Mortgage Rates Delaware: Find The Best Loan Options
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It's no secret that the housing market in Delaware has been heating up in recent years. The biggest reason? Buyers want to take advantage of the low lending rates in the state and low property taxes in certain counties.
If you're also hoping to buy a property in the state, you've come to the right place. We'll help you compare loan offers and find the most affordable option. Get insider access to mortgage and refinance rates in Delaware right here!
Mortgage Loan Options In Delaware
Before you purchase a home in Delaware, you need to choose from several types of loans. Each of them has unique interest rates, minimum down payment (DP), and eligibility requirements. Pick a loan type based on your current financial situation, credit rating, and the speed at which you’d like your mortgage to close.
Conventional mortgages are the most common loan type, available from banks, credit unions, mortgage companies, and other private lenders.
Conventional loans fall under two categories: conforming or nonconforming. Conforming loans adhere to guidelines and limits set by the Federal National Mortgage Association – in Delaware, you can borrow up to $548,250, which is on par with the national average. If your loan is above this limit, it will be considered a non-conforming loan.
If you’re planning to get a conventional loan, keep in mind that you’ll usually be required to pay private mortgage insurance (PMI) in case your down payment (DP) is less than 20% of the loan amount. The mortgage insurance company will repay the lender if you default on the loan.
Most banks and mortgage companies offer loans that are backed by the United States federal government. These home loans feature lower average mortgage rates and also have more lenient credit requirements.
While government-backed loans come with these advantages, they come with more documentary and eligibility requirements, which can lengthen the process. If you want to close your loan faster, you might want to opt for a conventional mortgage.
These are the most common government-backed loan programs:
Federal Housing Administration (FHA) loan: FHA loans are designed for low-income borrowers. To get approved for this type of home loan, borrowers only need a minimum credit score of 580 and a down payment of 3.5% of the home price. You can also qualify with a 500-579 credit score if you put down 10% DP.
U.S. Department of Agriculture (USDA) loan: USDA loans are designed to boost homeownership in eligible rural areas. Like most government-insured mortgages, USDA loans have more lenient credit requirements and also require zero down payment. However, keep in mind that you may need to pay for private mortgage insurance.
Department of Veterans Affairs (VA) loan: VA loans are offered to current and former members of the military as well as their immediate families. These home loans require no down payment, though you may need to pay VA fees and closing costs.
When getting a mortgage, it's crucial to look at the loan terms – these determine how long and how much you’re expected to pay for the property. There are two types of loan terms:
Fixed-rate mortgage loans have a set interest rate for the entire life of the loan. Since this loan term has a consistent mortgage interest rate, your monthly payment amount will not change.
The consistent monthly payments and interest rates make these fixed-rate loans more predictable. As a borrower, you won't have to worry about budgeting your mortgage in the future since the rates stay the same.
Typically, you can pick from 15-year, 20-year, or 30-year fixed-rate terms.
Adjustable-rate mortgages (ARMs) are loans with an initial fixed-rate period. Once this period ends, the interest rates will be adjusted depending on market indices. To identify an ARM's fixed-rate period, you can check the name – for example, a 5/1 ARM has a fixed interest rate for five years, after which the ARM rate will adjust annually.
Compared to a fixed-rate loan, ARMs have a lower initial mortgage rate. If you are hoping to pay less during the first few years of your loan, this might be an attractive option for you. However, your monthly payment amount may increase after the fixed-term period because your lender will adjust your mortgage interest rates based on market performance.
Current homeowners in Delaware also have the option to refinance their mortgages. You can choose from the following options:
Rate and term refinance: This enables you to change the rate or term of your loan. For instance, you can switch a fixed-rate loan into an ARM.
Lower refinance rates will lower your monthly payment amount but may extend the life of the loan. You can also decrease the length of the term so you can pay off the balance faster, but this will increase your monthly payment.
Cash-out refinance: This refinancing option enables you to take out a loan that's larger than the home value. You can use the new loan to pay off your current mortgage, then pocket the remaining cash balance.
Before signing a cash-out refinance offer, remember that changing your loan terms comes with new closing costs and other fees. Don’t replace your existing loan until you’ve calculated the potential savings and whether you can afford the new payments.
Today’s Mortgage Rates In Delaware
Mortgage rates in Delaware trend slightly higher than the national average, but they remain attractive to the average borrower. If you’re planning to take out a mortgage soon, check the rates by using the table below.
