Financing Resources for First-Time Homebuyers in Delaware

Buying your first home is an experience full of excitement and anticipation, but the process can also feel overwhelming and sometimes downright scary. Luckily for potential homebuyers in Delaware, there are plenty of programs available to help first-time homebuyers understand the process and even help with the finances.

The U.S. Department of Housing and Urban Development (HUD) offers counseling services to help first-time homebuyers better understand the homebuying process. HUD-approved counseling agencies provide many of these services for free. Some agencies also offer online education programs which, if completed, can help you access certain first-time homebuyer loan programs.

There are a number of HUD-Approved Housing Counseling Agencies in the state.

• CLARIFI
• First State Community Action Agency
• Housing Opportunities of Northern Delaware, Inc.
• Interfaith Community Housing
• NCALL Research
• Neighborhood House, Inc.
• Telamon Corporation
• YWCA Delaware

Home loan programs in Delaware offer a variety of incentives to potential homebuyers.

• Delaware FHA Loans: These loans are insured by the Federal Housing Administration and they offer first-time homebuyers an affordable lown down payment (3.5%). However, borrowers will need to pay for mortgage insurance (MIP) which serves as protection for the lender should you default on the loan. Loan limits vary based on county and are calculated based on the medium home price for that area. While there are no income limits to qualify for an FHA loan, you will need to meet the debt-to-income ratios allowed by the FHA.
• USDA Rural Housing Loan: While you do not need to be a first-time homebuyer to qualify for this lending program, it’s still a great option for homebuyers of any kind looking to purchase a home in rural Delaware. This loan offers 100% financing, no down payment, and 30 year low fixed rate loans, among other things. Loans through this program are available for amounts up to $510,400, require a credit score of 620, and are available only to primary residents.
• DSHA’s Homeownership Loan Program: Delaware State Housing Authority has a variety of financing options for low-moderate income Delawareans. To qualify, applicants must meet specific eligibility standards including maximum income limits, minimum credit score requirements, and maximum debt-to-income ratios.
• Homes for Grads: The DSHA’s Homes for Grads program is available to applicants who have graduated college with a four-year degree or higher in the last three years. Qualified borrowers will receive a reduced mortgage rate of 50 basis points, or one-half of a percentage, if using one of DSHA’s Preferred Plus loans.

In addition to the lending programs listed here, the state also has opportunities for down payment assistance.

• DSHA Preferred Plus Down Payment Program: Preferred Plus assistance is available to all applicants using the DSHA’s Homeownership Loan program. The DSHA’s website states that customized Preferred Plus assistance provides, “a no-interest second mortgage loan of 2 percent to 5 percent of your overall loan amount. You can apply that amount toward down payment or closing costs.”
• PRMI Dream Maker Down Payment Program: The PRMI Dream Maker Down Payment Program is available to homebuyers purchasing a primary residence with an FHA loan. To qualify, you must have a minimum FICO score of 620 and you must be purchasing the property as your primary residence. Through this program, you are able to get 3.5% of the purchase price toward the down payment as a second mortgage.
• PRMI DPA Advantage Grant Program: The PRMI DPA Advantage Grant Program is a HUD-approved Delaware down payment assistance program that can be used with an FHA loan. This grant is completely forgivable and is available for up to 2% of the purchase price of the home. It can be combined with up to 6% seller paid closing costs, and applicants must have a minimum credit score of 580 and be purchasing the home as their primary residence.

Delaware has a unique tax credit available for first-time homebuyers. The DHSA’s website offers this explanation for how the program works:  “If you borrow $150,000 at a 3.75% interest rate, you will pay about $5,625 in mortgage interest in the first year. This tax credit will allow you to reduce your federal income tax liability by $1,968 for the year.”

To be eligible for this tax credit, you cannot have owned a home in the past three years as your primary residence (with some exceptions), your household income and the purchase price must be within the maximum limits, you must be buying this home as your primary residence, and you’ll have to complete all the pertinent tax credit documents at the time of closing.

If you’re a potential first-time homebuyer in Delaware, you should know there are plenty of programs out there to make the process easy and affordable.