Delaware First-Time Home Buyer: 2023 Programs and Grants

What to know about buying a house in Delaware

First-time homebuyers can find a great place to live in Delaware. Not only are home prices a little below the national median, but the state offers special mortgages with below-market rates. Better yet, if you qualify, you might 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 list price in Delaware was $380,000 in March 2023. That was a 6.15% increase year-over-year, according to the Delaware Association of Realtors.

For a first-time home buyer saving for a down payment, increasing home prices present a real challenge. Even the best savers can feel like they’re running uphill. So 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 no 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 your mortgage loan, you could 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) helps first-time home buyers in Delaware with a number of programs and resources. You’ll find its offerings on the DSHA’s website, which is styled “Kiss Your Landlord Goodbye!”

DSHA Homeownership Loan Program

The primary first-time home buyer program offered by the Delaware State Housing Authority is a 30-year fixed-rate mortgage “at or below the standard market rate for qualified buyers.” In other words, because of its competitive interest rates, you may be able to reduce your monthly payment or purchase a more expensive home when compared to other loans.

If you use the DSHA loan program, you can still select the type of mortgage you want from conventional, FHA, VA, or USDA loans. You may also be eligible 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 lenders
• 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.

Delaware first-time home buyer grants

First-time home buyer grants in Delaware help qualified people buy their first homes in the state by giving them money. These grants can help with closing costs and down payments, making it easier and less expensive for first-time buyers to buy their own home.

DSHA Preferred Plus

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 your city or county might offer. Your real estate agent or Realtor should also be able to help you find homeownership programs in the area you want to move to.

DSHA First-time Homebuyer Tax Credit

You can reduce your federal tax bill by taking advantage of the Delaware First-Time Homebuyer Tax Credit. The federal government will pay up to 35% of your annual mortgage interest, up to a maximum of $2,000. You can apply for this income tax credit in addition to the DSHA mortgage and down payment assistance programs.

In most cases, you have to be a first-time homebuyer to qualify for a mortgage credit certificate. However, repeat home buyers may qualify if they purchase in a “targeted area.” Additionally, you must be below the upper income and home purchase price limits for your county and property type.

Speak with a DSHA-approved lender or a tax professional to learn how this tax credit could impact you.

Buying a home in Delaware’s major cities

Delaware’s three largest cities have median home prices that are lower than the state average. These metro areas may have good deals for first-time home buyers. Some even have their own programs for down payment assistance.

Wilmington first-time home buyers

The median list price of homes in Wilmington was $265,000 in April 2023, according to Realtor.com. That was a decrease of 1.8% year-over-year.

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

• $7,950 for 3% down payment
• $53,000 for 20% down payment

Wilmington is located within New Castle County. Furthermore, the county provides its residents with a down payment assistance program. Download the 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 must be repaid monthly 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 April 2023, according to Realtor.com. That was an increase of 3.5% year-over-year.

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

• $8,697 for 3% down payment
• $57,980 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 must repay the borrowed amount 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 $340,000 in April 2023, according to Realtor.com. That was an increase of 9.7% year-over-year.

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

• $10,200 for 3% down payment
• $68,000 for 20% down payment

Like Wilmington, Newark is located in New Castle County. So, it seems likely that the county’s program to help with a down payment is open to people from 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 free advice to any first-time home buyer in the state of Delaware.

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

Statewide and regional first-time home buyer resources in Delaware

• Delaware State Housing Authority (DSHA): Homeownership programs, including down payment and closing cost assistance and first-time homebuyer programs. Review the DSHA’s list of participating lenders
• 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

• Dover First Start Homeownership Program: Down payment and closing cost assistance
• Wilmington
• New Castle County Down Payment Settlement Program (DPS): Review the downloadable brochure

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, get personalized rate quotes from at least three mortgage lenders.

Don’t just look at the advertised rates on the internet. Apply for preapproval and compare the interest rates and fees offered to you. That is the only way to ensure you get the best deal on your new home loan.

¹Source: Delaware Associations of Realtors Housing Market Statistics Report

²Source: Experian.com study of 2022 and 2021 data

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