We update the data daily, so visit this page regularly for the latest rates.
Delaware Mortgage Rates
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If you want personalized mortgage rates, use the tool at the top of the page. Simply enter your personal and financial information, and we'll provide you with a personalized Delaware mortgage rate estimate!
Aside from the mortgage interest rates, please make sure to check the annual percentage rates (APR) as well. APRs are a combination of the mortgage rate and other charges, such as points, fees, and other associated costs. This will give you a more complete picture of how much your mortgage will actually cost.
DSHA Mortgage: This is a 30-year fixed-rate loan that's offered at interest rates below the standard market rate. It's available to both first-time buyers and current homeowners.
DSHA Preferred Plus Program: This program is available to applicants with a DSHA Homeownership Loan. It allows you to get a second mortgage equal to 2-5% of your overall loan amount, which you can use to cover your DP or closing costs.
DHSA's First-Time Homebuyer Tax Credit: This first-time homebuyer program enables you to claim part of the annual interest paid on your mortgage as a special federal tax credit, up to $2,000 a year.
Steps To Buying Real Estate In Delaware
Since there are plenty of buyers looking for a property in Delaware, you need to act fast. You need to make an offer and close the deal before another buyer snatches up your dream house!
To increase your chances of buying a property in the state, follow these steps:
Step 1: Evaluate Your Finances
Before purchasing a home, you need to take a hard look at your financial situation. Check your FICO credit score to see what types of mortgages you qualify for. You should also compute your debt-to-income (DTI) ratio by adding up all your monthly debt payments and dividing them by your gross income. Most lenders require a DTI of at least 43%.
Once you've determined these, you’ll have a better idea of the maximum purchase price you can afford.
Step 2: Check Mortgage Rates
The next step is looking for lenders. Use our quote comparison tools and other resources to see which company offers you the best deal. To save money on your mortgage, check if you qualify for homebuyer programs as well.
Step 3: Get Preapproved For A Loan
Getting preapproved for a mortgage shows sellers that you're serious about buying a property. You can get a preapproval letter directly from your chosen lender by sending them details about your credit, income, and debt-to-income ratio.
Step 4: Start Searching For A House
Once you have your documents in order, it's time to look for a home in Delaware.
It's best to get a local real estate agent to help you look for properties and to guide you around the local neighborhoods. For example, populous cities like Wilmington in New Castle County may have higher mortgage rate trends – you can ask your agent to provide you with other options in the area that are within your budget.
Step 4: Make An Offer
After you find a great property in Delaware, make an offer. Work closely with your real estate agent so you can get the best deal. You may have to make an offer above the list price or pay part of the purchase price in cash to stand out from other borrowers.
Step 5: Close The Deal
If a seller accepts your offer, it's time to close the deal. This is where you fill in the paperwork and pay lender fees.
Depending on your situation, you might need to get lender credit to cover closing costs. Any lender credit will be applied to your mortgage, raising your monthly payments.
How To Get Better Mortgage Rates
The mortgage rate will determine how much you'll pay every month for your loan, which is why it’s essential to get it down as much as possible. Here are some tips for getting the best rates in the state:
Choose A Shorter Loan Term
Most people who purchase a property opt for a 30-year fixed-term mortgage because of its cheap monthly payments. However, you won't always get the lowest interest rates if you go in this direction.
Instead, you can opt for shorter loan terms that often come with lower interest rates. This option also allows you to pay your balance off and build home equity quicker.
Purchase Discount Points
Some borrowers purchase discount points to lower their mortgage interest rates. Each discount point is typically priced at 1% of your loan amount and reduces the interest rates by 0.25%.
While discount points allow you to lower your rates, there is a trade-off: higher upfront costs. Calculate your potential savings to determine if discount points are worth the buy.
Improve Your Credit Rating
Lenders will generally charge you a low interest rate if they find that you have a good credit score. This is because a higher credit score means that the lender is taking on less risk lending to you.
With that said, it's best to boost your credit score before purchasing a property to get the best rates. You can improve your score by:
Given how competitive the market has been in recent years, purchasing real estate in Delaware can be tough, But by learning more about mortgage rate trends and the home buying process, you might be able to outbid other buyers and land the property you’ve always wanted.
For more mortgage resources or advice on buying a property in the state, get in touch with Wesley LLC. We'll help you finance the home of your dreams!