Compare mortgage rates in Vermont.

Introduction to Mortgage Interest Rates

In a constantly evolving Vermont real estate environment, staying informed about mortgage rates is crucial for homebuyers. Mortgage rates play a major role in determining the affordability of a home, and even small fluctuations can have a big impact on monthly payments and overall borrowing costs.

Mortgage interest rates are determined by a complex combination of economic factors and the borrower’s financial status. If you’re house-hunting in Vermont, it pays to take some time to understand these details, as well as what types of mortgage are available — so you can decide what’s best for you and your finances.

Where Mortgage Rates Come From

To understand mortgage rates, it’s essential to know where they come from. The Federal Reserve, also known as the Fed, sets rates that serve as a benchmark for other interest rates, including mortgage rates. Inflation and unemployment rates also factor into the mix.

But your personal financial profile — namely your credit score, income, and assets — also plays a significant part in what mortgage rate you may be offered. We’ll dig into that later.

How Interest Rates Affect Home Affordability

The mortgage rate you get on your home loan will have a significant impact on home affordability. Even small changes in interest rates can make a substantial difference in monthly mortgage payments and the overall cost of buying a home.

For example, consider a $300,000 mortgage with a 30-year term. A one-percentage-point increase in the interest rate from 4.00% to 5.00% would result in a monthly payment increase of almost $200. Over the life of the loan, this difference would amount to more than $64,000 in additional interest paid.

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Should Homebuyers Wait for Interest Rates to Drop?

Many people wonder whether they should buy now or wait for interest rates to come down. While it’s tempting to try to time the market, predicting future interest rate movements is notoriously difficult. Waiting for interest rates to drop may mean missing out on lower home prices or increased inventory. If you’re a first-time buyer, waiting also delays the process of building equity in a home that you own.

For these reasons, it’s generally advisable to make a home purchase decision based on current financial circumstances and long-term plans, rather than solely relying on the hope of lower interest rates in the future. (P.S.: You can always refinance your mortgage later if rates decrease significantly.)

Vermont Mortgage Rate Trends

Understanding historical mortgage rate trends can provide valuable insights. Vermont’s mortgage rates have fluctuated over the years, but they generally follow national trends, often above but sometimes below the national average and never deviating by a full point.

Historical U.S. Mortgage Rates

To provide a broader perspective, let’s look at historical U.S. mortgage rates over several decades. While current rates may seem high compared to recent years, they are still relatively low compared to historical numbers.

Factors Affecting Mortgage Rates in Vermont

Numerous factors influence mortgage rates in Vermont and nationwide. Some of these factors are economic, while others are entirely within the homebuyer’s control. If you want a sense of where rates are heading, you can first look to the economic indicators:

Economic Factors

Economic factors that impact mortgage rates include the federal funds rate, inflation, and unemployment rates.

•  The Federal Reserve (Fed): The Fed’s rates serve as a benchmark for other interest rates, including mortgage rates. When rates rise, it becomes more expensive for banks to borrow money, leading to higher mortgage rates. Conversely, when the Fed lowers its rate, mortgage rates often dip, too.

•  Inflation: When inflation rises, the purchasing power of money decreases, making it more expensive for lenders to lend money. They may increase interest rates to compensate.

•  Unemploment rate: The unemployment rate is one of the things the Fed watches as it sets its rates. Moreover, low unemployment indicates a strong economy, which may generate increased competition in the housing market.

Consumer Factors

In addition to economic factors, your personal finances may affect the specific mortgage rate you’re offered. These include:

•  Credit score: A credit score is a numerical representation of your repayment behavior. A higher credit score generally indicates a lower risk of default, which makes a borrower more attractive to lenders. The lender may offer a lower mortgage interest rate as a result.

•  Down payment: A larger down payment reduces the loan amount — and thus the risk — required of the lender. As a result, borrowers who make a larger down payment often qualify for lower mortgage interest rates.

•  Income and assets: A steady income and sufficient assets are important factors considered by lenders, who want to ensure that borrowers have the financial means to repay the loan even if times get tough.

•  Type of mortgage loan The type of mortgage loan a buyer chooses can help determine the interest rate offered. Adjustable-rate mortgages (ARMs) typically offer lower initial rates compared to fixed-rate mortgages. Government-backed loans, such as FHA and VA loans, may also have lower interest rates.

