Whether you’re looking for endless winter activities, breathtaking mountain scenery, or simply long to escape the hustle and bustle of city living,

Vermont

is a great place to buy a home.

With its charming New England vibe, popular ski and snowboard resorts, and proximity to the Great White North, it may come as a surprise that Vermont is ranked as one of the least populous states in the US.

Nevertheless, the real estate market in Vermont remains competitive, and finding a property to call your own can be tricky if you don’t know where to look.

Fortunately, car and home insurance super app

Jerry

is here to answer all of your questions about buying a house in Vermont. In this step-by-step guide, find everything you need to know to begin your house hunting journey.

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Figure out your finances

The primary step in your home buying journey is to evaluate the state of your finances.

Having an understanding of the financial factors that impact your mortgage qualifications will not only prepare you for what to expect but will make for an effective house hunt.

The most crucial financial factors throughout the home buying process include:

Debt-to-income ratio

Credit score

Closing costs and other fees

Down payment

Homeowners insurance

Check your credit score

A credit score signals to lenders how likely you will be to pay back a loan in full and on time based on your financial history.

A conventional loan in Vermont typically requires a credit score of 620.

If your credit score is lower than that, you have a few options:

You can work to improve your credit score and postpone your purchase until you’re able to qualify for a better mortgage

Veterans and active service members may apply for a mortgage through The Federal Housing Administration (FHA) and Veterans Administration (VA), which offer mortgages for homebuyers with credit scores as low as 523 and 500, respectively.

You may still qualify for a loan with low-credit loan options

Calculate your debt-to-income (DTI) ratio

Another financial factor to keep in mind is your debt-to-income ratio or DTI. Also assessed by lenders, this number signifies what you will be able to afford after taking on a mortgage.

To calculate your DTI, add up your monthly payments and divide them by your pre-tax gross monthly income. When adding up your monthly expenses, consider such payments as:

Rent or house payments

Car payments

Credit card payments

Student loan payments

Alimony or child support

For example, the average monthly income in Vermont amounts to $5,065, while the average monthly debt sits at $2,083. When divided, we end up with a debt-to-income ratio of 41%.

If your DTI is above 50%, you’ll have a hard time buying a house in Vermont. Aim for a DTI at or below 41%, especially if you want a conventional mortgage.

When evaluating what kind of mortgage you can afford with your monthly income, keep in mind other non-debt monthly payments, such as groceries, utilities, and retirement savings. While they won’t be included in your DTI calculation, it's important to plan for all expenses.

Key Takeaway Most mortgage lenders in Vermont will approve a conventional loan if you have a DTI of 41% or lower.

Determine your down payment

A down payment is the sum of money paid upfront when you obtain the home, calculated as a percentage of the home’s selling price. Lenders take your down payment to secure your incentive in paying off the loan and offset the risk of missed mortgage payments.

For a conventional loan in Vermont, you will need a down payment of 20%.

If you’re unable to make the down payment, there are down-payment assistance programs available throughout the state:

The

ASSIST Second Mortgage program

offers first-time homebuyers $5,000 as an interest-free 30-year mortgage, due only when you pay off your first mortgage, refinance, or sell your home.

The Veterans Administration (VA) allows veterans to qualify for a loan with no down payment on the condition of a one-time payment to VA.

You can qualify for a down payment as low as 3.5% with the Federal Housing Administration (FHA) if you pay for private mortgage insurance throughout the term of the loan.

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Key Takeaway A good down payment in Vermont is 20% of the property’s purchase price. If you’re unable to make this payment, check into government-backed loan programs.

Prepare for closing costs and other fees

To close the deal and finalize your transaction, you will need to pay for such services as appraisal fees, home inspection and loan application fees, property taxes, and homeowners insurance premiums.

These payments are known as closing costs and typically amount to 2-5% of the home’s price. Keep in mind that these payments are the responsibility of the home-buyer and are generally paid out-of-pocket.

To give you an idea of how much you should prepare to pay in closing costs, let’s examine the average closing cost amounts in Vermont.

If you purchase a home priced at the average Vermont selling price of $200,000 to $300,000, you can expect to pay between $4,000 and $8,000 in closing fees.

According to data from ClosingCorp, the average closing cost in Vermont is $5,946.84, or 1.98% to 2.97% of a home’s sale price.

MORE: How to make a counteroffer after a home inspection

Key Takeaway Prepare to pay between 2% and 3% in closing costs to finalize your transaction.

Look for homeowners insurance

In addition to protecting you from financial fallout following an unexpected accident or disaster on your property, many lenders will require you to have homeowners insurance to secure a mortgage.

Even if it’s not required, home insurance is a smart investment. However, finding the right homeowners insurance policy can be confusing, expensive, and difficult, and you may be tempted to buy the first policy you see.

To find the lowest rate in Vermont, compare rates from at least three different insurance companies. With the insurance broker super app

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MORE:

Does home insurance cover flooded basements?

Key Takeaway The first step to buying a house in Vermont is to evaluate your finances. Review your credit score, DTI, and savings for a down payment and closing costs.

