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Figure out your finances
Get preapproved for a mortgage
Look for a house
Make an offer
How to save on homeowners insurance
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The Small Wonder has a growing real estate market for good reason. With no sales tax, beautiful nature, and friendly New England communities, Delaware is a great state to buy a home.
Whether this is your first time or fifth, buying a home is a complex, time-consuming process. Thankfully, insurance broker Jerry is here to simplify things—we created a comprehensive guide to buying a home in Delaware. We cover everything from figuring out your finances, getting a loan, picking a house, and even how to save some money on your homeowners insurance.
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Figure out your finances
The first and most important part of buying a house is figuring out your finances. This is a massive financial decision with long-term effects—you’ll likely be paying your mortgage for decades. You need a solid understanding of your credit score, debt-to-income (DTI) ratio, and the many fees and costs associated with buying a home to get a sense of what you can buy.
So before we run to the realtor or put in a bid on a dream house, let’s figure out what type of house you can afford in Delaware.
Check your credit score
Your credit score is a reflection of your credit history—the higher the score, the more trustworthy a lender will find you. Low credit scores can indicate to a bank or lender that you might not be able to pay your mortgage.
Check your credit score to understand what type of loan you can get. In Delaware, you’ll likely need a credit score of 620 or higher if you want to get approved for a loan to buy a house.
If your credit score is below 620, here are a few options:
- You can raise your credit score. This takes time, so if you’re hoping to get a mortgage soon, this might be an issue.
- You can apply for a mortgage with the Federal Housing Administration (FHA), the Delaware State Housing Authority (DSHA), or the Veterans Administration (VA). They all offer mortgages for buyers with low credit scores. As the name suggests, a VA mortgage is only available to active service members or veterans.
Calculate your debt-to-income (DTI) ratio
Another number that factors into your ability to get a mortgage is your debt-to-income ratio or DTI. This is how much you owe versus how much you make.
To determine your DTI, you’ll need to divide all your monthly payments by your pre-tax income. Relevant payments include:
- Rent or house payments
- Car payments
- Credit card payments
- Student loan payments
- Alimony or child support
If your expenses are over 50% of your income, you’ll have difficulty getting a mortgage. A DTI below 36% is the goal if you want a traditional mortgage.
Determine your down payment
Once you determine if you can afford a house, you’ll need to decide how much you want to pay at once. A down payment is a large percentage of the total purchase price that you pay initially. Most mortgages require a down payment of at least 20%.
The higher your down payment, the less you have to borrow for your mortgage. That means less interest and lower monthly costs.
If you don’t have enough savings for a 20% down payment, you can turn to the same agencies that help those with low credit: the Federal Housing Administration (FHA), the Delaware State Housing Authority (DSHA), and the Veterans Administration (VA).
An FHA mortgage can allow you to make a down payment as low as 3.5%.
With a good credit score, those who get a VA loan might not need to make a down payment at all.
Prepare for closing costs and other fees
There’s one more thing to consider before choosing a price range—how much you’ll need to pay in fees!
Closing costs usually cost 3-6% of the house’s total value. Since the average cost of a home in Delaware is $329,776 (according to Zillow's Home Value Index), you could be paying as much as $19,787 in closing costs for an average-priced home.
These are the fees that go into closing costs:
- Home appraisal (required by most lenders) fee
- Credit report fee
- Home inspection fee
- Mortgage origination fee
- Earnest money (i.e., a good-faith deposit that will go towards your down payment)
- Mortgage insurance
- Property taxes
- Homeowners insurance
Delaware has one of the lowest average property taxes at 0.56%. This number changes depending on where you live—property tax in New Castle County will be higher than in Sussex county.
Key Takeaway Check the property tax rate in your desired area before you go home shopping.
Look for homeowners insurance
Another new, major expense after buying a house is homeowners insurance. Homeowners insurance is worth the cost; however, it can save you financial ruin if your house is damaged or destroyed by a covered peril.
In the U.S., the average homeowners policy costs $1,387 per year or $115 per month. Thankfully, the average policy is much lower in Delaware, with costs closer to just $680 a year. That’s less than $60 a month!
To find a homeowners policy, don’t just take the first option. You should compare quotes from multiple different companies to see where you are offered the best deal. Since each insurer uses its own formula to determine your rates, you could be charged very different costs for identical coverage at two different companies.
If you want to simplify the comparison shopping process, you should download Jerry. Jerry is a licensed brokerage app that instantly gives you competitive quotes from a long list of top providers.
Key Takeaway Calculating your credit score, DTI, and down payment amounts are critical to budgeting and planning for buying your dream home in Delaware.
