Conventional Loan Guide for First-Time Buyers in Vermont

Conventional Loan

Conventional Loan Guide for First-Time Buyers in Vermont

Reviewed by the HomeMath editorial team Updated 2026-08-06

Key takeaways

Minimum credit score is usually around 620 for a conventional loan.
Down payments can be as low as 3% of the purchase price when eligible for first‑time‑buyer programs.
Maximum total debt‑to‑income ratio is typically about 45%, with a housing‑only DTI limit of roughly 36%.
Loan amounts are capped at the federal conforming loan limit, which is adjusted each year.
Closing costs generally range from 2% to 5% of the loan amount.

Conventional loans are mortgage products that are not insured or guaranteed by the federal government. They are a common choice for first‑time homebuyers in Vermont because they often offer competitive rates, flexible terms, and the ability to avoid mortgage insurance with a 20% down payment.

Key Eligibility Factors

Credit score: Lenders usually look for a score of 620 or higher. A higher score can secure better interest rates and lower fees.
Down payment: While 20% avoids private mortgage insurance (PMI), many conventional programs accept as little as 3% for qualified first‑time buyers, especially when paired with state assistance.
Debt‑to‑income (DTI) ratio: Total DTI should stay below about 45%, and the housing‑only DTI (including mortgage, taxes, and insurance) is often limited to roughly 36%.
Loan limits: The maximum loan size follows the federal conforming loan limit, which is updated annually and varies by county.

Typical Costs

Closing costs: Expect 2%–5% of the loan amount for fees such as appraisal, title, and attorney services.
Private mortgage insurance (PMI): Required if the down payment is less than 20%; the premium drops off once equity reaches 20%.

Vermont‑Specific Considerations

Most Vermont real‑estate closings are handled by attorneys rather than title companies, which can affect timing and fee structures.
The Vermont Housing Finance Agency (VHFA) offers first‑time‑buyer programs, including Mortgage Credit Certificates that turn a portion of the mortgage interest into a federal tax credit, and down‑payment assistance grants that do not have to be repaid.

Steps to Secure a Conventional Loan

Check your credit report and address any errors.
Save for a down payment and closing‑cost reserves.
Get pre‑approved by a lender to understand how much you can afford.
Shop for a home and make an offer.
Complete the loan application, provide documentation, and order an appraisal.
Review the loan estimate, negotiate any needed adjustments, and sign the closing documents.

This article provides general information and should not be considered personalized financial advice. Consult a qualified mortgage professional for guidance tailored to your situation.

FAQ

Can I still qualify for a conventional loan if I have student loan debt?

Yes, student loans are factored into your total DTI ratio. As long as your overall DTI stays below the lender’s limit (usually around 45%), you can qualify.

Do I need to pay private mortgage insurance if I put down 5%?

With a down payment under 20%, most lenders require PMI. The cost varies with loan size, credit score, and the insurer, but it can be canceled once you reach 20% equity.

How does the Vermont Mortgage Credit Certificate affect my taxes?

The MCC allows you to claim a federal tax credit equal to a percentage of the mortgage interest you pay each year, reducing your overall tax liability.

Is a higher credit score always better for a conventional loan?

A higher score typically earns a lower interest rate and may reduce or eliminate PMI, but lenders also consider income stability, savings, and overall debt load.

Can I use a conventional loan to buy a condo in Burlington?

Yes, as long as the condominium project is approved by the lender and meets the required occupancy and financial criteria.

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