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Compare mortgage rates in Delaware.
Key Points
• Delaware mortgage rates have usually run a bit lower than the national average.
• Mortgage rates are influenced by economic indicators, consumer behavior, and actions taken by the Federal Reserve.
• Diverse mortgage types are available in Delaware, as elsewhere, including fixed-rate mortgages, adjustable-rate mortgages (ARMs), FHA loans, VA loans, USDA loans, and jumbo loans.
• Homebuyers can secure competitive mortgage rates by comparing interest rates and fees, getting preapproved, improving their credit score, making a larger down payment, keeping debt-to-income ratio low, and considering discount points.
Introduction to Mortgage interest Rates
As you may know, mortgage interest rates are not set in stone. But do you know how they’re determined? Mortgage rates are set via a complex mix of economic factors and the borrower’s financial status. Understanding the factors that influence mortgage rates can help homebuyers make informed decisions and secure the most competitive rate for their situation. Here, we’ll do a deep dive into home loan rates, as well as homebuyer assistance programs, tools and calculators, and closing costs.
Where Mortgage Rates Come From
The Federal Reserve, often referred to as the Fed, holds the key to mortgage rates. The Fed sets short-term interest rates, which serve as a benchmark for other interest rates, including mortgage rates.
When the Fed raises short-term interest rates, it becomes more expensive for banks to borrow money. As a result, they pass on this increased cost to borrowers in the form of higher mortgage rates. Conversely, when the Fed lowers interest rates, mortgage rates typically follow suit, making it more affordable for borrowers to secure a home loan.
A homebuyer’s financial profile also figures into mortgage rates. We’ll get into that below.
How Interest Rates Affect Home Affordability
Many homebuyers underestimate the significant impact that mortgage rates have on home affordability. Even a small change in the interest rate can make a substantial difference in the monthly mortgage payment and the overall cost of the loan. For middle-income Americans, even half-a-percentage increase in the interest rate can put homeownership out of reach.
Say you’re going to buy a $400,000 home, just a little less than the U.S. median sale price right now. You’ve saved up a 20% down payment, or $80,000, and plan on taking out a 30-year mortgage.
With a fixed interest rate of 7.00%, your monthly payment would be about $2,128 per month, before additional costs like homeowners insurance and property taxes. At 6.50%, that payment goes down to $2,022, and at 6.00% it drops to $1,918. So in this scenario, a full percentage point drop equates to $210 per month in savings, or $2,520 per year.
However, it’s over the long term that interest really has the opportunity to add up. Over the 30-year lifetime of the loan, you’d pay approximately the following amount in total interest:
• 7.00%: $446,426
• 6.50%: $408,140
• 6.00%: $370,683
Should Homebuyers Wait for Interest Rates to Drop?
Whether to buy a home now or wait for interest rates to drop is a common dilemma for first-time homebuyers. It’s important to consider the opportunity cost of waiting. Home prices tend to appreciate over time, and waiting may mean missing out on potential gains in home equity — or seeing home prices rise out of reach.
Remember, homeowners have the option to refinance their mortgage in the future if interest rates decrease. Mortgage refinance allows homeowners to secure a lower interest rate on their existing loan, potentially saving tens of thousands in interest over the life of the loan. Therefore, buying a home now and refinancing later may be a more advantageous strategy than waiting for rates to drop.
Delaware Mortgage Rate Trends
Examining historical mortgage rate trends can offer valuable insights into the housing market. While mortgage rates rose in recent years, they remained below historical highs. In fact, current rates are hovering around the 50-year average, indicating a relatively stable mortgage environment compared to past decades. (The FHFA stopped reporting this data after 2018.)
