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Buying a home with a VHFA loan

why choose vhfa?

  • LOW interest rates
  • VARIOUS downpayment options
  • SAVINGS OF UP TO $500 thanks to an exemption from Vermont's Property Transfer Tax

VHFA does not make loans directly to consumers. Instead, we offer low-rate mortgage programs for eligible borrowers through participating lenders located throughout the state.

Learn the ins and outs below, and then take that first step:

Contact a VHFA participating lender!

*See Cash Assistance Rate Option

20 questions

  1. How do I apply for a VHFA home loan?
  2. How can VHFA help me
    finance a home?
  3. What are your current
    interest rates?
  4. What home loan programs does
    VHFA offer?
  5. Are VHFA loans subject to income and
    purchase price limits?
  6. Do I have to be a first-time buyer/homeowner?
  7. Do I have to live in the property?
  8. Do I have to be a Vermont resident?
  9. Do I have to attend homeownership classes or counseling?
  10. Do I need a down payment?
  11. Are there special closing costs?
  12. Can I get VHFA financing without my spouse?
  13. Can I get VHFA financing with another person?
  14. Am I eligible for a VHFA home loan?
  15. Do I financially qualify for a VHFA home loan?
  16. What are VHFA's requirements for credit?
  17. How does VHFA consider my credit score?
  18. What type of property can I buy with a VHFA loan?
  19. Does VHFA inspect the property?
  20. Am I subject to special requirements — such as Federal Recapture Tax — when I sell or refinance?

More questions?
Contact a VHFA participating lender

  1. How do I apply for a VHFA home loan?
    VHFA does not make home loans directly to homebuyers. You must apply for a VHFA loan through a participating lender. Rates and requirements for VHFA loans are identical no matter which participating lender you choose.

    A participating lender will:
    • Review your information to determine your eligibility for VHFA;
    • Determine the loan amount you qualify for;
    • Work with you to complete an application and other required forms; and
    • Process your loan application

    If you have questions during the application process, contact your lender.




  2. How can VHFA help me finance a home?
    VHFA is not a conventional financial institution that makes home loans directly to consumers. Instead, we work with participating lenders to make sure our low-rate loans are available to all eligible homebuyers.

    We offer low rates, flexible downpayment options, and a special Cash Assistance Rate Option to help you with closing costs and/or downpayments.

    Furthermore, all VHFA borrowers are exempt for up to $500 of the Vermont Property Transfer Tax.



  3. What are your current interest rates?
    VHFA's 30-year 0 point interest rate for stick-built homes is 6.25% (APR 6.25% points only). Current rates are available on VHFA.org. Rates are subject to change without notice.

  4. What home loan programs does VHFA offer?
    VHFA offers programs to purchase properties and a limited refinance program. We do not offer programs for construction loans, home improvements loans or general refinance.

    Our current programs are:


  5. Are VHFA loans subject to income and purchase price limits?
    Yes. All applicants must meet VHFA's income limits and purchase price limits. Income limits are based on family size and the area you are buying in. Purchase price limits are based on location and whether the property is existing, new or a two-unit.



  6. Do I have to be a first-time buyer/homeowner?
    You must be a first-time buyer or not have owned a home in the past three years if you are buying a property in one of the following counties:
    • Addision
    • Bennington
    • Chittenden
    • Grand Isle
    • Windsor
    There is an exception in the Burlington Targeted Area, which is Census Tract 4. To determine if a property is in the Burlington Targeted Area, go to www.census.gov and click on American FactFinder; enter the street address as requested.

    You do not have to be a first-time buyer if you are purchasing in any other county in Vermont.

  7. Do I have to live in the property?
    Yes. You must begin to live in the property within 60 days after you close the VHFA loan and the property must be your primary residence for as long as you have the VHFA loan.



  8. Do I have to be a Vermont resident?
    No, but the property you're buying must be located in Vermont and you must occupy the property as your principal residence. You must meet the first-time buyer requirement, as applicable, and you cannot own another principal residence in Vermont or another state.

  9. Do I have to attend homeownership classes or counseling?
    VHFA only requires that applicants be a client of a NeighborWorks® HomeOwnership Centers of Vermont to be eligible for our HOUSE Program, or when purchasing manufactured housing, and sometimes limited programs that VHFA offers. To be a client, you must attend an orientation session, homeownership classes and one-on-one counseling. While not required for all VHFA loans, we strongly recommend all first-time homebuyers to attend homeownership education classes. In addition to the pre-purchase education the NeighborWorks® HomeOwnership Centers of Vermont offer, in some cases, they can provide financial assistance for home purchase. Homeownership Centers are located throughout Vermont. For more information visit the Homeownership Centers on the web.

