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2022 Vermont First-Time Homebuyer Programs

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Vermont offers many first-time homebuyer programs that can make buying a home more affordable through assistance with down payment and closing costs. However, many of these programs have strict eligibility requirements, including income limits and target purchase areas. If you need assistance purchasing a home, understanding how these programs work will give you a better idea of which option may be the best fit for you.

Vermont statewide and local first-time homebuyer programs

The Vermont Housing Finance Agency (VHFA) oversees statewide down payment assistance (DPA) programs, while various city and county housing administration offices manage programs on a local level. Below is an overview of the types of programs you can expect to see from the Green Mountain State.

Program nameAssistance amountAssistance typeWhere it’s available
VHFA ASSISTUp to $15,0000% second mortgageStatewide
NeighborWorks of Western Vermont DPA LoanUp to $40,000Second mortgageStatewide
City of Burlington Housing Program Up to $10,0000% interest, deferred payment loanBurlington
Champlain Housing Trust Shared Equity Program Up to 20% to 30% of the home’s market valueShared equityChamplain

What to know about different types of down payment assistance

Most of the time, first-time homebuyer programs provide down payment assistance in the form of either a grant or a low-interest second loan. Although being offered that amount of money may seem too good to be true, it’s important to understand that these programs typically come with some strict rules that you need to follow. With that in mind, here is a closer look at how each type of down payment assistance works:

Low-interest second loan: If the down payment assistance comes in the form of a low-interest second loan, a second lien will be put on the property. In some cases, the loan will be forgiven after you live in the property for a set period of time. In others, you may be expected to repay the funds when you’re ready to sell the property or refinance your home loan.

Grant: With grant money, no additional lien will be put against your home. However, you’ll usually still be expected to live in the home for a defined period of time. Otherwise, you may have to repay the funds if you decide to sell or refinance early.

Other models: Additionally, some states, cities and municipalities will take it upon themselves to offer down payment assistance in unique ways. For instance, Champlain’s Shared Equity Program exchanges equity in the property for down payment funds instead of offering a grant or loan.

How Vermont first-time homebuyer programs work

LendingTree researched the Department of Housing and Urban Development (HUD)’s Vermont Homeownership Assistance page and its current offerings to compile this guide, along with programs from various local housing resources. Still, new programs may open up throughout the year, so it’s a good idea to check with your local housing authority and any local nonprofit organizations to see what’s available when you’re getting ready to buy.

The steps below will give you an idea of what to expect from the process.

  1. Receive mortgage approval from a participating lender: All first-time homebuyer programs are dependent on being able to be approved for a mortgage. However, luckily, once you’ve received approval from a participating lender, they can help you ensure that you meet any other program requirements.
  2. Make sure you meet any income requirements: The majority of down payment assistance programs are designed to help low-to-moderate-income homebuyers shoulder the upfront costs of buying a property. As a result, most programs have income limits as part of their eligibility criteria. You can usually find these limits on the program’s website.
  3. Complete any homebuyer education requirements: Some Vermont first-time home buyer programs require that you can complete a homebuyer education course before you can be considered eligible for assistance. These programs are designed to ensure that you’re aware of the responsibilities that come along with owning your own home.
  4. Learn how repayment works: As we said above, while first-time homebuyer program payments eventually are forgiven, there are certain situations that can trigger repayment. With that in mind, you’re going to want to ensure that you understand how repayment works before accepting any funds.

Vermont first-time homebuyer program requirements

Before you apply for down payment assistance, It’s crucial to make sure you meet the eligibility requirements. The eligibility requirements for these programs can be even more stringent than the minimum requirements for your first mortgage. With that in mind, the table below will give you a better idea of the eligibility requirements for some of Vermont’s first-time homebuyer programs.

Program name Credit score minimumDTI ratio maximumMaximum income limitFirst-time homebuyer education course?
VHFA ASSIST 640 to 680, depending on loan program45%$63,040 to $125,000, depending on county and household sizeYes
Neighborworks of Western Vermont DPA Loan62045%NoneYes, unless you have owned a home in the last three years
Champlain Housing Trust Shared Equity ProgramNone45%$67,200 to $126,000, depending on household sizeYes

THINGS YOU SHOULD KNOW

It’s a good idea to familiarize yourself with the median income limits for your area to make sure your income doesn’t exceed the allowable limits for the first-time homebuyer program that interests you. You can check Vermont’s up-to-date income limits by accessing HUD’s median family income lookup tool and entering your state and county information.

National first-time homebuyer programs

Before you can be approved for a DPA program, you’ll need to be approved for a mortgage. There are some loan programs that are usually a good fit for first-time homebuyers, although they aren’t exclusively available to buyers who haven’t owned a home before. Typically, these loan programs are known as “national first-time homebuyer programs.”

Here’s a closer look at the options that are available to you.

Conventional loans. Unlike the other options on this list, these loans aren’t backed by any government agency, which means they come with more stringent qualifying requirements. However, if you meet the requirements, you’ll be able to enjoy more favorable loan terms, which can save you money in the long run. Two conventional first-time homebuyer loan programs: Fannie Mae HomeReady and Freddie Mac Home Possible loans.

FHA loans. FHA loans are insured by the Federal Housing Administration (FHA), which allows the loan program to accept borrowers with lower credit scores and higher debt-to-income ratios than conventional programs. Still, that flexibility does come at a price. FHA requires its borrowers to pay two separate mortgage insurance fees, one upfront when they purchase the home and one on an annual basis

VA loans. Similarly, VA loans are backed by the Department of Veterans Affairs (VA) and are meant for veterans, active-duty military members and their spouses. Notably, these loans do not require a down payment, a minimum credit score or private mortgage insurance, making them one of the most flexible options on this list. That said, even though you won’t have to make a down payment if you qualify, you can still use funds from a DPA program to cover your closing costs.

USDA loans. If you’re a low-to-moderate-income homebuyer and you’re interested in buying a home in a rural area, you may qualify for a loan guaranteed by the United States Department of Agriculture (USDA). USDA loans offer borrowers favorable terms in exchange for buying a home in a designated rural area. Although USDA loans do not require a down payment, you can still use a DPA program to cover your closing costs.

FAQs about Vermont first-time homebuyer programs

Who qualifies as a first-time homebuyer in Vermont?

In most cases, you’ll be considered a first-time homebuyer as long as you haven’t owned a home in the past three years. However, some programs do stick to stricter definitions. If you have questions about your eligibility for a specific program, it’s a good idea to contact the program administrator for more information.

Can I qualify for down payment assistance in Vermont?

Since each Vermont first-time homebuyer program has its own eligibility criteria, it’s hard to give one answer to who will qualify for assistance. That said, as long as your income is within the prescribed limits for your area and you’re able to meet the other financial requirements while funding is still available, there’s a good chance that you’ll qualify.

How much of a down payment do I need to buy a house in Vermont?

If you qualify for either the VA loan program or the USDA loan program, you likely won’t need to make a down payment when buying a home. However, even if your loan program does have a down payment requirement, it will likely only be 3% to 3.5% of the home’s purchase price.

Home price trends in Vermont’s major areas

Home prices rose sharply in Vermont in 2021. In Rutland County (Rutland), the median home price rose 17.5% to $224,710 year-over-year in the fourth quarter of 2021, according to data from the National Association of Realtors (NAR). The higher loan amounts translated to an average monthly mortgage payment of $861, up from $708 the year before. In Chittenden County (Burlington), home prices only rose 16.7%, to a median home price of $398,343. The average mortgage payment rose from $12,64 to $1,527.

 

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