First-Time Homebuyer Programs in Delaware

The down payment on a new home often presents the biggest hurdle for first-time homebuyers. In Delaware, where the average home value is $387,158, a down payment of $77,432 is typically required to avoid private mortgage insurance.

Fortunately, first-time homebuyer programs in Delaware can help you achieve homeownership. Mortgages that allow for a smaller down payment are also available, although they usually come with income requirements and necessitate mortgage insurance. MoneyGeek explores several state-specific and government-backed first-time homebuyer programs for people from different financial backgrounds.

Delaware offers grants and loans to assist first-time homebuyers in covering down payment and closing costs. We have compiled the first-time homebuyer programs offered by the Delaware State Housing Authority (DSHA) to help you find the best option for your needs and situation.

The Welcome Home program, offered by Delaware State Housing Authority, helps first-time homebuyers with affordable mortgage options and financial assistance for down payments and closing costs. This program supports buyers by providing tailored options depending on the home's condition and the buyer's financial needs, which are:

• Smart Start: Offers an unassisted first mortgage, ideal for buyers who don't need financial help with down payments or closing costs.
• First State Home Loan: Provides 3% of the total loan amount as assistance for down payments and closing costs. The assistance is deferred, meaning no payments are required until the home is sold, refinanced or transferred.
• Diamond in the Rough: Offers up to 5% of the loan amount, deferred until the home is sold or refinanced, specifically for homes needing repairs, allowing buyers to finance renovations alongside the purchase.

The Home Again program offers affordable, fixed-rate mortgage options for first-time and repeat homebuyers in Delaware. It provides flexible loan solutions, including down payment and closing cost assistance, helping buyers who may not qualify for other programs due to income limits.

The program allows buyers to purchase various property types, such as single-family and multi-unit homes. It also offers the same three assistance programs — Smart Start, First State Home Loan and Diamond in the Rough — to support buyers' unique financial needs.

The Delaware First-Time Homebuyer Tax Credit allows eligible buyers to claim 35% of the annual interest paid on their mortgage, up to $2,000 per year, as a federal tax credit. This credit reduces the amount of federal taxes owed, offering savings for first-time homebuyers. The credit can be used alongside other Delaware State Housing Authority programs, such as down payment and closing cost assistance, to make homeownership more affordable.

Aside from statewide first-time homebuyer programs in Delaware, there are also city-specific programs available to help you pursue homeownership in a city of your choosing. Check out the table below for some of the cities in Delaware that provide first-time homebuyer programs for potential residents.

In Delaware, there are zero-down-payment loan programs that allow you to purchase a home without putting money down. USDA and VA loans are two government-backed options that require no down payment.

The USDA loans program is designed to assist individuals in rural areas in purchasing homes. These loans are issued by the U.S. Department of Agriculture through its Rural Development Guaranteed Housing Loan program, catering to those who meet specific criteria.

USDA loans offer several benefits, including the possibility of no down payment, making homeownership more accessible. These loans typically have competitive interest rates and flexible credit requirements, which can be advantageous for those who may not qualify for conventional loans. The program aims to improve the quality of life in rural areas by promoting homeownership.

To be eligible for a USDA loan, the property must be located in a USDA-eligible rural area with a population of less than 35,000 people and must be 2,000 square feet or below. Applicants must meet income limits specific to their area, which vary based on the size of the household.

VA loans are a specialized mortgage option offered by the U.S. Department of Veterans Affairs to support eligible veterans, active-duty service members and certain members of the National Guard and Reserves. These loans are designed to make homeownership more accessible for those who have served in the military.

One of the standout features of VA loans is the no-down-payment requirement, which can significantly reduce the upfront cost of buying a home. VA loans do not require private mortgage insurance (PMI), which can save borrowers money over the life of the loan. VA loans typically offer lower interest rates than private loans. As of November 2024, the APR for a 15-year fixed-rate VA loan in Delaware is 6.15%, while a 30-year fixed-rate VA loan has an APR of 6.38%.

To qualify for a VA loan, you need to meet specific eligibility requirements. This includes your length of service or service commitment, duty status and character of service. You must meet certain income limits based on your location and obtain a valid Certificate of Eligibility (COE).

First-time homebuyers in Delaware can take advantage of low-down-payment loan programs that allow them to finance their home with a down payment of 3.5% or less. These programs include conventional, FHA and FHA 203(k) loans.

FHA loans and conventional loans are often compared as they are the two most common types of mortgages. When it comes to down payment requirements, FHA loans require at least a 3.5% down payment, while conventional loans can require as low as 3% for first-time homebuyers. In terms of credit score requirements, conventional loans typically have stricter credit score and debt-to-income ratio requirements than FHA loans.

Interest rates are another critical factor to consider. As of November 2024, the current APR for a 15-year fixed-rate conforming loan in Delaware is 6.04%. The APR for a 15-year fixed-rate FHA loan is 7.96%. APRs on FHA loans can be higher because there tend to be more fees and extra costs associated with borrowing money on government-backed loans.

You can use our FHA vs. conventional loan calculator below to help you compare FHA and conventional mortgage programs and determine the best option for you.

We answered frequently asked questions about first-time homebuyer programs in Delaware to help you find the best option and move closer to homeownership.

Explore additional MoneyGeek resources for first-time homebuyers in Delaware to help you with the homebuying process.