Types of Mortgages Available in Vermont

Vermont offers various mortgage types to meet the needs of different homebuyers. These include:

Fixed-Rate Mortgage

A fixed-rate loan offers a constant interest rate throughout the life of the mortgage. This provides stability and predictability in monthly payments, making it a popular choice for homebuyers who prefer certainty.

Adjustable-Rate Mortgage (ARM)

An ARM starts with a lower interest rate compared to a fixed-rate mortgage. However, after the introductory period the interest rate can adjust periodically based on market conditions. ARMs can be an especially good option for borrowers who plan to sell or refinance their home before the fixed-rate period ends.

FHA Loans

Backed by the Federal Housing Administration, these loans offer more flexible eligibility requirements compared to conventional loans. They are designed to make homeownership more accessible for first-time buyers and those with less-than-perfect credit.

VA Loans

Eligible veterans, active-duty military members, National Guard and Reserve members, and surviving spouses find these loans hard to beat because they offer competitive interest rates and do not require a down payment. A Certificate of Eligibility from the VA is required to obtain a VA loan.

USDA Loan

Backed by the U.S. Department of Agriculture, these loans are designed for borrowers looking to purchase a home in a rural area. There is a maximum income threshold for eligibility which varies based on location. They feature competitive interest rates and flexible credit requirements.

Jumbo Loans

Buyers who need a mortgage that exceeds the conforming loan limits set by the Federal Housing Finance Agency (FHFA) will need to apply for this type of loan. In Vermont, as in most of the U.S., you’ll need a jumbo loan if your mortgage amount exceeds $832,750. Jumbo loans typically have stricter credit requirements compared to conforming loans. However, they offer the advantage of allowing borrowers to finance pricey properties.

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Popular Places to Get a Mortgage in Vermont

Securing a mortgage often depends on choosing the right location, where there are homes available at affordable prices. Burlington, as Vermont’s largest city, is a popular place to buy in Vermont. But the average home value there is over $500,000, so if you’re looking for places that tend to have less-expensive properties, you’ll have to head to the suburb of South Burlington, or venture further into some of the less-expensive and more rural locations below:

Least Expensive Locations

Vermont ranks 16th among U.S. states based on its cost of living, so it’s not a cheap place to live. But for homebuyers looking for the best affordable places in the U.S., Vermont offers some gems, including:

•  Newport: A lovely lakefront city near the Canadian border, Newport is a tourist-friendly town but not an expensive one. The cost of living here is 12% below the state average, making it one of Vermont’s least costly towns.

•  Derby Line: A neighbor of Newport, the village of Derby Line is on the Canadian border and boasts Vermont’s lowest cost of living.

•  Montpelier: Vermont’s capital city is a dynamic place that attracts young adults looking for outdoor recreation. It also has a cost of living that’s four points below the state average.

Most Expensive Locations

For those seeking more luxurious properties, Vermont also offers several options, including not only Burlington but also Shelburne (where the average home value tops $680,000) and the tourist-friendly Green-Mountain town of Manchester.

Tips for Securing a Competitive Mortgage Rate in Vermont

Securing a competitive mortgage rate is crucial for saving money over the life of a loan. Take these steps to secure a competitive mortgage rate in Vermont:

Compare Interest Rates and Fees

Take the time to add up the total cost of interest rates and fees and compare the results from multiple lenders. Especially if you are buying your first home, don’t just go with the first offer you receive. Be sure to ask for specifics about any upfront costs or closing fees associated with the loan.

Get Preapproved

Going through the mortgage preapproval process strengthens your position as a buyer and allows you to make an offer with speed when you find the right property. Mortgage preapproval also gives you a very clear understanding of how much house you can afford to buy and what your payments might look like. If you’re worried about interest rates rising, you can pay a fee to the lender to lock in your rate for up to 90 days.

Vermont Mortgage Resources

Vermont offers resources to assist would-be homeowners, particularly those who qualify as a first-time homebuyer and those with limited financial resources (who are often one and the same). These resources include:

First-Time Homebuyer Programs

Vermont Housing Finance Agency (VHFA) offers a variety of mortgage programs. The MOVE program is for first-time homebuyers and has both income and home price limits. But if you qualify, it often offers the lowest VHFA interest rate. Vermont also has a mortgage credit certificate which provides for an annual federal income tax credit of up to $2,000. Again, there are income and other eligibility criteria.

