Delaware First-Time Home Buyer: 2023 Programs and Grants

What to know about buying a house in Delaware

Delaware is a pretty great place for first-time home buyers. Home prices are a little below the nationwide median; the state can offer special mortgages that often have below-market rates; and, if you’re eligible, you may be in line for an interest-free loan to help with your down payment.

Here’s how to get started and, as the Delaware State Housing Authority puts it, “Kiss your landlord goodbye.”

In this article (Skip to...)

• DE home buyer overview
• Home loan options
• DE home buyer programs
• First-time buyer grants
• Buying in Delaware’s cities
• Resources
• DE mortgage rates

Delaware home buyer overview

The median home sale price in Delaware was $405,000 in July 2022, according to the Delaware Association of Realtors. That was a 5.66% increase year-over-year.

For a first-time home buyer saving for a down payment, a 5% to 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 stats

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 U.S. Department of Agriculture), you may not need any down payment at all.

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% 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, 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
• Delaware State Housing Authority (DSHA) loans: May include competitive interest rates and down payment assistance. More information below

Note that government loan programs (including 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.

In addition, most programs let you use gifted money or down payment assistance (DPA) to cover your down payment and closing costs. Depending on the mortgage loan you choose, you could potentially get into your new house with minimal cash out of pocket.

If you’re unsure which program to choose for your first mortgage, your lender can help you find the right match based on your finances and home buying goals.

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’s primary offering is the DSHA Homeownership Loan Program. Thich is a 30-year, fixed-rate mortgage “at or below the standard market rate for qualified buyers.” In other words, thanks to its competitive interest rates, you might save on your monthly payment or be able to buy a more costly home compared with other loans.

If you’re using the DSHA loan program, you still get to choose the type of mortgage you want from conventional, FHA, VA, or USDA loans. You may also be in line for down payment assistance.

To be eligible for the DSHA Homeownership Loan Program, you’ll need:

• A loan amount of no more than $417,000
• A credit score of 620 or higher. If yours is below 659, you’ll need to complete a housing counseling course
• A lender chosen from DSHA’s list of participating lenders⁴
• A household income below local limits. These vary by county and household size

The loan’s income limits vary by county and household size. For example:

• Kent and Sussex counties: An income limit of $116,280 for a 1-2 person household. No more than $145,350 for households with three or more residents
• New Castle County: An income limit of $126,480 for a 1-2 person household. No more than $158,100 for a household with three or more residents

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 Homebuyer Tax Credit

You may also be able to get the Delaware First-Time Homebuyer Tax Credit which reduces your federal tax bill. 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.” Speak with a DSHA-approved lender and/or a tax professional to learn how this tax credit could impact you.

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.

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, 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. Additionally, your real estate agent or Realtor should be able to help you identify homeownership programs in your target area.

Buying a home in Delaware’s major cities

Median home prices in Delaware’s three biggest cities are actually lower than the statewide average. These metro areas could offer good deals for first-time home buyers. And some even have their own down payment assistance programs.

Wilmington first-time home buyers

The median list price of homes in Wilmington was $290,000 in August 2022, according to Realtor.com. That was an increase of 16% year-over-year.

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

• $8,700 for 3% down payment
• $58,000 for 20% down payment

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

If you’re eligible, you can borrow between $1,000 and $5,000 as an interest-free loan. But this differs from the DSHA’s loan 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

The median list price of homes in Dover was $289,900 in August 2022, according to Realtor.com. That was an increase of 8.4% year-over-year.

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

• $8,700 for 3% down payment
• $58,000 for 20% down payment

Check out 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

The median list price of homes in Newark was $335,000 in August 2022, according to Realtor.com. That was an increase of 11.7% year-over-year.

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

• $10,050 for 3% down payment
• $67,000 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 the state of Delaware.

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

Statewide and regional first-time home buyer resources in Delaware

• Delaware State Housing Authority: Homeownership programs, including down payment and closing cost assistance
• Habitat for Humanity: Through volunteer labor, builds and rehabilitates houses for families in need
• U.S. Department of Agriculture Rural Housing: Programs to help first-time buyers become homeowners in rural communities

Local home buyer programs in Delaware

• Wilmington
• New Castle

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.

¹Source: Delaware Associations of Realtors Housing Market Statistics Report

²Source: Experian.com study of 2021 and 2020 data

³Based on a review of the state's available DPA grants at the time this was written

⁴Kiss Your Landlord Goodbye! List of Participating Lenders