Delaware First-Time Home Buyer | 2022 Programs and Grants

What to know about buying a house in Delaware

Delaware is a pretty great place for first–time home buyers. It offers special mortgages that often have below–market rates. And, if you’re eligible, you may be in line for an interest–free loan with no monthly payments to help with your down payment.

So take heart! And, as the Delaware State Housing Authority puts it, “Kiss your landlord goodbye.”

Verify your home buying eligibility in Delaware. Start here (Feb 14th, 2022)

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Delaware home buyer overview

According to Redfin, the median sale price for homes in Delaware was $339,000 in December 2021. That was a 13.6% increase year–over–year.

For a first–time home buyer saving for a down payment, a 13.6% increase in home prices presents a real challenge. Even the best savers can feel like they’re running uphill.

So be sure to check out the First State’s down payment assistance programs. These can help eligible buyers reach their down payment goals much faster than would otherwise be possible.

Delaware Home Buyer Overview
Average Home Sale Price in Delaware	$339,000
Minimum Down Payment in Delaware (3%)	$10,170
20% Down Payment in Delaware	$67,800
Average Credit Score in Delaware1	710
Maximum Delaware Home Buyer Grant2	Statewide through the DSHA. Up to 5% of your main mortgage as an interest-free loan that’s repaid when you sell, move, refinance or finish paying down your mortgage

Down payment amounts are based on the state’s most recently available average home sale price. “Minimum” down payment assumes 3% down on a conventional mortgage with a minimum credit score of 620.

If you’re eligible for a VA loan (backed by the Department of Veterans Affairs) or a USDA loan (backed by the US Department of Agriculture), you may not need any down payment at all.

Verify your home buying eligibility in Delaware. Start here (Feb 14th, 2022)

First–time home buyer loans in Delaware

If you’re a first–time home buyer in Delaware with a 20% down payment, you can get a conventional loan with a low interest rate. And you never have to pay for private mortgage insurance (PMI).

Of course, few first–time buyers have saved enough for 20 percent down. But the good news is, you don’t need that much. Not by a long shot.

Borrowers can often get into a new home with as little as 3% or even 0% down using one of these low–down–payment mortgage programs:

• Conventional 97 – From Freddie Mac or Fannie Mae. 3% down payment and 620 minimum FICO score. You can usually stop paying mortgage insurance after a few years once you reach 20% home equity
• FHA loan – Backed by the Federal Housing Administration. 3.5% down and a 580 minimum credit score. But you’re on the hook for mortgage insurance until you refinance to a different type of mortgage, move home, or pay off your loan
• VA loan – Only for veterans and service members. Zero down payment is required. Minimum credit score varies by lender but often 620. No ongoing mortgage insurance after closing. These are arguably the best mortgages available, so apply if you’re eligible
• USDA loan – For those on low–to–moderate incomes buying in designated rural areas. Zero down payment required. Credit score requirements vary by lender but often 640. Low mortgage insurance rates
• DSHA loans – May include competitive interest rates and down payment assistance. More information below

Note that government loan programs (including the FHA, VA, and USDA home loans) require you to buy a primary residence. That means you can’t use these loans for a vacation home or investment property.

Depending on the mortgage loan you choose, you could potentially get into your new house with minimal cash out of pocket.

These programs even let you use gifted money or down payment assistance (DPA) to cover the down payment and closing costs.

If you’re not sure which program to choose for your first mortgage loan, your lender can help you find the right match based on your finances and home buying goals.

Find the best first-time home buyer loan for you (Feb 14th, 2022)

Delaware first–time home buyer programs

The Delaware State Housing Authority (DSHA) has a first–time home buyer program called Kiss Your Landlord Goodbye!

The program offers a 30–year, fixed–rate mortgage with a rate “at or below the standard market rate for qualified buyers.” In other words, you might save on your monthly payment or be able to buy a more costly home compared with other loans.

But you still get to choose the type of mortgage you want from conventional, FHA, VA, or USDA loans (see above). And you may be in line for down payment assistance.