Down Payment Assistance

VHFA’s ASSIST is a down payment assistance program for eligible homebuyers. The program provides up to $10,000 toward down payment and closing costs in the form of a 0% loan repayable upon the sale of the property or the complete payment of the first mortgage. Applicants must have less than $30,000 in combined liquid assets to qualify.

Tools & Calculators

Tools and calculators can help would-be homeowners determine their home-buying budget, estimate their monthly mortgage payments and see how different down payment amounts might impact their budget and payments.

Refinancing Options in Vermont

A mortgage refinance can be a smart financial move to lower your interest rate, reduce your monthly payments, or access cash for other purposes (the latter requires what’s known as a cash-out refinance). Most lenders offer refinancing of conventional mortgages, and there are also refi options for government-backed loans such as:

•  FHA Streamline Refinance: The FHA Streamline Refinance allows FHA-insured homeowners to refinance into current mortgage rates with no appraisal and limited closing costs.

•  Interest-Rate Reduction Refinance Loan: An Interest-Rate Reduction Refinance Loan can reduce the monthly payments on VA loans. No credit or income verification is required and you may not need an appraisal.

Closing Costs, Taxes, and Fees in Vermont

When purchasing a home in Vermont, it’s important to factor in closing costs, taxes, and fees associated with the transaction. These costs can vary depending on the purchase price of the home and the type of loan obtained, but in general buyers in Vermont can expect to pay between 3% and 6% of the home’s purchase price in closing costs. These costs may include loan origination fees, appraisal fees, title insurance, and recording fees.

The Takeaway

The Green Mountain State offers a range of mortgage options for homebuyers. By staying informed about current mortgage rates, exploring assistance programs, and carefully considering refinancing options, individuals can make strategic decisions that align with their financial goals and put down roots in Vermont.

FAQ

Will mortgage rates drop in Vermont?

At some point in the future mortgage rates will likely drop in Vermont. It’s knowing exactly when that is the tricky part. Stay informed about economic trends and monitor interest rates through online research to make an informed decision about the right time to buy.

Will mortgage rates ever go back to normal?

The definition of “normal” mortgage rates varies over time and what feels normal to one generation might feel high to another, so it’s hard to say.

Will Vermont home prices ever drop?

Vermont home prices are influenced by various factors, including supply and demand and economic conditions. Your best bet is to seek out one or more local real estate agents in the specific area of Vermont where you might be buying. They’re most likely to have their finger on the pulse of the local market.

Is it a good time to buy a house in Vermont?

The decision of when to buy a house involves personal financial considerations, housing market conditions, and individual preferences. There is no one-size-fits-all answer. Factors such as affordability, interest rates, and long-term financial plans will determine the best time to purchase a home in Vermont.

How do I lock in a mortgage rate?

To lock in a mortgage rate, you can pay a fee to the lender. This locks in the interest rate for a specified period, typically ranging from 30 to 90 days. Locking in a rate can provide peace of mind and protect against potential interest rate increases during the loan application process.

How do mortgage interest rates work?

Mortgage interest rates are determined by a combination of economic factors, including the Federal Reserve’s interest rate decisions, inflation, and unemployment rates. Lenders use these factors to assess the risk associated with lending money and set interest rates accordingly. Borrower-specific factors, such as credit score, down payment, and loan type, also influence the interest rate offered.

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SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.

†Veterans, Service members, and members of the National Guard or Reserve may be eligible for a loan guaranteed by the U.S. Department of Veterans Affairs. VA loans are subject to unique terms and conditions established by VA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. VA loans typically require a one-time funding fee except as may be exempted by VA guidelines. The fee may be financed or paid at closing. The amount of the fee depends on the type of loan, the total amount of the loan, and, depending on loan type, prior use of VA eligibility and down payment amount. The VA funding fee is typically non-refundable. SoFi is not affiliated with any government agency.

¹FHA loans are subject to unique terms and conditions established by FHA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. FHA loans require an Upfront Mortgage Insurance Premium (UFMIP), which may be financed or paid at closing, in addition to monthly Mortgage Insurance Premiums (MIP). Maximum loan amounts vary by county. The minimum FHA mortgage down payment is 3.5% for those who qualify financially for a primary purchase. SoFi is not affiliated with any government agency.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

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