First-time homebuyers in Delaware can take advantage of affordable mortgages the state offers through lender partnerships with the Delaware State Housing Authority. The housing finance agency has both home loans and a down payment assistance program that can make it easier for you to buy a home anywhere in the state.
Delaware first-time homebuyer loan programs
DSHA Homeownership Loan Program
The Delaware State Housing Authority’s (DSHA) Homeownership Loan Program offers a mix of 30-year fixed-rate conventional, FHA, VA and USDA loans, all with competitive interest rates. These are available to both first-time and repeat homebuyers, and can be combined with the agency’s down payment and closing cost assistance. The maximum loan amount you can get is $417,000.
To qualify for a Homeownership Loan, you’ll need a credit score of at least 620. If your score is 659 or less, you’ll also need to go through housing counseling — a program requirement. If your credit score is less than 620, the DSHA can connect you to free financial coaching to help you improve your standing. In addition, if your score is 699 or less, your debt-to-income (DTI) ratio can’t exceed 45 percent.
You must also adhere to household income limits, which are based on county:
- New Castle County – No more than $115,920 for a one- or two-person household or $144,900 for a three-person or larger household
- Kent County and Sussex County – No more than $98,280 for a one- or two-person household or $122,850 for a three-person or larger household
DSHA Homes for Grads
Homebuyers in Delaware who graduated with a four-year degree (or higher) in the past three years could qualify for the DSHA’s Homes for Grads program, which comes with a reduced interest rate of one-half of a percentage (or 50 basis points). To qualify, you’ll need to meet the eligibility requirements of the Homeownership Loan Program.
Delaware down payment assistance
DSHA Preferred Plus
The DSHA’s Preferred Plus down payment and closing cost assistance program offers homebuyers a second mortgage in the amount of 2 percent to 5 percent of your overall loan amount. This no-interest second mortgage needs to be repaid when you move out, sell your home, refinance your first mortgage or when the home isn’t your primary residence anymore. To qualify, you’ll need to meet the eligibility requirements for a Homeownership Loan.
Other Delaware homebuyer assistance programs
First-Time Homebuyer Tax Credit
Delaware offers a federal tax credit for first-time homebuyers of up to 35 percent of your annual mortgage interest, up to $2,000 a year. You can apply for the credit alongside the DSHA’s mortgages and down payment assistance program.
To qualify, you must be a first-time homebuyer (or have not owned a home in the past three years), or purchasing a home in a special “Targeted Area” or a veteran. The home’s price also needs to fall within purchase limits for the county, which range from $294,600 for a single-family home in Sussex County to $696,656 for a four-unit home in New Castle County. Your income also must be within the household income limits, which differ by county and household size and whether you’re buying in a Targeted or Non-Targeted Area.
Other first-time homebuyer loan programs
First-time homebuyers in Delaware can look into other loan programs backed by the government, such as FHA, VA or USDA loans. These programs are popular with those who have lower credit scores or can’t afford a high down payment. Fannie Mae and Freddie Mac also back conventional loans with down payments as low as 3 percent, which can be another option for first-time buyers. To learn more about these types of loans and more, take a look at Bankrate’s first-time homebuyer loans and programs guide.
For other Delaware homeownership programs, including by city or county, visit HUD.gov.
As you reach out to mortgage lenders and consider your loan options, keep the Delaware State Housing Authority’s loans and assistance program in mind, as they can help you get into a home sooner and for less money upfront. You can also connect with one of the agency’s partner lenders to get the process started. Whichever offer you end up choosing, compare quotes from at least a few lenders to help ensure you snag the best mortgage rate.