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2022 Delaware First-Time Homebuyer Programs

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For first-time homebuyers in Delaware, purchasing a home may present a financial challenge. However, the state and some cities and counties offer first-time homebuyer programs to help you achieve your dream of homeownership. Of course, to qualify you will need to meet the programs’ requirements, such as income limits, minimum credit score and occupancy mandates. And for some programs, you may have to repay any assistance you receive if you sell the home or refinance your mortgage.

Delaware statewide and local first-time homebuyer programs

The Delaware State Housing Authority (DSHA) offers several first-time homebuyer programs ranging from down payment assistance to low-interest loans and tax credits, while New Castle County offers down payment and settlement assistance. Program requirements vary, so review them carefully before filling out an application.

Program nameAssistance amountAssistance typeWhere it’s available
DSHA Homeownership Loan ProgramMaximum of $417,00030-year, fixed-rate loan with interest rates at or below the standard market rateStatewide
DSHA Preferred Plus 2% to 5% of first mortgage amountNo-interest second mortgageStatewide
Delaware First-Time Homebuyer Tax CreditClaim 35% of mortgage interest (maximum of $2,000) as federal tax credit each yearTax creditStatewide
DSHA 203(k) Program5% of the final home loan amountFederal Housing Administration’s (FHA) rehabilitation & repair programStatewide
New Castle County Down Payment Settlement ProgramMaximum of $5,0000% 8-year loanNew Castle County, outside the city of Wilmington

What to know about different types of down payment assistance

Down payment assistance often comes in a variety of forms, including loans, grants and forgivable loans. Each type comes with requirements that must be met to not only qualify for the assistance but also ensure you don’t lose or have to repay it.

Loans. Many down payment assistance programs provide the funds you need upfront, which you will then repay during a set loan term. These loans often have no or low interest, and the repayment terms could vary from repaying the full amount when you sell or refinance the house to having deferments early in the loan, with payments on the back end of the loan term.

Forgivable loans
. Rather than setting up loans for repayment, some down payment assistance loans are forgivable after a specified time period, meaning you won’t have to pay the money back unless you fail to comply with the program terms. Usually, these loans are given in the form of a second mortgage through a lien placed on your home. You are not typically required to make monthly payments, and the second mortgage does not accrue interest.

Grants
. Unlike loans and forgivable loans, a grant is not a second mortgage and no lien is placed against your home. Instead, you receive the money to use for your down payment and/or closing costs without any repayment terms. The tradeoff is you may have to adhere to strict requirements like having to remain in the home for a specific period of time.

How Delaware first-time homebuyer programs work

To qualify for first-time homebuyer programs, you will need to meet all the requirements set by the Delaware State Housing Authority, local governments and housing authorities. While many programs’ requirements are the same, some of the specifics may differ. You should review these before applying for any program to make sure you are in a position to qualify. Also take note of any requirements to pay back any assistance you receive if you don’t follow the program’s guidelines.

To qualify for a Delaware first-time homebuyer program, prepare to meet these requirements:

1. Make sure your income isn’t too high. First-time homebuyer programs typically have maximum household income limits that could rule you out if you make too much. As an example, the maximum household income you can have for the DSHA homeownership loan ranges from $113,400 to $141,750 in New Castle County and $99,600 to $124,500 in Kent and Sussex counties, depending on the number of people in the household.

2. Complete a homebuyer counseling program. It’s common for many first-time homebuyer programs to require applicants to complete a homebuyer counseling program as part of the application process. But this is not always the case. For instance, the New Castle County program states you have to complete a housing counseling program prior to closing, while the DSHA Homeownership Loan Program requirements state you only have to complete a housing counseling program if your credit score is at or below 659.

3. Look for repayment terms in the event you sell the home or refinance the mortgage. If you sell the house or refinance the mortgage before the terms of the homebuyer program expire, you could have to repay the amount of assistance you received. For example, the New Castle County Down Payment Settlement Program loan must be paid in full if you sell the property or transfer the ownership.

4. Meet credit score or debt-to-income (DTI) ratio requirements. Many, but not all, first-time homebuyer programs include minimum credit score requirements and maximum DTI ratio limits. Examples include the DSHA 203(k) Program, that has a minimum credit score requirement of 620, and the New Castle County Down Payment Settlement Program, that has a DTI ratio limit of 52%.

