What to know about Vermont mortgage rates

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Rich culture paired with countless outdoor recreation opportunities make Vermont a great place to call home. Residents of the Green Mountain State enjoy its beautiful seasons and delicious local foods.

If you’re searching for a home in Vermont, remember to shop around and compare mortgage rates. What may seem like a small difference could add up to thousands over the course of a 15-year or 30-year mortgage.

Mortgage debt in Vermont

Credit Karma members with mortgages in Vermont had average mortgage debt of $166,426 in 2020, with average monthly mortgage payments of $1,200.

That puts Vermont a bit below average for both mortgage debt and average monthly mortgage payments compared to Credit Karma members across the U.S. in 2020. 

Types of home loans

If you choose to finance your dream home, you might be overwhelmed with the number of mortgage loan options out there. Here are some of the more common mortgage types Vermont homeowners may consider.

Conventional loans in Vermont

Conventional loans are mortgages that aren’t part of government programs. These loans tend to be good for people with solid credit and a down payment of at least 3% to 5%.

Vermont FHA loans

FHA loans are a good option for first-time homebuyers to explore — particularly if your credit is less than perfect. That’s because you may be able to qualify with credit scores as low as 580 with a 3.5% down payment or 500 with a down payment of 10%. This FICO® score requirement is the FHA minimum standard. In general, additional lender credit score requirements may apply.

The FHA loan limit in 2021 is generally $356,352 for a one-unit property, but it can reach as high as $822,375 depending on where you live.

One area in Vermont has a higher limit.

  • Burlington-South Burlington, VT

You can find the exact limit by county on the U.S. Department of Housing and Urban Development website.

VA loans in Vermont

If you’re an eligible veteran or service member comparing mortgage rates in Vermont, a VA loan can be attractive since down payments and mortgage insurance aren’t typically required, and you may be able to qualify even if your credit isn’t perfect.

Similar to FHA loans, VA loans are insured by the federal government but issued by private lenders.

Conforming loan limits in Vermont

Conforming loans are a type of home loan that meets certain loan limits set by the Federal Housing Finance Agency. This means they can be bought by Fannie Mae and Freddie Mac, federal-government-sponsored enterprises that guarantee mortgages.

Loans that exceed conforming loan limits are known as jumbo loans. Lenders often consider these loans riskier than conforming loans. 

All of Vermont’s counties have a conforming loan limit of $548,250 in 2021.

First-time homebuyer programs in Vermont

If you’re hoping to buy your first home, there may be some assistance programs available to you in Vermont.

  • MOVE Program: Offered by the Vermont Housing Finance Agency, MOVE provides 30-year fixed rate mortgages. Eligible applicants for conventional loans through this program are offered reduced mortgage insurance premiums. For qualified buyers, MOVE comes with a discount of up to $825 on Vermont Property Transfer Tax at closing. To qualify, you must meet certain income and purchase price limits — and in certain counties you must be a first-time homebuyer (no prior homeownership in the previous 36 months).
  • ASSIST Program: This VHFA program offers down payment and closing assistance in the form of a zero-interest loan. There’s no monthly payment, and you’ll repay the loan when you sell, refinance or pay off your home. To be eligible, you must take out a VHFA mortgage, and your liquid and non-retirement assets must be less than $30,000. You also must be a “true” first-time homebuyer, with no prior ownership of a principal residence.
  • Mortgage Credit Certificate: With the VHFA’s Mortgage Credit Certificate, you can apply for a federal tax credit of up to $2,000 per year. This tax credit is permitted as long as you live in the home and hold the original first mortgage.

Mortgage refinancing rates in Vermont

If you’re thinking about refinancing your mortgage, keep a few things in mind:

  • Break-even cost — Once you know the closing costs for your refinance, you can use any savings on your monthly mortgage payment to calculate how long it will take you to recoup that investment and “break even.”
  • Cash-out refinance — Have you accumulated equity in your home that you’d like to convert to cash? A cash-out refinance lets you refinance your home for more than what you owe and get cash in return. But you’ll owe the full amount plus interest and you’ll end up owning less equity in your home, which means less cash in your pocket if you sell in the future.
  • Loan term — You also may want to either shorten or extend your loan term. For instance, if you have a 30-year mortgage, you may want to convert it to a 15-year loan. Keep in mind that reducing your term likely means you’re paying more each month — but less in interest over time. Lengthening your loan term may mean you pay less each month, but more interest over the course of the mortgage.

About the author: Anna Baluch is a freelance personal finance writer from Cleveland, Ohio. You can find her work on sites like The Balance, Freedom Debt Relief, LendingTree and RateGenius. Anna has an MBA in marketing from Roosevelt Un… Read more.