Vermont VA Loan: What Veterans Need to Know Before Buying

VA loans are one of the best financing tools available in American real estate — zero down payment, no private mortgage insurance, competitive interest rates, and a funding fee that sellers can cover. They work well in Vermont. But Vermont layered its own legal requirements on top of the standard VA process, and veterans who do not understand those state-level requirements sometimes run into unexpected complications at closing.

Here is what is different about using a VA loan specifically in Vermont.

The VA Loan Basics Still Apply

The core VA loan program works the same in Vermont as it does in every other state:

• Zero down payment required — you can finance 100% of the purchase price up to the conforming loan limit
• No private mortgage insurance (PMI) — this alone saves hundreds of dollars per month compared to a conventional loan with less than 20% down
• 2026 conforming loan limit for all Vermont counties: $832,750 — anything above this is a jumbo loan and requires a down payment
• VA Funding Fee: For first-time VA loan users with zero down, the funding fee is 2.3% of the loan amount. This can be financed into the loan or paid at closing. Certain veterans with service-connected disability ratings of 10% or higher are exempt from the funding fee entirely.

These fundamentals are unchanged in Vermont. What Vermont adds on top is where preparation matters.

Vermont Is an Attorney State

This is the most important Vermont-specific fact for any buyer using any loan type: Vermont is an attorney state. Unlike the majority of U.S. states where title companies or escrow agents run closings, Vermont law requires a Vermont-licensed attorney to represent your interests, conduct the title examination, and execute the closing.

You will need to budget for attorney fees that do not exist in many other states:

• Buyer's attorney fees: $1,400 to $1,750 for a standard residential transaction
• Title search: $250 to $600 (sometimes included in the attorney fee, sometimes itemized separately)
• Lender's title insurance: Required by the VA — $500 to $1,500 depending on purchase price
• Owner's title insurance: Strongly recommended given Vermont's historic housing stock and complex rural title chains — another $500 to $1,500

The VA allows seller concessions of up to 4% of the loan amount, which can cover the funding fee and some of these closing costs. Negotiating seller concessions to offset Vermont's closing cost structure is worth discussing with your agent.

Vermont records all real estate instruments at the local town clerk's office — not at a county courthouse. There is no centralized state registry. Your attorney examines grantor-grantee indexes at the specific municipal clerk's office where the property is located, which can be particularly complex in smaller rural towns.

The Vermont Property Transfer Tax

In most states, the seller pays transfer taxes. In Vermont, the buyer pays them. This is a non-negotiable statutory requirement that applies to VA loan purchasers just as it applies to everyone else.

For a principal residence purchase — which VA loans, by their nature, always are — the rate structure is:

• 0.5% on the first $200,000 of the purchase price (Clean Water Surcharge exempt on this tier)
• 1.47% on the remaining balance above $200,000

On a $350,000 VA purchase, that is $1,000 on the first $200,000 plus $2,205 on the remaining $150,000 — a total transfer tax of $3,205.

VA loans do not qualify for Vermont's Exemption 99 (which reduces the rate to 0% on the first $250,000 for VHFA and USDA-backed loans). The standard principal residence rates apply. This is a meaningful closing cost that first-time buyers sometimes underestimate.

The VA Minimum Property Requirements in Vermont

The VA Minimum Property Requirements (MPRs) ensure the home is safe, sound, and sanitary at the time of purchase. In Vermont's older housing stock, MPRs create specific friction points that buyers using conventional financing might be able to negotiate around more easily.

Heating Systems

Vermont homes rely heavily on oil heat. A VA appraisal will flag a home if the heating system is not capable of maintaining 50 degrees Fahrenheit in all living areas without requiring continuous operation. Oil furnaces in poor repair, or homes that rely primarily on wood stoves as their sole heat source, may require remediation before VA financing is approved.

VA appraisers also scrutinize oil tank condition. A red-tagged above-ground storage tank — prohibited from receiving fuel delivery under Vermont law — is almost certainly a VA appraisal failure. Confirm tank compliance before making offers on oil-heated homes.

Private Wells and Septic Systems

An estimated 40% of Vermont households rely on private drilled wells. The VA requires that water from a private well be tested and meet local health standards before closing. This is Vermont law as well — sellers must provide Department of Health groundwater information to buyers within 72 hours of executing a purchase and sale agreement.

