont: 6 Steps

Purchasing a house is one of the most significant financial decisions many will make in their lifetime. In Vermont, the average home value is $402,217, which is higher than the national average of $362,481. This discrepancy highlights the need to carefully consider financial readiness and resources.

Understanding down payment assistance programs, mortgage types and state-specific regulations can ensure a smooth journey toward homeownership in the Green Mountain State. MoneyGeek has compiled pointers to help you navigate the homebuying process in Vermont, from saving for a down payment and choosing the ideal location to finding the best financing option for your needs and credit history.

According to the U.S. Census Bureau, the homeowner vacancy rate in Vermont for the second quarter of 2024 was 0.6%. The homeowner vacancy rate measures the percentage of vacant homes available for sale.

The stable vacancy rate is 2%, giving homebuyers some choice and flexibility. Vermont's current rate suggests insufficient inventory on the market to satisfy homebuyer demand, which may lead to increased competition among buyers and drive up home prices.

Before buying a house in Vermont, examine your financial and credit history. Lenders look for a strong financial profile to ensure you can manage mortgage payments effectively, increasing your chances of getting approved when applying for a mortgage.

Your credit score is pivotal in determining the mortgage loans and interest rates you can access. A higher score generally means better rates and terms. According to Experian, as of the third quarter of 2023, the average credit score in Vermont was 737.

If your score falls into the poor range on the FICO scale, which is below 580, buying a house is still possible, although securing a mortgage may be challenging. Refer to the table below to identify the mortgage type that aligns with your credit score requirements.

Source: Experian

Your debt-to-income (DTI) ratio is a snapshot of how much of your monthly income would be dedicated to debt payments. This insight helps lenders determine the mortgage debt you can manage. In Vermont, the average mortgage debt reached $171,339 in the third quarter of 2023, according to Experian.

Monthly debt payments factored into your DTI include mortgage, credit card bills, auto loans and student loans. Use our debt-to-income ratio calculator below to see your front-end DTI, back-end DTI and total monthly debt payments. Front-end DTI is housing expenses, while back-end DTI includes all monthly debt obligations.

Buying a house beyond your financial means can lead to significant stress and financial instability. To avoid this mistake, consider the 28% rule, which suggests that your monthly mortgage payment should not exceed 28% of your monthly income.

According to the U.S. Bureau of Labor Statistics, the median annual income in Vermont in April 2024 was $49,630, or a gross monthly income of $4,136 before taxes. Applying the 28% rule, you should aim to spend no more than $1,158 on monthly mortgage payments.

To get a ballpark figure of your monthly mortgage payment in Vermont, use our mortgage calculator below.

A down payment is the initial upfront payment when purchasing a home, typically expressed as a percentage of the home's price. A 20% down payment is the standard, but it can pose a significant challenge for many homebuyers. In Vermont, the average home value is $402,217, which could mean a $80,443 down payment. For homes above the average value of $475,000, a 20% down payment would be $95,000.

Fortunately, saving up for a 20% down payment is not mandatory. Many mortgage types allow for lower down payments. Government-backed loans like VA loans require no down payment, while FHA loans require only a 3.5% down payment.

If you put down less than 20%, your lender may require you to take out private mortgage insurance. Our PMI calculator can estimate your monthly premium based on your credit score and down payment.

Vermont offers several down payment assistance programs that help bridge the gap for those who may struggle to afford a down payment, enabling them to achieve their dream of owning a home. This includes programs under the Vermont Housing Finance Agency (VHFA)

Check the table below for the available down payment assistance programs offered by the VHFA.

Finding the right location in Vermont involves considering several factors, including the average house price in your desired area, proximity to family, friends, work or school and access to public transportation, parks, restaurants and shopping centers.

The cost of living is another factor to consider when choosing your new home. According to the Missouri Economic Research and Information Center (MERIC), Vermont's cost of living index for the first quarter of 2024 was 114.7, higher than the national average of 100. When evaluating locations, consider these essential expenses:

• Food
• Health care
• Clothing
• Utilities
• Education
• Transportation
• Entertainment

Check the table below to see the average home values in some cities of Vermont based on recent data. You can use our cost of living calculator to help estimate how much you'll need to pay for all the essentials in different locations.

Source: Zillow

Partnering with a real estate agent can significantly speed up your house hunt in Vermont. Agents provide advice, manage paperwork, offer an expanded list of property options and recommend service providers like title companies and inspectors to make the homebuying process smoother.

Do your due diligence and interview agents with experience in the neighborhoods you're interested in. Consider the following tips:

• Find someone compatible with your needs and personality
• Verify the agent's credentials, training and licensure
• Ensure they have in-depth knowledge of the area
• Shop around for agents and compare their rates

You can also use the license holder search tool from the Vermont Office of Professional Regulation to find or verify real estate agents in the state.

