The State of Delaware offers a military-friendly home loan program as well as a first-time home buyer tax credit offered to qualified veterans who can apply even if they are not purchasing a first home.
If you are a Delaware resident, or about to become one, you should be familiar with the following options as well as your VA, FHA, and USDA home loan choices.
Delaware State Housing Authority Preferred Plus Home Loan
Preferred Plus is a home loan program that assists borrowers who want to purchase a primary residence in the state of Delaware; this program uses a network of participating lenders who can work with VA mortgages and other government-backed loans or conventional equivalents. Part of the assistance offered through this program?
A down payment loan in the form of a second mortgage (with no interest charged) that is issued for up to five percent of the loan amount.
This second mortgage is forgivable UNLESS the borrower refinances or sells the home. It is not forgivable if the borrower moves out of the property and stops using it as their primary residence. Down payment assistance may result in a higher mortgage loan interest rate, but veterans who apply for this program may choose to exercise their no-downpayment option.
There are requirements for these types of mortgage:
- Income caps apply, but purchase caps may not
- Loan limits apply
- Minimum FICO score requirements apply–620 or better
- Those with FICO scores below 659 may be required to attend mandatory housing counseling as a condition of loan approval
- Maximum debt-to-income ratio (DTI) of 45% for all borrowers with a FICO score of less than 699
- No maximum DTI ratio for FICO scores greater than 699
There may be some amount of required borrower contribution in programs like these–be sure to ask what may be required if you are a veteran using a VA mortgage.
Preferred Plus is administered through the Delaware State Housing Authority network of participating lenders. You can search for these lenders online or contact DSHA directly for more information.
The Delaware First Time Home Buyer Tax Credit Program
The First-Time Homebuyer Tax Credit entitles first-time Delaware buyers who purchase a home in Delaware (primary residence only, no investment properties) to claim a federal income tax credit up to $2,000 each tax year that the homebuyer uses the home as their primary residence and makes mortgage payments.
Qualified veterans can participate even when not buying their first home. Income and purchase price caps may apply.
This tax break may be combined with a Delaware State Housing Authority Preferred Plus loan (see below). See the Division of Revenue official site for instructions on how to apply in the current tax year. You do not have to use a Preferred loan or other DSHA program to claim this tax credit.
Remember, tax laws change frequently–make sure the program you are interested in applying to is still running and allowed under current state tax code.
Tax break programs are administered via your state’s taxation authority. You may need to consult the local tax office to learn what is required in your zip code for claiming a property tax credit.
Delaware First-Time Home Buyer Transfer Tax Break
While not specifically aimed at veterans or currently serving military members, any applicant who bought a first home after Aug. 1, 2017 and paid an increased Delaware State Transfer Tax (at a rate of 1.25%) may be entitled to a refund.
According to the Delaware Division of Revenue, “Realty transfer taxes are typically shared equally by the buyer and the seller” but there may be a reduction in the rate paid that can be claimed on closing day.
This is offered to those who have never had “any direct legal interest” in the purchase of a home, and who intend to occupy the home as their primary residence within 90 days of the closing date. Income and house price restrictions may apply. You can request this refund by completing Form 5405 and submit your refund request to the Delaware Division of Revenue.
Tax break programs are administered via your state’s taxation authority. You may need to consult the local tax office to learn what is required in your zip code for claiming a property tax credit.
Joe Wallace is a 13-year veteran of the United States Air Force and a former reporter for Air Force Television News
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