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 — especially as prices have ticked up almost 6 percent year-over-year.

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, down payment assistance and closing cost help.

Delaware first-time homebuyer programs

Smart Start Home Loan

The DSHA’s Smart Start Home Loan is a first mortgage for those buying houses in Delaware. There are two types of Smart Start loans: Welcome Home (for first-time buyers) and Home Again (for repeat buyers and first-time buyers whose income exceeds the Welcome Home limits).

The program provides conventional, FHA, VA, and USDA financing and offers discounted interest rates, in some cases as low as 5.625 percent (as of this writing). The exact rates available are priced daily and are typically at or below the market rate.

• Requirements
  

  • Minimum credit score of 620 (if your score is 659 or below, you must participate in housing counseling)
  • Household income can’t exceed certain limits (vary by location and family size)
  • Home’s purchase price can’t exceed certain limits (vary by location)

• Pros and cons
  

  Pros

  • Open to first-time and repeat buyers
  • Competitive interest rates

  Cons

  • Doesn’t include down payment or closing cost assistance

Delaware down payment assistance and grants

First State Home Loan Program

A First State Home Loan from the DSHA includes a primary mortgage with a discounted rate, as well as 3 percent of the loan amount in down payment and closing cost assistance. 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. It includes conventional, FHA, VA and USDA loans.

Like the Smart Start Home Loan, this program is also available to first-time homebuyers (through the Welcome Home pathway) or repeat buyers (through the Home Again pathway). First-time buyers whose income exceeds the Welcome Home limits can also apply through the Home Again pathway.

• Pros and cons
  

  Pros

  • More affordable interest rates
  • Repayment deferred until you sell, refinance, transfer the title or move out
  • Funds can be used for a down payment or closing costs

  Cons

  • Higher interest rates than Smart Start loans

Diamond in the Rough Loan Program

With this program, qualifying borrowers can get an FHA 203(k) mortgage to buy and repair a house in Delaware. It provides up to $35,000 for home renovations, as well as down payment assistance equal to 5 percent of the loan amount.

Like the First State Home Loan, you won’t need to repay the assistance until you sell, refinance, transfer the title or move out of the property.

• Pros and cons
  

  Pros

  • Below-market interest rates
  • Repayment deferred until you sell, refinance, transfer the title or move out
  • Money can be used for a down payment or closing costs

  Cons

  • Only available for FHA 203(k) loans

City-specific homebuyer assistance programs

City of Wilmington First Start Homebuyer Program

If you’re planning to purchase a home in the city of Wilmington, you can use the First Start Homebuyer Program to help pay for a down payment and closing costs. Assistance is equal to 6 percent of the home’s purchase price or $15,000, whichever is less. The program is open to first-time homebuyers, single parents and displaced homemakers.

• Requirements
  

  • Household income cannot exceed 80 or 100 percent of the Area Median Income (AMI)
  • Must contribute at least $1,000 of your own money to the closing costs
  • Property must be located in Wilmington
  • Must be a U.S. citizen or legal resident
  • Must attend a housing counseling course

• Pros and cons
  

  Pros

  • Can be used for a down payment or closing costs
  • Closing cost funding is provided as a grant and doesn’t need to be repaid
  • Down payment assistance is forgivable after 10 years

  Cons

  • Required to use at least $1,000 of your own money

Other Delaware first-time homebuyer loans

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 one of the DSHA’s Home Again mortgages (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.

Additionally, 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 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 must be in a rural area. There are also 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

As you prepare to become a first-time homebuyer, here are some next steps:

• Research your options: As you get started on the homebuying process, review each of the above Delaware homebuyer assistance programs 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.
• Improve your credit score: If your credit could use some work, focus on boosting it before buying a home. Having a high credit score will help you get the best interest rates.
• Get multiple mortgage offers: 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.

You can also explore the following resources for buying a home in Delaware:

• Explore other first-time homebuyer programs by state
  

Article sources

We use primary sources to support our work. Bankrate’s authors, reporters and editors are subject-matter experts who thoroughly fact-check editorial content to ensure the information you’re reading is accurate, timely and relevant.