While rates may continue to drop in the short term, the long-term trend suggests that current rates are already relatively favorable compared to historical averages.
| Year | Delaware Rate | U.S. Rate |
|---|---|---|
| 2000 | 8.01 | 8.14 |
| 2001 | 6.92 | 7.03 |
| 2002 | 6.53 | 6.62 |
| 2003 | 5.87 | 5.83 |
| 2004 | 5.78 | 5.95 |
| 2005 | 6.13 | 6.00 |
| 2006 | 6.59 | 6.60 |
| 2007 | 6.33 | 6.44 |
| 2008 | 5.97 | 6.09 |
| 2009 | 4.97 | 5.06 |
| 2010 | 4.74 | 4.84 |
| 2011 | 4.57 | 4.66 |
| 2012 | 3.64 | 3.74 |
| 2013 | 3.92 | 3.92 |
| 2014 | 4.16 | 4.24 |
| 2015 | 3.99 | 3.91 |
| 2016 | 3.77 | 3.72 |
| 2017 | 4.07 | 4.03 |
| 2018 | 4.60 | 4.57 |
Historical U.S. Mortgage Rates
For further context, let’s check out historical U.S. mortgage rates. In the early 1980s, mortgage rates reached unprecedented highs, peaking at over 18%. Since then, rates have generally trended downward, with occasional periods of increase. The current rates, hovering around 5%, represent a significant decline from those historical peaks.
Factors Affecting Mortgage Rates in Delaware
Many factors influence mortgage rates in Delaware and across the country. Some of these are economic, while others are within the homebuyer’s control. Understanding these factors can help borrowers make informed decisions and position themselves for the best possible mortgage rate.
Economic factors that impact mortgage rates include the Fed’s interest rate decisions, inflation, and unemployment rates. Borrower-specific factors such as credit score, down payment, income, assets, and type of mortgage loan also play a role in determining the interest rate offered.
Economic Factors
• The Fed: As noted above, the Fed sets short-term interest rates, which serve as a benchmark for other interest rates, including mortgage rates. Although mortgage rates are not directly tied to Fed rates, they tend to follow the same economic trends.
• Inflation: Inflation, the general increase in prices and fall in the purchasing power of money, affects mortgage rates. When inflation rises, the purchasing power of money decreases, making it more expensive for lenders to lend money. As a result, they may increase interest rates to compensate for the reduced value of their loans.
• Unemployment rate: The unemployment rate, an indicator of economic health, influences mortgage rates. A lower unemployment rate generally signifies a strong economy, which leads to increased demand for housing. This increased demand puts upward pressure on home prices and, consequently, mortgage interest rates.
Consumer Factors
• Credit score: A credit score represents an individual’s credit history and debt repayment behavior. A higher credit score indicates a lower risk of default, making borrowers more attractive to lenders. As a result, individuals with higher credit scores typically qualify for lower mortgage interest rates.
• Down payment: The down payment, the upfront payment made by the borrower toward the purchase of a home, impacts mortgage rates. A larger down payment reduces the loan amount required from the lender, lowering the risk associated with the loan. Consequently, borrowers who make a larger down payment may be offered a lower mortgage interest rate.
• Income and assets: Lenders carefully evaluate a borrower’s income and assets to assess their ability to repay the loan. A steady income, a stable employment history, and sufficient assets provide reassurance to lenders. Borrowers with strong income and asset profiles may be rewarded with lower mortgage interest rates.
• Type of mortgage loan: The type of mortgage loan a homebuyer chooses can influence the interest rate. Adjustable-rate mortgages (ARMs) often come with lower initial rates compared to fixed-rate mortgages. Additionally, government-backed loans, such as VA mortgages, may offer more favorable rates. And a shorter loan term typically corresponds with a lower interest rate.
Types of Mortgages Available in Delaware
Delaware offers a diverse range of mortgage types to cater to the needs of different homebuyers. Each has its own set of features, eligibility requirements, and interest rate structures.
Conventional loans, offered by private lenders and not backed by the government, provide flexibility in terms of interest rate options. They can be fixed-rate or adjustable-rate. Conventional loans may require a credit score of 620 or higher.
Fixed-Rate Mortgage
Fixed-rate mortgages offer stability and predictability in terms of monthly payments. The interest rate remains the same throughout the entire loan term, providing peace of mind to borrowers who prefer a consistent payment schedule. Fixed-rate mortgages are available in terms of 10, 15, 20, or 30 years.
The choice of loan term depends on the borrower’s financial situation and preferences. Shorter loan terms, such as 10 or 15 years, may come with higher monthly payments but result in significant interest savings over the life of the loan. Longer loan terms, such as 20 or 30 years, offer lower monthly payments but ultimately lead to paying more interest.