  10. Do I need a downpayment?
    You must have sufficient cash assets to complete the transaction — downpayment and the cost of closing the loan. Depending on your credit history, you might be required to have a downpayment, and in some cases, part of the downpayment might have to come from your own savings. To assist buyers who need additional funds for downpayment and/or closing costs, VHFA offers a Cash Assistance Rate Option program. Additional eligibility requirements apply for this optipon.

    Note: Mortgage insurance is required on all loans that have less then a 20% downpayment. Your participating lender will give you details on the mortgage insurance.

     

  11. Are there special closing costs?
    No. The closing costs for a VHFA loan are similar to a conventional loan. One reduced cost is the Vermont Property Transfer Tax. VHFA borrowers are exempt from the Vermont Property Transfer Tax on the first $100,000 of the purchase price, resulting in up to $500 savings.



  12. Can I get VHFA financing without my spouse?
    Yes. You may apply for a loan yourself. However, due to the source of VHFA's funding, your spouse must meet all of the program eligibility requirements (See question #14), and your combined income must be within VHFA's income limits. Your spouse will be required to sign specific VHFA documents and provide copies of tax returns to verify eligibility.



  13. Can I get VHFA financing with another person?
    Yes. The other co-owner must meet the program eligibility requirements (See question #14), be financially qualified (See question #15) and have acceptable credit (See questions #16). Only individuals approved by VHFA are allowed to take title to the property.

  14. Am I eligible for a VHFA home loan?
    You must meet the following program eligibility requirements:
    • Income: Your gross annual income must not exceed the income limit by family size in the area you plan to purchase a home. (See income limits.) You must also have sufficient regular income to support the mortgage payment, other housing-related expenses and personal debts. A participating lender will review your earnings history to determine if your income is within the income limits and is sufficient to support your loan amount request.
    • Purchase price: The property you are buying must be within the current purchase price limits.
    • First-time homebuyer: In most areas you are not required to be a first-time homebuyer. Only in Addison County, Bennington County, Chittenden County (except for Census Tract 4 in the City of Burlington), Grand Isle County and Windsor County, you must not have owned a principal residence within the past three years. You do not have to be a first-time home buyer if you are purchasing in any other county in Vermont.
    • Other real estate: At the time you close the VHFA loan, you cannot also own other real estate except for:
      • A vacation property unsuitable for year-round occupancy;
      • Vacant land; or
      • Commercial real estate (that does not include residential rental units;
      • Single-wide mobile home in a park that is not permanently affixed
    • Occupancy: You must occupy the purchased property as your principal residence within 60 days after you close your loan and for as long as you have the VHFA mortgage.
    • New home loan: We provide home loans to purchase a property that you do not already have an interest in. VHFA does not refinance existing home loans, except under the Limited Refinance Program.


  15. Do I financially qualify for a VHFA home loan?
    To determine if you financially qualify, discuss your qualifications with a participating lender. Items considered in qualifying are:
    • Income/Employment: Your employment and income history will be reviewed for stability. You must have a source of stable income that is sufficient to cover the expenses related to the mortgage and all other debts.
    • Monthly mortgage payment: As a general guideline for affordability, a percentage of your income is considered to cover your monthly mortgage payment plus a monthly escrow.
    • Escrow: VHFA requires that your monthly mortgage payment include an escrow of these items. Plus:
      • Principal and interest
      • Property taxes;
      • Homeowner's insurance; and
      • Mortgage insurance and flood insurance, when applicable



  16. What are VHFA's requirements for credit?
    • Credit history: You must have a sufficient and acceptable credit history that shows an ability and willingness to meet payments when due. Your credit history will determine your down payment. Your credit history may be reflected in the credit score provided on your credit report, which will impact your downpayment requirement (See question #10). If you have had past credit difficulties, you should discuss this with a participating lender. Your lender can determine if your credit is acceptable.
    • Your credit report: Credit agencies collect and organize information about you and your credit history. For information on your credit report, contact one of the following credit agencies:
    • More help: For assistance with credit issues, contact Consumer Credit Counseling Service of NH/VT


  17. How does VHFA consider my credit score?
    In most cases, you'll have a credit score that's based on your credit history. Your credit score helps determine the amount of downpayment you will be required to have and the percentage of your income that can be considered to support your debts. Your lender will determine the credit score to be used and your eligibility based on the applicable score.



