Delaware first-time homebuyer assistance programs
Living in Delaware comes with one money-saving perk: no sales tax. However, it’s still a relatively pricey place to buy a home. Whether you’re a first-time homebuyer looking to live on the beach or planning to move to downtown Wilmington, the Delaware State Housing Authority (DSHA) can lend a hand with a more affordable mortgage and down payment and closing cost help.
Delaware first-time homebuyer loan programs
The DSHA recently launched a revamped mortgage program for first-time homebuyers, dubbed Welcome Home. A first-timer is defined as either someone who has never owned a primary residence, or someone who hasn’t owned one in the last three years. To qualify, you’ll need a credit score of at least 620. If your credit score is less, the DSHA can connect you to financial coaching to help you improve your standing.
Smart Start Home Loan
Previously known as the DSHA unassisted mortgage, the Smart Start Home Loan is designed to serve as a first mortgage. The program provides conventional, FHA, VA, and USDA financing and offers discounted interest rates, in some cases as low as 5.5 percent (as of this writing). The exact rates available are priced daily and are typically at or below the market rate.
In addition, there are sales price limits associated with the Smart Start mortgage that vary based on the location of the home. In New Castle County, the maximum home sales price allowed is $539,250, while in Kent and Sussex County the homes cannot cost more than $481,176.
There are also income limits for applicants who use Smart Start home loans:
| County | Area | 1 or 2 Person Households | 3 or More Person Households |
|---|---|---|---|
| New Castle County | Non Targeted Areas | $111,600 | $128,340 |
| Targeted Areas | $133,340 | $156,240 | |
| Kent & Sussex Counties | Non Targeted Areas | $97,700 | $112,355 |
| Targeted Areas | $117,240 | $136,780 |
For a one- to two-person family purchasing a home in New Castle County the household income limit is $137,280, while for a family of three or more people the household income cannot exceed $171,600. In Kent and Sussex counties, the income limit for applicants with a one- to two-person family is $117,240 and for a family of three or more people the limit is $146,550.
Home Again
If a borrower’s income exceeds the Welcome Home limits, they might qualify under the Home Again program, which is also open to repeat buyers. For a one- to two-person family purchasing a home in New Castle County the household income limit is $137,280, while for a family of three or more people the household income cannot exceed $171,600. In Kent and Sussex counties, the income limit for applicants with a one- to two-person family is $117,240 and for a family of three or more people the limit is $146,550.
Again, applicants must have a minimum credit score of 620; those with credit scores of 659 or below must participate in housing counseling.
Delaware down payment assistance
Home Sweet Home Program
For home buyers that need assistance coming up with a down payment, Delaware offers Home Sweet Home.
The program provides a zero-interest second loan of as much as $12,000. The money is forgivable based on how long you occupy the home. For each year borrowers continue to live in the home as their primary residence, the loan balance is decreased by 10 percent. This process continues for up to 10 years. After 10 years, the loan is completely forgiven as long as you can provide verification that the home continued to serve as your primary residence the entire time.
The maximum sales price for homes purchased using the Home Sweet Program is $285,000. In addition, applicants must have a credit score of at least 620.
The state funds available for this program are limited and once they’ve run out, the program will end.
Delaware Diamonds Home Loan
Another option for home buyers seeking down payment assistance, the Delaware Diamonds Home Loan also provides a zero-interest loan. As much as $10,000 is available through this program.
However, applicants must work in specific professions to be eligible. The program is open to Delaware state employees, public and private school employees, healthcare workers employed by specific health companies. In addition, first responders such as firefighters, police officers, paramedics and emergency medical technicians may also apply for the Delaware Diamonds program, as can active duty military and qualified veterans.
Similar to the Home Sweet Home loan, each year borrowers live in the home as their primary residence, the loan debt is decreased by 10 percent. After 10 years, the debt is forgiven.
This program also has limited stated funding and once it is exhausted, the program will end.
First State Home Loan Program
First time home buyers can also access down payment assistance of as much as 3 percent of their first mortgage loan amount with the First State Home Loan program. The debt from this loan is deferred until you refinance the mortgage, sell the home, transfer the title or no longer live in the home as your primary residence. Applicants must have a credit score of at least 620.
Other Delaware homebuyer assistance programs
First-Time Homebuyer Tax Credit
As a first-time homebuyer in Delaware, you can also take steps to reduce your tax bill. The state offers a federal tax credit that can be used by those who purchase a home with the Smart Start mortgage or with other types of mortgages as long as the lender is a DSHA participating lender. The program allows first-time buyers a credit of up to 35 percent of their annual mortgage interest, up to $2,000 each year.
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 $481,176 for a single-family home in Sussex County or Kent County to $1,037,011 for a four-unit home in New Castle County. Your income also must be within the household income limits. Here’s a breakdown of the differences based on area and size of household:
| County | Area | 1-2 Person Household | 3+ Person Household |
|---|---|---|---|
| New Castle County | Targeted | $133,340 | $156,240 |
| New Castle County | Non-Targeted | $111,600 | $128,340 |
| Kent or Sussex County | Targeted | $117,240 | $136,780 |
| Kent or Sussex County | Non-Targeted | $97,700 | $112,355 |
Other Delaware first-time homebuyer loan programs
First-time homebuyers in Delaware could be eligible for 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.
- FHA loan: Offered by the Federal Housing Administration (FHA), these loans are insured by the government but are obtained from a variety of mortgage lenders including big banks. The benefits of FHA loans, particularly for first-time home buyers, include that they typically have a low minimum credit score and down payment requirements. You may be able to get approved with a score of as low as 580.
- VA loan: Guaranteed by the U.S. Department of Veterans Affairs, VA loans are open to veterans, active-duty service members and surviving spouses.There are several appealing factors with VA loans for first-time buyers, including no down payment requirement, no private mortgage insurance requirement and competitive interest rates.
- USDA loan: A program of the U.S. Department of Agriculture that’s designed to assist first-time homebuyers or applicants who don’t meet conventional mortgage requirements, USDA loans do not require a down payment. However homes purchased with USDA mortgages often must be in a rural area and there are income limits for applicants.
- Good Neighbor Next Door: In order to use the Good Neighbor Next Door Program, you must be a teacher, law enforcement officer, firefighter, or EMT and live in the area you serve. In addition, the home being purchased must be a single-family home located in a designated revitalization area and must be listed for sale exclusively through the Good Neighbor Next Door Sales program.
To learn more about these types of loans — and others — take a look at Bankrate’s first-time homebuyer loans and programs guide.
Get started
There are many programs available to assist first-time home buyers in Delaware. As you get started on the home buying process, review the Delaware State Housing Authority’s loans and assistance program to determine if any are a good fit for you and your needs. When buying a home in Delaware, you can also connect with one of the housing authority’s partner lenders to get the process started. Compare quotes from at least a few lenders to make sure you get the terms that best fit your financial needs. When you find a mortgage rate and offer that look especially attractive, ask your lender about a rate lock.
