- Delaware is a state that requires real estate closings to be finalized by an attorney.
- The attorney will prepare all closing documents.
- The buyer and seller will usually complete the transaction together at the same table.
- Like every state, Delaware has unique environmental features that influence inspections and the purchase details.
Phase 1: Post-Contract Negotiations
After you reach an agreement on price, these are the steps to finalize the contract.
- First, you and the seller of the Delaware home need to reach an agreement on the sale price and sign a contract.
- At the same time, a deposit, called “earnest money” is made from the buyer to the seller. This is essentially a display of the buyer’s commitment to purchase the home, and will be returned to the buyer (or used in the transaction) when the purchase is complete. If the buyer backs out, the seller may keep the deposit.
- The seller will issue disclosures, a statement of known issues, problems, repairs, and damage to the home. The buyer is expected to review and sign off on the disclosures, which have usually been released before the contract started.
- The buyer can now perform inspections. These need to be completed by a certain date, which is known as the “inspection contingency date.” If the buyer can’t complete inspections by this date, an extension can be granted. In Delaware, a general inspection is usually recommended. Termite and mold inspections may also be completed.
- Buyers can now request changes to the contract based on the inspection results. They can request changes to the purchase price or ask that the seller fix any problems. The seller can agree to the requests or respond with a negotiated offer, such as an offer to fix some of the problems and reduce the price by a smaller amount.
- If desired, the buyer can request a home warranty. This warranty covers appliance repairs or replacements for a certain time, usually about a year.
Phase 2: The Delaware Mortgage
Unless you are paying for your Delaware home entirely with cash, you’re going to need a mortgage. This can be the most extensive and drawn-out phase, so it’s best to start early.
- You will fist submit an official application, which can be done on your own or with professional assistance.
- The lender will send a “good faith estimate,” which is a breakdown of your estimated closing costs.
- Before the lender can fund your loan, they will need a variety of documents, including:
- Bank statements from all accounts owned by the borrower.
- Information on outstanding liens and lines of credit.
- Two years of tax returns.
- Pay stubs and contact information for your employer.
- Any information that is important to your financial situation, including payments you make or receive. This may include alimony, child support, and legal judgements.
- Information on large deposits outside of your regular income. Cash gifts used as downpayments may require a gift letter.
- Repeat information on any of the above documents. Lenders want as much information as possible, so don’t be surprised or offended if they request additional papers and files.
4. The lender will eventually make a final decision. If approved, you will receive a loan commitment letter that states their willingness to finance your purchase as long as certain conditions are met, including an appraisal.
5. The finance contingency can now be removed. This is done, in most cases, by sending a copy of the loan commitment letter to the seller, the seller’s agent, or the attorney overseeing the process.
6. An appraisal is ordered. This is done to ensure the property has significant value compared to the loan, which is important to the lending institution.
7. Homeowners’ insurance is purchased and proof of this insurance should be sent to the lender, finalizing the mortgage process.
Phase 2 often requires the most work from a buyers, as they have to collect and organize documents, sign papers, and send information to the lending institution. It’s not complicated, it just takes time. It’s best to start early and gather your information as soon as possible.
Phase 3: Closing the Delaware Purchase
In the state of Delaware, the closing usually takes place at one table with all parties together at the same time. Usually it occurs at the office of the attorney who is overseeing the purchase. Unless a separate agreement is in place, the buyer will take possession of the property once all documents have been signed.
- First, the attorney overseeing the process will complete a title search. This is to determine if there are any liens or ownership disputes that would keep the property from being sold. This is often done well in advance of the closing date.
- If the title is clear, the closing can be scheduled.
- The attorney will work with a title company to issue a “title commitment,” which is basically an official document stating the title is, to the best of their knowledge, free and clear.
- A final cash figure for what the buyer needs to bring to the closing is calculated. This will include the downpayment, closing costs, property taxes, and utilities.
- A final walkthrough is completed by the buyer and buyer’s agent. This is simply to confirm that the property is still in decent shape and hasn’t been damaged since it was last seen.
- The buyer and seller will meet at the closing table to sign all documents.
- The buyer will pay the remaining funds and closing costs.
- The transaction is recorded with the appropriate municipality, such as the city or county.
- Once the settlement is complete, the buyer can take possession of their new Delaware home!
Conforming Loan Limits in Delaware
(Note: Loan limits are subject to change and not all applicants will qualify for the full amount. Talk with a lending professional for current limits.)
“Conforming loans” are mortgages that are within the lending limits set by the Federal Housing Finance Agency (FHFA). They include government-supported loans such as FHA, VA, and USDA loans. Working on a county-by-county basis, the FHFA agency sets limits based on an areas’s median home price, with goal of setting limits that, while not too large, allow for the purchase of high-quality, comfortable, affordable homes.
Although limits in high-cost areas can be higher, the FHFA sets a baseline limit that is used in most American counties. In Delaware, which only has three counties, the limit for the entire state for a single-family home is $647,200.
Conforming loans allow for the purchase of a property with as many as four units. In all of Delaware, the limit for a two-unit property is $828,700, while the limit for a three-unit is $1,001,650. If you want to purchase a four-unit property in Delaware with a conforming loan, the limit is $1,244,850.
It should be noted that these are the limits for conforming loans only. Larger lending with a jumbo loan in Delaware is possible. Talk to our staff for information on conforming and jumbo loans for your Delaware purchase.
Downpayment Assistance Programs in Delaware
If you are having trouble saving for a downpayment, assistance is available. Buyers in Delaware can take advantage of numerous state and local programs.
Statewide Programs for All Delaware Homebuyers
The Delaware State Housing Authority, or “DSHA,” administers most of the downpayment support available to buyers in the First State.
DSHA Preferred Plus Program
The majority of support comes from the DHSA’s “Preferred Plus Program,” which offers a second mortgage to buyers purchasing a home in this area. The additional loan can be worth as much as 5% of the home’s purchase price.
This money can be used for a downpayment or closing costs, but you would need to repay the loan when you sell the home or refinance. The assistance will also need to be repaid if you move from the property but maintain ownership.
This program can be combined with the DSHA First-Time Home Buyer Tax Credit, which can reduce federal taxes by as much as $2,000. This makes homeownership even more affordable for Delaware buyers.
Major Local Programs
Here are also a variety of downpayment programs in Delaware offered by city and county governments.
New Castle Down Payment Settlement Program
This program offers a loan that can go as high as $10,000 to help you purchase a property. The loan comes with 0% interest, and buyers only need to contribute $500 of their own savings.
Wilmington First Start Home Ownership Down Payment and Settlement Assistance Program
The city council in Wilmington, the largest city in Delaware, has approved this downpayment support. The program provides borrowers with downpayment loans as large as $15,000.
Dover First Start Program
First-time buyers in Dover can take advantage of “First Start,” which provides assistance as high as $20,000. The loan has a 0% interest and, most importantly, can be forgiven after ten years!
Common Requirements
These programs come with a variety of requirements. Most common are income restrictions; only low- and moderate-income buyers (in most cases) are eligible for downpayment assistance in Delaware. For example, the income for a three-person household using the New Castle program is limited to $75,900.
There may also be credit requirements, usually around 620 or higher. Buyers may also need to be first-time homebuyers, although people who purchased in the past but have not owned a property for three or four years are likely eligible.
Other requirements include property condition, type, and purpose. Talk with an experienced lending professional for up-to-date information on downpayment assistance in Delaware.
DPA programs in Delaware are always changing, so if you want up-to-date information on downpayment assistance in your area, contact our helpful team today!
