The dynamics and linear stability of a volatile liquid film flowing over a locally heated surface are investigated. The temperature gradient at the leading edge of the heater induces a gradient in surface tension that leads to the formation of a pronounced capillary ridge. Lubrication theory is used to develop a model for the film evolution that contains three key dimensionless groups: a Marangoni parameter (M), an evaporation number (E), and a measure of the vapor pressure driving force for evaporation (K), which behaves as an inverse Biot number. The two-dimensional, steady solutions for the local film thickness are computed as functions of these parameters. A linear stability analysis of these steady profiles with respect to perturbations in the spanwise direction reveals that the operator of the linearized system can have both a discrete and a continuous spectrum. The continuous spectrum exists for all values of the spanwise wave number and is always stable. The discrete spectrum, which corresponds to eigenfunctions localized around the ridge, appears for values of M larger than a critical value for a finite band of wave numbers separated from zero. Above a second, larger critical value of M, a portion of the discrete spectrum becomes unstable, corresponding to rivulet formation at the forward portion of the capillary ridge. For sufficiently large heat transfer at the free surface, due either to phase change or to convection, a second band of unstable discrete modes appears, which is associated with an oscillatory, thermocapillary instability above the heater. The critical Marangoni parameter above which instability develops, Mcrit(K,E), has a nonmonotonic dependence on the steepness of the temperature increase at the heater, in contrast to the monotonic decrease for a nonvolatile film at vanishing Biot number. An energy analysis reveals that the dominant instability mechanism resulting from perturbations to the film thickness is either streamwise capillary flow or gravity for weakly volatile fluids and thermocapillary flow due to spanwise temperature gradients for more volatile fluids. The stability results are rather sensitive to the steepness of the temperature increase and heater width due to the nonlinear coupling of gravity, capillary pressure gradients, thermocapillary flow, and evaporation through the base states.