Test specifically for:

• Total coliform and E. coli (standard)
• Arsenic (naturally occurring in Vermont's Champlain Valley and Piedmont geology — two out of five wells in some towns test above safe levels)
• Uranium (naturally occurring at elevated concentrations in certain Vermont aquifer zones)

The VA does not have a separate approval process for arsenic or uranium, but a well that tests above Vermont's Maximum Contaminant Levels will trigger a requirement to remediate before closing. Budget for a point-of-use treatment system if results are elevated.

For septic systems, the VA requires evidence that the system is functioning. A failing or noncompliant septic system is a hard stop. Request recent pump records and a full inspection.

Lead Paint

Vermont's housing stock is old. A substantial portion of the state's homes were built before 1940. The VA requires lead paint testing or a risk assessment for homes built before 1978 — buyers cannot waive the lead paint inspection contingency on a VA loan as they can on conventional financing. If lead paint is identified, the seller must remediate before closing.

Flood Zones

If a property lies within FEMA's Special Flood Hazard Area (Zone A or AE), the VA requires flood insurance. This is a hard requirement — the lender cannot waive it.

But in Vermont, checking only FEMA maps is not sufficient due diligence. The July 2023 floods caused catastrophic damage to properties that were not in FEMA-designated hazard zones, because Vermont's flooding mechanism is primarily fluvial erosion — high-velocity bank collapse — rather than slow inundation. Before making an offer on any property near a river or stream, cross-reference the Vermont ANR Natural Resources Atlas for River Corridor designations. Properties in River Corridors face erosion risk regardless of their FEMA classification.

The Homestead Declaration

Vermont does not automatically classify your home as your primary residence for tax purposes. Every year you own and occupy the home as your primary domicile, you must file the Homestead Declaration (Form HS-122) by April 15.

Missing this deadline means your property defaults to the nonhomestead tax classification. Filing late (between April 15 and October 15) carries a penalty of up to 8% of the education tax. Missing the October 15 absolute deadline locks you into the higher rate for the entire year.

For veterans whose primary assignment or deployment creates ambiguity about primary residency, consult your attorney about how Vermont handles this. The declaration requires the property to be your primary domicile as of April 1 of each year.

Combining VA and VHFA

The VA loan and VHFA programs are separate instruments with different eligibility structures. VHFA loans are FHA, RD, or conventional loans — not VA loans. You generally cannot use a VA loan and a VHFA first mortgage simultaneously.

However, veterans who are eligible for VA financing but choose not to use it (or who do not meet VA eligibility) can access VHFA programs including the ASSIST second mortgage (up to $15,000 at 0% interest, deferred) and the First Generation Homebuyer Grant ($15,000 non-repayable, stackable with ASSIST).

If you have VA eligibility, the zero-down and no-PMI benefits of the VA loan typically outweigh the down payment assistance from VHFA programs — especially for buyers with strong credit who can qualify for competitive VA rates. Run both scenarios with a Vermont lender familiar with both programs before deciding.

Finding a VA-Approved Lender in Vermont

Not every Vermont lender actively originates VA loans. Vermont Federal Credit Union, Union Bank, and Merchants Financial Group are among the institutions with Vermont-specific knowledge and experience with VA products. The Vermont National Guard's community of service members has historically been served by local credit unions that understand both the VA loan mechanics and Vermont's legal closing structure.

When evaluating lenders, ask specifically about their experience with VA appraisals in Vermont's older housing stock. An appraiser who is not familiar with Vermont's oil tank regulations, Act 250 implications, or private well testing requirements may flag issues that create delays — or miss issues that should be caught.

The Complete Vermont Closing Picture

A VA purchase in Vermont involves more moving parts than a VA purchase in a title-company state. The attorney requirement, the buyer-paid transfer tax, the mandatory property condition standards in older housing stock, and Vermont's annual Homestead Declaration requirement all require active attention.

The Vermont First-Time Home Buyer Guide covers every layer of the Vermont closing process — including the attorney fee structure, transfer tax calculations, Homestead Declaration filing, flood risk assessment, and the specific environmental due diligence steps relevant to Vermont's older housing.

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