Get preapproved for a mortgage

Once you have thoroughly evaluated your financial situation, you can move on to the next step in your home buying journey and apply for mortgage preapproval.

To confirm that you are financially capable of buying a home and closing a sale, your lender will investigate your finances and require you to produce documentation of tax returns, pay stubs, current debts, and proof of income.

In addition, you will need to provide your Social Security Number and fill out a mortgage application. Once all of your information has been provided, your lender will perform a hard credit check, which may take as long as 7-10 days.

If you’re approved, you’ll receive the loan amount and a letter of preapproval stating the financial parameters of your loan.

Keep in mind that applying for mortgage preapproval before you’re financially stable can hurt your credit score, so don’t apply until you are secure in your finances and ready for a mortgage!

Key Takeaway Getting preapproved for a mortgage demonstrates to sellers that you are financially qualified to close a sale.

How to pick the right mortgage in Vermont

There are two important factors to consider when choosing a mortgage: the mortgage term and interest rate.

A mortgage is a serious financial commitment that can last from 15-30 years. It’s important to assess all of your mortgage options before settling on your choice.

Long-term mortgages typically have lower monthly payments but higher interest rates, while short-term mortgages have higher monthly payments and lower interest rates.

Before you make your final decision, compare different lender options to find a mortgage that makes the most financial sense for you.

MORE:

Can you negotiate upgrades on new construction homes?

Look for a house

Now that all of your finances are in order, you can begin your house hunt!

There is a multitude of factors to consider when finding a new home. Start by prioritizing what is most important to you and guide your decision from there.

Pick your city or neighborhood

Finding the right location to buy a new home will depend on your personal preferences and priorities.

For example, when strictly assessing pricing, Orleans, Swanton, and Enosburg Falls rank as the top three most affordable cities in Vermont, while Burlington,

Winooski

, and Woodstock sit on the pricier side.

However, you may also want to consider a location’s crime rate, cultural attractions, and climate.

Does having a school nearby to your home matter to you, or are you more focused on the nightlife scene? Perhaps you want a mix of both!

Inform your real estate agent what you’re looking for in a city or neighborhood, as their professional expertise may bring you options you hadn’t originally considered.

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Buyer’s market vs. seller’s market

Your hunt for a house will not only depend on your personal preference but will be largely shaped by an area’s current housing market.

Knowing what kind of market you’re shopping in can help inform your decisions on where and when you want to buy a home.

If the supply of homes on the market is high and buyer demand is low, you’re shopping in a buyer’s market. In this type of market, houses decrease in value and can be sold for prices much lower than they would in a seller’s market.

When homes are in low supply and buyer demand is high, sellers are more likely to have bidding wars over their homes and sell the property for more money than the original value price. This is known as a seller’s market.

The market in Vermont is always changing and will impact how picky you can be when it comes to finding your new home.

Key Takeaway Do your research to determine what the current housing market looks like before making an offer.

Find a real estate agent

Whether you’re a first-time buyer or new to the area you're looking in, a real estate agent will smooth out the home buying process by giving you tips, information, and connecting you with other real estate professionals when necessary.

When choosing a real estate agent, pay attention to their qualifications, reviews, years of experience, and transactions in the last year.

Ensure your real estate agent can accurately summarise your needs and priorities, answer your questions, communicate effectively, and work promptly.

Make an offer

You’ve found the home of your dreams! Don’t take a deep breath just yet. Now comes the time to make an offer! Knowing how fast you need to act will depend on the current housing market.

In Vermont, homes typically stay on the market for 73 days before receiving an offer. Keep in mind that the market fluctuates with the seasons. In September, for example, homes tend to sell quicker than the rest of the year, while homes have sat on the market for an average of 109 days in April.

When in doubt, ask your real estate agent what the current time frame is for making an offer.

If your offer is accepted and all inspections and appraisals of the home have been completed, you can take your deep breath. You are now a Vermont homeowner!

MORE:

How to choose the right kind of home insurance for you

How to save on homeowners insurance

Before you run to the furniture store to decorate your new home, remember to purchase homeowners insurance for your new property. With the harsh winter weather and heavy mud season, you’ll want to have protection in place in case of disaster.

Luckily,

Jerry

takes the hassle out of comparing rates and will do all of the hard work for you. Jerry can even

bundle your home and auto policies

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FAQs

How much money do I need to buy a house in Vermont?

The exact amount will vary depending on where you’re buying, how big of a down payment you can make, and what kind of mortgage you qualify for. With average Kentucky home values at around $326,063, it’s wise to start with at least $66,212 in savings.

What credit score is needed to buy a house in Vermont?

Ideally, you should have a credit score of at least 620 to buy a house in Vermont. However, you may still qualify for an FHA loan or a VA mortgage if you have a good credit score.

What is the best place to buy a house in Vermont?

Woodstock is often recognized for its New England charm and family-friendly environment, while Orleans has been noted for its affordability and safety. However, if you’re on the hunt for a thriving art scene, check out Burlington.

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