  18. What type of property can I buy with a VHFA loan?
    VHFA provides financing for various property types. For a property to be eligible for a VHFA loan, it must be within the purchase price limits, meet the property requirements and be an eligible property type.
    • General property requirements
      • All properties must be safe, reasonably livable, and meet all state and local building and zoning codes.
      • All properties must have a potable water supply, be structurally sound and all mechanical systems must be in good working condition.
      • Newly-constructed properties must be fully completed
    • Existing two-family houses
      • Both units must have been a residence for the previous five years.
    • Existing and newly-constructed single-family houses
      • The amount of land sold with the property cannot exceed 15 acres and must be one contiguous parcel
      • VHFA does not offer construction financing
    • Existing and newly-constructed condominium units
    • Manufactured Housing
      • Existing and new single- and double-wide mobile homes
        • VHFA will consider mobile homes on owned land (not to exceed 15 acres) or in eligible parks. A listing of VHFA approved condo projects/mobile home parks is available online.
        • The wheels, hitch and axles must be removed.
        • The unit must be attached to a permanent foundation that must consist of:
          • Poured concrete slab;
          • Poured concrete support columns installed below the frost line; or
          • Concrete block piers that are set upon poured concrete footers installed below the frost line.
        • Piers and columns must be of sufficient size and adequate bearing to support the unit.
        • Insulated skirting must be installed around the perimeter to protect the undercarriage from air infiltration.
        • Mobile homes in parks must be in a VHFA-eligible park and are restricted to a 20-year term.
        • Pre-1976 units must be currently financed with VHFA, are restricted to a 20-year term and require a full property inspection by a qualified property inspector.



  19. Does VHFA inspect the property?
    No. The participating lender you apply with will have the property appraised by a professional real estate appraiser. The appraiser will determine, for the use of the lender, the current value of the property for lending purposes. The appraisal is not a property inspection. For existing properties, we recommend you hire a qualified home inspector to perform a property inspection.



  20. Am I subject to special requirements —such as Federal Recapture Tax — when I sell or refinance?
    Due to the source of VHFA's funding, some borrowers may be subject to what is known as Federal Recapture Tax. Whether an individual borrower is subject to the Federal Recapture Tax is determined at the time the property is sold and if certain other factors apply. The Federal Recapture Tax is regulated by the Internal Revenue Service.

    However, VHFA will reimburse homeowners who closed their VHFA mortgage loan on or after Feb. 1, 2006, for any validated Federal Recapture Tax liability actually paid if the specific guidelines are met. You still may be liable for the Federal Recapture Tax, but you may be reimbursed the amount of the Recapture Tax you paid from VHFA. Read more about requirements for reimbursement.

    The Federal Recapture Tax does not require you to provide information about your income each year, and your loan's interest rate and payment are not adjusted annually based on your income. Federal Recapture Tax is only applicable if you sell or dispose of your property within the first nine years of your VHFA loan and is based on information only in the year you dispose of the property.

    It is important to know that you are subject to Federal Recapture Tax only if you meet very specific requirements at the time you sell or otherwise dispose of your property. It is not possible to determine if you will be subject to the tax at the time of application. The maximum Federal Recapture Tax that could potentially be owed is no more than 6.25% of the original loan amount. At application and closing, your lender will provide you with additional information on the Federal Recapture Tax.

    For you to be subject to the Federal Recapture Tax, you must meet all three of the following requirements:
    • Dispose of your property within nine (9) years from the date of the loan. If you do not sell within the first nine years, you are no longer subject to the Federal Recapture Tax.
    • Your income at the time you sell must exceed specific income limits. The income limits that determine this are not the same as the limits used to determine if you are eligible for the home loan. The income limits used for the Recapture Tax are much higher. At the time you close on your VHFA home loan, you will receive a chart showing the income limits that will apply to you.
    • You must make a net profit on the sale of the property.

    If you sell or otherwise dispose of the property within the first nine years, you must complete and file IRS Form #8828 with your tax returns.

    The Federal Recapture Tax is paid directly to the IRS. VHFA does not calculate nor accept payment for the Federal Recapture Tax.

    You are not subject to the Federal Recapture Tax if you refinance within the first nine years. You must sell the property as explained above for this tax to apply.
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