Delaware first-time homebuyer program requirements

A review of the requirements for each first-time homebuyer program in Delaware could show you areas you need to improve so you can qualify, including your DTI ratio and credit score.

Program name Credit score minimumDTI ratio maximumMaximum income limitHow long you have to live in the home
DSHA Homeownership Loan Program620Varies by mortgage loan type$99,600 to $141,750*N/A
DSHA Preferred Plus620Varies by mortgage loan type$99,600 to $141,750*N/A
Delaware First-time Homebuyer Tax Credit N/AN/A$83,000 to $132,300**N/A
DSHA 203(k) Program 620No DTI cap with DU/LPA and total approval$99,600 to $141,750*N/A
New Castle County Down Payment Settlement Program N/A52%$52,950 to $99,800***Duration of loan (8 years)

*Income limits vary based on county and family size

**Income limits vary based on county, targeted vs. non-targeted areas and family size

***Income limits vary based on 80% of median income for New Castle County area and family size

THINGS YOU SHOULD KNOW

Most first-time homebuyer programs have income limit requirements that homebuyers must meet in order to qualify for assistance. Therefore, it’s important to know the median income limits for the area where you want to secure a mortgage and buy a house. You can find current Delaware income limits by going to the HUD website and entering your state and county information.

National first-time homebuyer programs

When reading through the program elements for Delaware’s first-time homebuyer programs, you’ll see mentions of federal loan programs, which also are known as national first-time homebuyer programs. However, these loans typically aren’t limited to first-time homebuyers.

Most of the Delaware first-time homebuyer programs can be coupled with these loans to help pay the down payment and/or closing costs.

Conventional loans. Unlike government-back loans, conventional mortgages usually have tighter requirements to qualify. On the plus side, they also usually have higher loan limits, which could make it easier to purchase the home you want. The two most popular conventional loans are Fannie Mae HomeReady® and Freddie Mac Home Possible®.

FHA loans. For mortgages backed by the Federal Housing Administration (FHA), you could qualify for a lower down payment, and you may qualify with a lower credit score than you would a conventional mortgage. However, FHA loans also typically have lower loan limits, which could limit your options for buying a house. These loans also require you to pay a mortgage insurance premium to protect the lender if you default.

VA loans. For active and former members of the military, loans backed by the U.S. Department of Veterans Affairs (VA) don’t have down payment or mortgage insurance premium requirements. Closing costs for VA loans are limited given lenders can’t charge you more than 1% in closing costs. On the other hand, a VA funding fee between 0.5% and 3.6% is required.

USDA loans. Specifically for low- to moderate-income homebuyers, USDA loans are backed by the U.S. Department of Agriculture (USDA). These loans typically carry low interest rates and no down payment requirements, and you must purchase a home in a designated rural area.

FAQs about Delaware first-time homebuyer programs

Who qualifies as a first-time homebuyer in Delaware?

Under the guidelines set by the FHA, a first-time homebuyer is defined as a homebuyer who has not owned a primary residence within the past three years. If you shared ownership of a home with a former spouse while married, you also could qualify as a first-time homebuyer. There may be other exceptions to this definition depending on the lender, so if you have concerns regarding whether you qualify as a first-time homebuyer, discuss those with the lender when shopping around for a loan.

Can I qualify for down payment assistance in Delaware?

Yes, you could qualify for down payment assistance in Delaware provided you meet the requirements set out by the first-time homebuyer program.

How much of a down payment do I need to buy a house in Delaware?

The type of mortgage you qualify for determines how much of a down payment you need to purchase a house in Delaware. While down payments for conventional first-time homebuyer loans could be as low as 3%, your actual down payment may be higher. FHA loans typically require a down payment of 3.5% if other requirements are met. USDA and VA loans have no down payment requirements.

Home price trends in Delaware major areas

While New Castle and Kent counties in Delaware saw increases in their average home prices over the last year, home prices in Sussex County remained the same. In New Castle County, home prices increased by 8.8% to $308,898, according to the National Association of Realtors. This resulted in a bump of $63 in monthly mortgage payments to $1,172.

Changes in home prices in Kent County were similar, with an increase of 7.8% to $256,660, resulting in an increase of $44 in monthly mortgage payments to $974.

 

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