A First-Time Home Buyer's Guide to Vermont: Financing, Inspections, and Closing

Buying a first home in Vermont comes with its own set of things to understand. The housing stock is old, many homes run on private wells and septic systems, and the programs that help first-time buyers have rules that differ by county. This guide covers the steps in order, from financing to the transfer tax at closing.

What should I do first?

Get pre-approved before anything else. In lower-inventory markets, well-priced homes in good condition can draw multiple offers soon after listing, and a seller will take an offer more seriously when financing is already in order.

Pre-approval is different from pre-qualification. Pre-qualification is a quick estimate based on what you tell the lender. Pre-approval means the lender has verified your income, assets, credit, and employment, and it carries real weight when you make an offer. Get it before you fall for a house.

Should I use a local Vermont lender?

National lenders can work, but a local lender often understands Vermont property types, including rural parcels with wells and septic systems, and can sometimes move faster at critical moments. A listing agent who has worked with a lender before may have more confidence in your offer.

What programs help first-time buyers in Vermont?

The Vermont Housing Finance Agency (VHFA) offers several loan programs through participating lenders:

• MOVE: often VHFA's lowest interest rate.
• MOVE MCC: includes a Mortgage Credit Certificate, issued at closing, that provides an annual federal income tax credit of up to $2,000.
• ADVANTAGE: VHFA's program with the highest income and purchase price limits.

Income and purchase price limits apply to all three. For MOVE and MOVE MCC, buyers purchasing in Addison, Bennington, Chittenden, Grand Isle, or Windsor county must not have owned a home in the past three years. A VHFA-participating lender can tell you which programs you qualify for.

USDA Rural Development guaranteed loans offer 100 percent financing, with no down payment, to eligible buyers purchasing a primary residence in an eligible rural area. Household income limits apply. Check a specific address and your income against the USDA program requirements before you count on it.

A good lender will know how these programs can work together and will tell you honestly which ones fit. Ask early.

What does a home cost beyond the price?

The sticker price is only part of the picture. Heating an old farmhouse through a Vermont winter, replacing a failing well pump, or getting reliable internet in a rural town can change the math significantly.

Heating deserves particular attention. What you'll spend depends on the size of the house, its insulation, and whether it runs on oil, propane, wood, or a heat pump. Ask for a year of heating bills before you make an offer.

Property taxes vary by town. Under Vermont's education funding system, each town's homestead education tax rate reflects the amount that community has voted to spend on education, according to the Vermont Department of Taxes. Ask for the most recent tax bill on any property you're seriously considering.

Should I waive the home inspection?

Buyers in competitive situations sometimes feel pressure to waive the inspection contingency. In Vermont, think very carefully before doing that. Much of the housing stock is old, and even a well-kept farmhouse can have problems a thorough inspection will find.

A standard inspection covers the structure, roof, foundation, electrical, plumbing, and heating. For many Vermont properties, you also want:

• A well flow test and a water quality test. The Vermont Department of Health recommends testing private wells for bacteria, inorganic chemicals, and gross alpha radiation.
• A septic inspection. Ask when the system was last pumped and inspected, and have it evaluated before closing.
• A look at the heating system. An old boiler or furnace can work fine and still be near the end of its life. Know what you're taking on.

Ask your agent for inspectors who know older New England construction.

What Vermont-specific issues should first-time buyers know?

• Broadband. Coverage in rural Vermont still has gaps. If you work from home, confirm service at the specific address before you make an offer. "Available in the area" isn't the same as "available at this house."
• Private roads. Many properties are reached by private roads shared with neighbors. Make sure there's a written maintenance agreement and that you understand your share of plowing, grading, and gravel.
• Act 250. Act 250 is Vermont's land use and development law, which reviews major subdivisions and developments. If the property is a larger parcel or has development potential, ask whether Act 250 review could apply.
• Current use. Land enrolled in Vermont's Current Use program is taxed on its farm or forest use value instead of its market value. If the land is later developed or its use changes, a Land Use Change Tax may apply, so understand the enrollment before you buy.

For land-heavy purchases, this guide to buying rural land in Vermont covers road access, Act 250, and current use in more depth.

How does working with a buyer's agent work now?

Since August 17, 2024, under practice changes from the National Association of Realtors settlement, offers of compensation to buyer's agents can no longer be published on the MLS, and agents working with a buyer must have a written agreement with the buyer before touring a home. The agreement should spell out how your agent is paid. Sellers may still agree to cover some or all of it as part of negotiation, but it isn't guaranteed, so talk it through openly before you sign.

Look for an agent who knows the specific towns you're considering, including which roads are hard to travel in mud season, and who has working relationships with local inspectors and lenders.

What happens after my offer is accepted?

Earnest money deposits are typically one to three percent of the purchase price, and the period from accepted offer to closing typically runs four to six weeks, covering inspections, financing, the title search, and any negotiation after inspection.

Your lender must give you a Loan Estimate within three business days of receiving your application, according to the Consumer Financial Protection Bureau. It lays out the expected interest rate, monthly payment, and closing costs.

How much is Vermont's property transfer tax?

The buyer pays Vermont's property transfer tax at closing. For a principal residence, the first $200,000 of value is taxed at 0.5 percent, and value above $200,000 is taxed at 1.25 percent plus a 0.22 percent Clean Water Surcharge, or 1.47 percent in total, according to the Vermont Department of Taxes. On a $350,000 principal residence, that works out to $3,205: $1,000 on the first $200,000 and $2,205 on the remaining $150,000.

Buying a first home in Vermont is worth doing carefully. Most of the expensive surprises here are ones you can find before closing if you ask the right questions.