How to Buy a House in Delaware: A Homebuyer’s Guide

A real estate agent can help homebuyers find the right home for them and can be particularly helpful for first-time buyers in Delaware. It is important to work with an experienced agent who has knowledge of the area, an understanding of zoning laws and regulations and familiarity with potential neighborhoods.

You can ask family and friends to recommend agents they have used. Check with your current mortgage broker or bank if they have agents on staff that are qualified. When interviewing agents, inquire about their experience and make sure they understand your wants and needs before agreeing to work with them.

Here are a few things to look for when choosing an agent:

• Experience
• Referrals
• Communication style
• Negotiation skills

In Delaware, the cost of living can vary greatly depending on where you choose to live. A typical family must consider the following factors when calculating the cost of living:

• Food
• Education
• Transportation
• Education
• Utilities

Housing prices are higher near large cities or along the coast because there is more demand for property in these areas due to better amenities and resources.

When determining your budget, be sure to factor in all relevant expenses before deciding on a home location. Prospective homeowners in Delaware can use MoneyGeek’s cost of living calculator to estimate their living expenses in the state.

Homeownership is an investment, not just an expense. However, Delaware is an expensive place to live, and homebuyers may look for affordable neighborhoods within that state. There are some disadvantages of living in less costly neighborhoods. For example, there might be limited access to social amenities such as hospitals, schools and malls.

Nonetheless, one of the advantages of purchasing a home in less expensive neighborhoods is that homeownership can be more affordable. The most affordable cities in Delaware include Harrington, Bowers and Woodside.

Rates vary by mortgage type. For instance, homebuyers with good credit ratings may get the best mortgage rates, while those with lower scores could pay more.

When shopping for a mortgage, it's essential to find your rate and any additional expenses (e.g., loan origination fee or closing costs). After considering these factors, choosing a loan will be easy.

We pulled data from Zillow and rural development USDA to determine the average interest rates in Delaware for different 30-year mortgage types:

• Conventional home loans: 6.22%
• VA loans: 6.13 %
• USDA loans: 3.5%
• FHA loans: 6.46%

Before applying for a loan, MoneyGeek recommends that you confirm your eligibility.

Homebuyers should take the time to research mortgage rates. The amount you ultimately pay back on your loan will depend on these interest rates.

Using a mortgage calculator, you can estimate the amount of your loan and calculate monthly payments depending on the interest rate, the period of the loan and more.

To get a ballpark figure for your mortgage payment, prospective homeowners might use MoneyGeek's mortgage calculator as a starting point. To determine which option best suits your requirements, you can also utilize MoneyGeek’s FHA vs. Conventional Loan Calculator.

Considerations such as your credit rating, the amount of your down payment, your preferred location and more should all be considered when making your choice on which mortgage provider to use.

In terms of qualifications, fees and maximum loan amounts, lenders have different policies. As a result, understanding your financial status may save you valuable time.

Most mortgage companies will evaluate your application based on the following criteria:

• Credit score: Having a high credit score is important for any potential homebuyer. A good rule of thumb is that the higher your credit score, the lower the interest rate for which you qualify.
• Debt-to-income ratio: Your debt-to-income ratio is calculated by dividing all monthly debt payments (credit card bills, car payments and more) by income.
• Employment history: Lenders will want to know whether or not you’re employed with proof of earnings before approving a mortgage application.
• Down payment: The larger your down payment, the lower your monthly mortgage payment and the interest rates you can get on loans.

The amount of your down payment is determined by the kind of mortgage you choose. A conventional loan usually requires a 20% down payment. Conversely, USDA and VA loans need no money down for qualified applicants. Borrowers must put down at least 3.5% on an FHA loan.

Once you know the loans you qualify for, you can calculate your down payment.

Furthermore, your down payment has a significant impact on your monthly costs. A larger down payment generally results in lower monthly payments (and vice versa). Knowing how much you need to pay ahead can help you estimate how much you should save every month.

Mortgage insurance, which protects lenders if a borrower fails to make payments, is another consideration for homebuyers. Mortgage insurance is required for FHA and USDA loans. Furthermore, applicants with less than a 20% down payment for a conventional mortgage must get mortgage insurance.

Private mortgage insurance (PMI) premiums are a regular expense that some borrowers with conventional loans have to shoulder. After a borrower has made regular payments for some time, the PMI policy may be canceled. Mortgage insurance is not required for Veterans Affairs (VA) loans, which is a perk for veterans.

Delaware offers down payment assistance programs that are funded through the Delaware State Housing Authority (DSHA). These programs are designed to provide qualified buyers with funds for their down payment and/or closing costs.