The homebuying journey involves navigating various mortgage options in Vermont to find the best fit for your budget. Available loans include conventional, jumbo, FHA, VA and USDA loans. You can select from 10-year, 15-year, 20-year or 30-year terms and decide between a fixed-rate mortgage or an adjustable-rate mortgage (ARM). Choosing the right financing option not only enhances your chances of approval but also helps you save money over time.

Interest rates on a mortgage can change daily due to factors such as the type of mortgage, the lender and the state of the economy. While the interest rate is the cost of borrowing the principal amount, the annual percentage rate (APR) provides a more comprehensive picture by including additional fees. This makes the APR a better measure of the actual cost of borrowing.

As of October 2024, the APR for a 30-year fixed conforming loan in Vermont was 5.86%, while the APR for a 30-year fixed-rate FHA loan is 6.28%. Check the table below to see the current mortgage rates in Vermont by mortgage type.

Obtaining a mortgage pre-approval in Vermont can streamline your homebuying process by clearly showing how much you can afford. Lenders typically issue a pre-approval letter, which serves as a conditional agreement to lend you a specified amount. This letter is usually valid for 60 to 90 days and can make your offer more appealing to sellers.

To get pre-approved, you'll need to submit several documents:

• Proof of income, such as pay stubs or tax returns
• Bank statements
• Credit history
• Identification, like a driver's license or passport
• Details of any outstanding debts

While pre-approval and prequalification help you understand your financial standing, they are different. Prequalification is a preliminary assessment based on self-reported information, whereas pre-approval involves a more thorough evaluation of financial history and creditworthiness.

Home inspections are highly recommended during the homebuying process in Vermont. They help identify issues that could affect the property's value and safety, assisting homebuyers in making informed decisions about their purchase. Inspectors examine structural components, roofing, plumbing, electrical systems and HVAC systems. The inspection report includes a detailed description of the current condition of these components and any recommended repairs.

For example, if an inspection uncovers a failing roof or outdated electrical systems, it could significantly impact the home's appraisal value. Such findings might lead the buyer to negotiate for repairs or a lower purchase price. In some cases, the buyer may decide to rescind their offer entirely.

Vermont regulates home inspections through the Office of Professional Regulation (OPR). Licensed home inspectors must adhere to the state's standards of practice when conducting inspections and provide a written summary of their findings and recommendations. These regulations ensure that home inspections are thorough and reliable.

When searching for a home inspector in Vermont, ensure they are licensed and meet the state's standards. Check online reviews and ask for references to understand their reputation and reliability. You can also use OPR's Find A Professional tool to find or verify licensed home inspectors.

Home appraisals in Vermont determine a property's market value, helping buyers and lenders ensure that the purchase price aligns with the property's worth. According to the 2023 Appraisal Survey from the National Association of Realtors (NAR), the median appraisal cost in 2023 was $500.

While inspections and appraisals are both necessary, they serve different purposes. An appraisal assesses a property's value, whereas an inspection evaluates its condition. Lenders require appraisals to confirm that the property's value supports the loan amount.

Closing on a house in Vermont marks the final step in your home-buying journey, where ownership officially transfers and you receive the keys to your new property. Your lender must provide a closing disclosure document three days before the official closing. This document outlines your loan terms, projected monthly payments and closing costs. Planning a final walk-through of the property with your real estate agent near closing day ensures the home remains in the expected condition.

On closing day, you will review and complete various paperwork that finalizes your home purchase. Some of the documents you will need to sign include:

• Final loan application: This document confirms the loan terms you have agreed upon with your lender, ensuring that all details are correct and up-to-date.
• Deed transfer: This legal document transfers property ownership from the seller to you, the buyer. It is recorded with the local government to officially recognize you as the new owner.
• Promissory mortgage note: A promissory note is a written promise to repay the mortgage loan. It outlines the repayment terms, including the interest rate and payment schedule.
• Homeowners insurance: Obtaining homeowners insurance in Vermont is crucial for protecting your new home from potential risks. This coverage can safeguard your property against weather-related damages and other liabilities.

Closing costs are fees due after a real estate transaction. According to NAR, the average closing cost was $4,763 in Vermont. These costs can include the following:

• Appraisal fee: This fee covers the cost of appraisal that determines the property market value.
• Title search and insurance fee: This fee ensures that the property's title is clear of liens or encumbrances and provides insurance to protect against future claims.
• Escrow deposit: This deposit is held by a third party to cover property taxes and insurance premiums.
• Prepaid costs: These are upfront payments for home insurance and property taxes.
• Other closing costs: This category can include various administrative fees, such as loan origination and recording fees.

Learning about the different first-time homebuyer programs in Vermont can help you achieve homeownership faster.

Buying a house in Vermont is a significant financial commitment that can last for years. To help you kickstart your homebuyer journey, we answered some frequently asked questions about buying a house in Vermont.