Finding financing for first-time homebuyers


By Maura Collins

The local housing market is (finally) recovering in a real and measureable way. In Chittenden County prices of primary homes have increased 7 percent during the first seven months of the year compared to last year. The number of sales jumped 13 percent.

In a state with a steady and strong homeownership rate of 73 percent, many see this long-awaited increase in prices as good news. When a home’s value rises, so can the owner’s equity. This supports the economy through increased consumer spending if homeowners tap that equity for purchases or investments.

But there is a downside. For the 27 percent of Vermonters who currently rent, many are priced out of the homeownership market. Despite the recession, the rental market remained tight in many parts of the state. The median rent for a 2-bedroom apartment in Chittenden County is over $1,000 a month.

When rents rise faster than incomes — which is what we’ve seen in Vermont — it becomes harder for first-time homebuyers, who are more likely younger and with lower incomes, to save up for the down payment and closing costs required to purchase their first home.

The Vermont Housing Finance Agency’s (VHFA) programs, provide lower interest rate loans, mostly to first-time buyers. The median age for a VHFA borrower is 30, far below the median of 38 among all buyers in the state.

A household spending $1,000 each month for rent could likely afford to buy a home priced just over $230,000 if they had a 10 percent down payment and cash for closing costs.

For many renters, saving $23,000 for a down payment and $10,000 more for the closing costs typically charged in Vermont is impossible. That total is more than the annual median income of renters in our state.

Last year the Lake Champlain Chamber of Commerce’s Young Professionals Advocacy Task Force heard from 400 individuals who responded to their survey on housing. Almost half were dissatisfied with their current living situation. The primary reasons were the need for more space and the desire to own but inability to afford it. Almost half paid more than 30 percent of their income for housing, a standard considered “unaffordable.”

It isn’t only the employees who feel this pinch. Employers also are on record saying that housing prices greatly impact their ability to attract and retain workers. Two independent surveys of local employers by VHFA and the Greater Burlington Industrial Corp in 2011 confirmed this.

In this year’s economic development bill, the Legislature responded to this need by expanding the Vermont Housing Tax Credit program so that eligible first-time buyers who qualify for a VHFA mortgage can now get an interest-free second mortgage up to $5,000. The second mortgage, called an ASSIST loan, can help eligible new homebuyers cover a wide range of closing costs and their required down payment. There are no monthly payments required on this second mortgage and the balance is due when the home is sold or refinanced.

VHFA works with participating lenders across the state who can explain program details and restrictions. A list of these lenders and information about the ASSIST loan is available at

The Vermont Housing Tax Credit program has historically provided funding for developers to construct affordable housing. The additional credits will be available for three years and should provide down payment assistance for an estimated 300 first-time homebuyers. VHFA received several offers from investors to purchase the credits and ultimately chose Union Bank who committed to purchase the credits available for all three years. With the program funding complete, all VHFA participating lenders now have the ability to access this down payment assistance for their borrowers in conjunction with a first mortgage through VHFA.

VHFA’s mission is to finance and promote affordable, safe and decent housing. Through this new program, we hope to make the access to homeownership in our state more equitable. By supporting our state’s first-time buyers and young professionals, Vermont is strengthening its housing market and economy.


Maura Collins is director of policy and administration at the Vermont Housing Finance Agency.