Delaware First-Time Homebuyer Programs: The DSHA Guide

Delaware will lend you the down payment — interest-free, with no monthly payment. Here's how the Delaware State Housing Authority's programs actually work, who qualifies, and how to apply.

The biggest barrier to buying a first home in Delaware isn't the mortgage payment — it's the cash to close. Between down payment and closing costs, buyers typically need 5–10% of the purchase price in cash. On a $350,000 home, that's $17,500–$35,000.

The Delaware State Housing Authority (DSHA) exists to solve exactly this problem. Its programs pair below-market mortgage rates with down payment and closing cost assistance — and the assistance is a zero-interest second mortgage with no monthly payment, repaid only when you sell, refinance, or move out.

Here's the complete guide.

Program names, limits, and rates change. Confirm current terms with DSHA (destatehousing.com) or a DSHA-approved lender before applying. This is general information, not financial or legal advice.

The two tracks: Welcome Home vs. Open Door

DSHA runs two first-mortgage tracks. Which one you use depends on whether you're a first-time buyer.

Welcome Home — for first-time buyers

The flagship program: a 30-year fixed-rate first mortgage at a below-market interest rate, available on top of a standard FHA, VA, USDA, or Freddie Mac conventional loan.

Who counts as a first-time buyer? Anyone who has not owned a primary residence in the past three years. Two exceptions widen the door:

• Qualified veterans (no first-time requirement)
• Buyers in DSHA-designated targeted census tracts (no first-time requirement)

Credit score: Minimum 620 (660 for manufactured homes). If your score is 620–659, you'll complete an eight-hour HUD-approved homebuyer education course before closing. At 660+, the course is waived.

Income limits (loan reservations on or after June 8, 2026; 1–2 person household):

• New Castle County: $122,700
• Kent and Sussex counties: $111,400
• Higher limits in targeted areas

Since April 2025, DSHA counts only the income of the borrowers actually on the loan — a change that helps buyers who assumed household income put them over the limit.

Purchase price caps:

• New Castle County: $659,385
• Kent and Sussex counties: $566,354
• Higher caps in targeted areas

Limits are updated periodically.

Open Door — for repeat buyers

Buying again? The Open Door track offers DSHA's below-market first mortgage to buyers who don't meet the first-time definition, with higher income limits ($147,240 New Castle / $133,680 Kent & Sussex for 1–2 person households, per 2026 figures). Down payment assistance options differ by track — ask your lender.

The down payment assistance menu (Welcome Home)

This is where DSHA shines. Four assistance products, each a zero-interest second mortgage with no monthly payment, due only when you sell, refinance, or stop using the home as your primary residence:

Smart Start is the fifth option: the same below-market first mortgage with no assistance attached — and the lowest interest rate of all. If you have your own down payment, Smart Start gets you DSHA's best pricing.

What "zero-interest second mortgage" really means

It's a real lien on the property, but:

• No interest accrues — you repay exactly what you borrowed, never more
• No monthly payment — it sits silently behind your first mortgage
• Due on sale, refinance, or move-out — when the first mortgage ends or you leave, the assistance is repaid from proceeds

On a $350,000 purchase with Take5 (5% of a ~$340,000 loan ≈ $17,000), that's $17,000 of down payment and closing cost help that costs you nothing out of pocket and nothing per month.

The Mortgage Credit Certificate (MCC)

Separate from the loan programs, DSHA offers a Mortgage Credit Certificate — a federal tax credit (not a deduction) worth a percentage of the mortgage interest you pay each year, up to $2,000 annually, claimable every year you hold the loan and live in the home.

Unlike a deduction (which reduces taxable income), a credit reduces your tax bill dollar-for-dollar. Over 10 years, that's up to $20,000 in federal tax savings. A DSHA mortgage is not required to qualify; a one-time application fee (historically ~$350 — confirm current fee) applies.

Verify current MCC availability and terms with DSHA — the program's funding and terms change.

How to apply (step by step)

1. Check the income and price limits for your county and household size at destatehousing.com
2. Find a DSHA-approved lender — DSHA does not accept applications directly; you must apply through a participating lender (DSHA publishes an approved lender list)
3. Get pre-approved — the lender verifies income, credit, and program eligibility
4. Complete homebuyer education if required (credit score 620–659)
5. Find your home within the purchase price cap
6. Close — the first mortgage and assistance second mortgage fund together

What to ask your lender

• Which track am I eligible for — Welcome Home or Open Door?
• Which assistance product fits my cash position — and what's the rate tradeoff vs. Smart Start?
• Am I in a targeted census tract? (Higher limits, no first-time requirement)
• Is the MCC available with my loan, and what's the current credit rate?
• What's the current below-market rate, and how does it compare to a standard loan with the same assistance?

Where DSHA works best in Delaware

• New Castle County (Wilmington, Newark, Bear, Middletown): highest limits, most inventory — the program's sweet spot
• Kent County (Dover, Smyrna, Milford): price caps rarely bind; strong fit for first-time buyers
• Sussex County inland (Seaford, Georgetown, Millsboro): works well; beach towns (Lewes, Rehoboth) can press against the $566,354 price cap — check the current caps

Common misconceptions

• "I owned a home five years ago, so I don't qualify." Wrong — the lookback is only three years.
• "My spouse owned a home, so we're out." DSHA counts borrowers on the loan; since 2025, only borrowers' income counts. Talk to a lender about your specific situation.
• "Assistance means a higher rate forever." The assisted rate is slightly above Smart Start's, but still below market — and the assistance itself costs nothing monthly.
• "I need 20% down anyway." No — that's the entire point. FHA + DSHA assistance can get you in with minimal cash to close.

Sources

• Delaware State Housing Authority: DMP Programs 2026 (destatehousing.com) — program names, assistance structures
• DSHA Delaware Mortgage Program Notice (effective April 20, 2026) — Welcome Home / Open Door tracks
• EIN Presswire / John Thomas Team reporting (June & August 2026) — income limits ($122,700/$111,400), price caps ($659,385/$566,354), credit score and counseling rules
• HomeAndMoney.com: Delaware First-Time Home Buyer Programs — Preferred Plus history, MCC tax credit details

Program details change frequently. Confirm all terms, limits, and availability with DSHA or a DSHA-approved lender. General information only — not financial advice.