To be eligible, you’ll need:

• A household income below local limits. These vary by county and household size
• A loan amounof no more than $417,000
• A credit score of 620 or higher. If yours is below 659, you’ll need to complete a homebuyer education course
• A lender chosen from DSHA’s list of participating lenders

That could be a good deal. So get a quote and compare it to the best mortgage offers you receive when you comparison shop.

First–time buyers may also be able to get a tax credit that reduces their federal tax bill. But this will work only if you itemize your deductions rather than take the standard deduction.

The DSHA website says, “You can claim part of the annual interest paid on your mortgage (35% of the interest) as a special federal tax credit, up to $2,000 a year.”

Delaware first–time home buyer grants

To boost your savings, the DSHA offers down payment loans between 2% and 5% of your mortgage amount. Most people who qualify for a DSHA mortgage will likely be in line for this assistance, too.

The good news is that this is a “silent” second mortgage, meaning you make no monthly payments and pay no interest. However, you will have to repay the amount you borrowed in full when you refinance your mortgage, sell the home, move out (the home must remain your main residence), or finish paying down your mortgage.

Before opting for the DSHA’s down payment assistance, compare it with other programs that might be offered by your city or county. And then choose the one that suits you best.

Verify your home buying eligibility in Delaware. Start here (Feb 14th, 2022)

Buying a home in Delaware’s major cities

Median home prices in Delaware’s three biggest cities are somewhat lower than the statewide average.

If you’re a Delaware first–time buyer with flexible plans, one of these cities may be a smart choice. Wilmington is especially affordable.

But wherever you choose to live in Delaware, check to see if you’re eligible for down payment assistance provided by your city or county. These programs can make your life much easier.

Wilmington first–time home buyers

In December 2021, the median list price of homes in Wilmington was $245,000. That was an increase of 2.1% year–over–year according to Realtor.com.

If you want to buy a home at that median price, your down payment options might fall between:

• $7,350 for 3% down payment
• $49,000 for 20% down payment

Wilmington is located within New Castle county. And the county offers a down payment assistance program to its residents. Download the brochure for eligibility criteria and details.

You can borrow between $1,000 and $5,000 as an interest–free loan. But this differs from the DSHA’s one because it has to be repaid through monthly payments over eight years. If you wish, you can make no payments for the first three years. But then you’ll have higher payments in years four through eight.

Dover first–time home buyers

In December 2021, the median list price of homes in Dover was $259,000. That was an increase of 12.6% year–over–year according to Realtor.com.

If you want to buy a home at that median price, your down payment options might fall between:

• $7,770 for 3% down payment
• $51,800 for 20% down payment

Download the City of Dover’s information sheet concerning its down payment assistance program. With this, you may be able to borrow up to $20,000 as a forgivable silent loan. That means you don’t make monthly payments or pay interest. And the loan will be forgiven in full after 10 years.

But you will have to repay the amount that you borrowed if, during those first 10 years, “the home is sold, transferred, or the property ceases to be the borrowers’ principal residence.”

Newark first–time home buyers

In December 2021, the median list price of homes in Newark was $289,900. That was an increase of 16% year–over–year according to Realtor.com.

If you want to buy a home at that median price, your down payment options might fall between:

• $8,700 for 3% down payment
• $57,980 for 20% down payment

Like Wilmington, Newark is located in New Castle county. So, presumably, the county’s down payment assistance program is available to residents of both cities. See the Wilmington section, above, for details and a link to download the brochure.

Where to find home buying help in Delaware

All the organizations we’ve listed above should provide advice freely to any first–time home buyer in Delaware or within their areas.

In addition to our selection, the U.S. Department of Housing and Urban Development (HUD) provides a few lists for statewide, regional, and local resources:

Statewide and regional first-time home buyer resources in Delaware

Local home buyer programs in Delaware

What are today’s mortgage rates in Delaware?

You can see today’s live mortgage rates in Delaware here.

When you’re ready to start the home buying process, make sure you get personalized rate quotes from at least three mortgage lenders.

Don’t just look at advertised rates online; actually apply for preapproval and compare the interest rates and fees you’re offered. That’s the only way to know you’re getting the best deal possible on your new home loan.

Show me today’s rates (Feb 14th, 2022)

¹ Source: Experian.com 2021 study of 2020 data

²Based on a review of the state’s available DPA grants at the time this was written