Get preapproved for a mortgage
Now that you’ve got an understanding of your finances, it’s time to get preapproved for a mortgage. Many sellers require preapproval to begin negotiations (or, in some cases, even see the property).
To get preapproved for a loan, you’ll need to fill out a mortgage application and share the following information with your lender:
- Social Security number
- Banking information
- Employment history
Then, you wait! The lender will use this information to confirm you’ll be able to pay off the loan. They’ll also run what is known as a hard credit check. This is when a lender checks your credit. Be warned: a hard credit check can lower your credit score.
If you get preapproved, you can start shopping.
How to pick the right mortgage in Delaware
The two main considerations when deciding on a mortgage are the mortgage term and interest rate.
A mortgage term is how long you’ll be paying off the mortgage. Most mortgage terms are between 15 and 30 years.
The interest rate is how much extra you’ll be paying to the lender. Long mortgage terms have higher interest rates (think 3.5%), but lower monthly costs, Shorter mortgage terms have lower interest rates (think 2.5%), since the lender is getting their money back faster.
Be sure to explore your options when choosing a loan. Some lenders may offer better terms than others.
Look for a house
Now that your finances are settled and your mortgage is preapproved, you get to do the fun part—house hunting!
Here’s some advice for finding the right home in Delaware.
Pick your city or neighborhood
Before you can pick a house, you’ll need to choose a neighborhood. Find an area that fits your budget while meeting your cultural and climate needs. A few popular Delaware towns or cities to consider are Newark, Ocean View, Lewes, and Milton.
Delaware is one of the smallest states, but it still offers plenty of options, so take the time to ensure you’re moving to a town you can see yourself in for a long time. No matter where in the state you move, one perk will remain consistent—Delaware has no sales tax!
If you already know what town or city you’d like to live in, start exploring the specific neighborhoods. Check out prices, crime rate, local car insurance rates, and proximity to the things that matter to you (parks, highways, nightlife). If you have kids, make sure to look into local school districts!
Buyer’s market vs. seller’s market
Understanding if you’re dealing with a buyer’s market or seller’s market is crucial when shopping for a home.
- A buyer’s market is when supply outweighs demand. This puts more negotiating power in your hands.
- In a seller’s market, there are more potential buyers than houses. This puts you at a disadvantage for negotiation and selection.
Check recent home sales in the area you’re interested in—If the final price was consistently higher than the asking price, you're likely in a seller’s market. If the final price was consistently lower than the asking price, you’re in a buyer’s market.
Another indicator is how long homes have been on the market. In a seller’s market, homes do not remain listed for very long.
The housing market is currently hot in Delaware, with housing prices rising and homes quickly being bought. Delaware is turning into a seller’s market.
Find a real estate agent
Buying a house is a time-consuming, stressful activity. It may feel impossible to buy the right house while balancing your own commitments. That’s why many shoppers hire real estate agents to help!
While not legally required, a good real estate agent can help you score the house of your dreams and simplify your life. Plus, agents are paid on commission, so there are no upfront costs.
Make an offer
Once you’ve finally found the perfect house, you need to make an offer. If you offer above or below the asking price is dependent on the market, the house, and how willing you are to lose the house if things don’t work out.
If you hired a real estate agent, they’ll be able to help with the paperwork!
If your offer is accepted then congratulations—you’re a homeowner!
How to save on homeowners insurance
With all these new expenses to deal with, you’re probably hoping to save whenever you can. One place where you can lower your costs is your homeowners insurance policy. If you want to find some serious savings while still getting the coverage you need, you should download Jerry.
Jerry is an insurance brokerage app that simplifies insurance shopping. Just a few minutes on the app will help you find a great price on your homeowners insurance. Plus, Jerry makes it easy to bundle your home and auto policies, leading to even more savings.
“Jerry was wonderful! I used it for my auto and renters policies. I trusted it so much that I signed up for my homeowners insurance under Jerry as well. All of the agents are amazingly nice and knowledgeable.” —Mary Y.
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How much money do I need to buy a house in Delaware?
You’ll need enough money in the bank to pay the house’s down payment (usually 20%), and enough income to pay the mortgage every month.
It’s recommended not to spend more than 28% of your gross monthly income on household expenses.
What credit score is needed to buy a house in Delaware?
To get a traditional loan, you’ll need above a 620 credit score. If your credit score is lower, you can look into specialty loans with the Federal Housing Administration (FHA), the Delaware State Housing Authority (DSHA), or the Veterans Administration (VA).
What is the best place to buy a house in Delaware?
‘Best’ depends on what you’re looking for—city or suburb? Great schools or killer nightlife?
A few currently hot real estate markets are Newark, Ocean View, Lewes, and Milton.