Down payments assistance programs offered by DSHA include:

• Preferred Plus: DSHA Homeownership Loan applicants may utilize Preferred Plus, a no-interest second mortgage loan of 2% to 5% of the loan amount. It may go toward closing expenses or a down payment.
• First-Time Homebuyers: First-time homebuyers in Delaware might benefit from a tax credit. Up to $2,000 per year, you may claim 35% of your mortgage interest as a special federal tax credit. In addition, the tax credit can be used with the DSHA down payment and closing cost program.

The list of documents needed for your loan application will depend on the mortgage type you are applying for. Generally, some of the documents that you may need include:

• Social Security card
• Income verification (pay stubs, W-2 form)
• Bank statements
• Credit report
• Military discharge papers (for veterans)
• Photo ID
• Employment verification

It is best to check with your lender to see whether any additional paperwork is required. Based on the specifics of your loan application and your existing credit standing, they may need further documents from you.

The pre-approval process for a loan is an essential part of the homebuying process. It speeds up the procedure and allows ample time to acquire the proper documents for your loan. Becoming prequalified for a mortgage can take up to two weeks.

Filling out the papers and having your credit examined often take 30 minutes. Depending on the lender, it may be valid for up to 30 to 60 days after approval.

This time frame allows you to complete other aspects of your home search, such as identifying your ideal home or determining which properties best meet your needs. Additionally, it gives you time to shop around for lenders to select one with favorable terms and rates.

You'll need pre-approval to purchase a home. While it’s not an offer on the property, a pre-approval letter shows your lender that you are serious about purchasing a house and have the necessary income and credit history for them to accept the loan.

You may get as many of these letters as you like, but it's crucial to be aware that certain lenders do credit checks that impact your score.

Depending on the lender, a pre-approval is available for 30 to 90 days. During this time, you may search for the ideal home before committing, and you can compare interest rates, points, fees and costs from other lenders.

When you’re looking for the perfect home, one of the most important things you can do is hire an inspector. Licensed inspectors are trained professionals who will thoroughly assess your potential new property and give you their expert opinion on whether or not it's worth buying. It may seem like a lot of money upfront, but it'll be worth it in the long run as they'll help ensure that your investment is sound.

Things to inspect include:

• Plumbing
• Roofing
• Electrical work (including outlets)
• Heating and cooling system (make sure ducts have been cleaned)
• Fireplaces (make sure gas pipes aren't connected)

If any repairs need to be made after the inspection has been completed, use licensed contractors.

Although it isn't always necessary, certain Delaware cities or counties may insist that you have a house inspection before you buy a home. If this is the case for your home, contact an inspector with experience in the area and explain what type of dwelling you're buying.

You'll need to know if the city you are considering buying a home in has any specific building regulations. An inspector can help you figure this out.

An appraisal is an estimate of the property’s value based on its current condition. An appraiser can determine the market value by researching similar properties that have sold or are currently for sale. The appraiser will then compare your home to those and offer their opinion of how much it would sell for if it was offered on the open market today.

An appraisal considers everything from physical features like age, size and condition to things like location and the availability of other comparable homes nearby. The final figure should be reasonably close to what you could expect to get if you were to put your home up for sale today.

Before you sign anything, review the paperwork. Make sure everything is accurate and that you’re comfortable with the terms of the contract. Ask questions if you need clarification on anything.

Documents to sign include the following:

• Purchase agreement
• Closing disclosure, note (if applicable)
• Deed (if applicable)
• Home warranty plan agreement
• Home inspection report (if necessary)
• Homeowner’s insurance certificate
• Mortgage pre-approval letter or commitment letter

Be aware that some mortgages require escrow accounts to be set up for property taxes and homeowners insurance before closing can occur.

Closing costs are the fees associated with buying a home. They are usually paid at the closing table and can include, but are not limited to:

• Mortgage lender fee: This is a flat fee charged by the lender for processing your loan.
• Origination fee: This is the lender’s fee for processing the paperwork.
• Appraisal fee: This is a fee paid to have your house appraised.
• Attorney’s fee: These are fees charged by an attorney who handles legal documents.
• Escrow: An escrow fee is an amount of money that the buyer pays the lender at closing. The escrow fee is used for the cost of title searches and insurance.

Buying a house in Delaware can be a daunting task. You will have to take many steps, but with the right information, it becomes much easier. One of the first things you need to do is choose a location and make sure you have enough money for a down payment. You may also need to get pre-approved for your loan before you begin looking at homes.

Be sure that your credit score is in good standing and that you can afford any mortgage payments on top of your other expenses and bills. After completing all the required steps, meet with your lender or broker to finalize your home purchase.

You should review all documents thoroughly to ensure they are not missing anything and sign them where indicated. Once signed, you should return them immediately so you can close on the home.