Adjustable-Rate Mortgage (ARM)
Adjustable-rate mortgages (ARMs) provide an initial period of lower interest rates, often referred to as the “teaser rate.” This lower rate can be attractive to borrowers looking to secure a lower monthly payment in the short term. However, after the initial period (often 5 or 7 years), the interest rate can adjust periodically, potentially leading to higher monthly payments in the future.
ARMs can be a suitable option for borrowers who plan to sell their home before the fixed-rate period ends or who are comfortable with the potential for fluctuating interest rates. It’s important to carefully consider the terms and potential risks associated with ARMs before committing to this type of mortgage.
FHA Loans
FHA loans, backed by the Federal Housing Administration, are designed to make homeownership more accessible to borrowers who may not meet the strict requirements of conventional loans. FHA loans typically have more lenient eligibility requirements, including lower credit score thresholds and lower down payment requirements.
VA Loans
VA loans, backed by the Department of Veterans Affairs, are exclusively available to veterans, active-duty military members, and certain members of the Reserve and National Guard. These loans offer competitive interest rates and do not require a down payment, making them an attractive option for eligible borrowers.
USDA Loans
USDA loans are tailored to low-income borrowers seeking to purchase a home in a rural area. These loans feature competitive interest rates and do not require a down payment, making them an excellent option for eligible individuals and families. The U.S. Department of Agriculture backs USDA loans, providing lenders with a guarantee against default. This makes homeownership more attainable for some borrowers.
Jumbo Loans
Jumbo loans are conventional loans that exceed the conforming loan limit set by the Federal Housing Finance Agency (FHFA). In Delaware, the conforming loan limits for single-unit residences is $766,550. Jumbo loans typically require a larger down payment and may have higher interest rates than conforming loans.
Popular Places to Get a Mortgage in Delaware
When searching for a mortgage, location plays a crucial role. Homebuyers should consider areas where home prices are within their budget and mortgage terms are favorable. Delaware, the second-smallest state in the nation, offers a range of cities and small towns, each with its own unique housing market and mortgage landscape.
The cost of living in a particular area can impact mortgage affordability. The Cost of Living Index (COLI) provides a valuable tool for comparing the cost of living across different locations. COLIs above 100 are more expensive than the average cost of living in the U.S., and those below 100 are less expensive. By considering the COLI, homebuyers can assess whether their income can comfortably support housing costs in a desired area.
Least Expensive Locations
For those seeking more affordable housing options, Delaware offers several locations with a lower cost of living. These areas include Milford (COLI: 95), Seaford (108.1), and Georgetown (108.1), where home prices tend to be more budget-friendly compared to other parts of the state.
Most Expensive Locations
On the other hand, areas such as Wilmington, Newark, and Rehoboth Beach are known for their higher cost of living. The average monthly expenses for one person will be higher in these areas. Home prices also tend to be higher, and mortgage rates may reflect the increased demand for housing.
Recommended: Best Affordable Places in the U.S.
Tips for Securing a Competitive Mortgage Rate in Delaware
Securing a competitive mortgage rate can make a substantial difference in the overall cost of a home. As shown above, even a slight variation in the interest rate can lead to significant savings or added expenses over the life of the loan. Therefore, it’s essential for homebuyers to take steps to secure the best possible mortgage rate.
Compare Interest Rates and Fees
Shopping around for mortgage rates is crucial to finding the best deal. Lenders offer different interest rates and fees, so it’s important to compare multiple options before making a decision. Online mortgage comparison tools can simplify this process by allowing homebuyers to quickly compare rates from different lenders.
In addition to the interest rate, inquire about any upfront costs or closing fees associated with the loan. These fees vary among lenders and can add to the overall cost of the mortgage. Be sure to factor these fees into your comparison when choosing a mortgage lender.
Get Preapproved
Getting preapproved for a mortgage is a valuable step in the homebuying process. It demonstrates to sellers that you’re a serious buyer and strengthens your position when making an offer. Preapproval also allows you to move quickly when you find the right property, as you’ll already have a clear understanding of your borrowing power.
The mortgage preapproval process involves a thorough review of your credit history. The lender will then issue a letter showing that you qualify for a certain loan amount at a specific interest rate. The letter is an offer, but not a commitment.
Delaware Mortgage Resources
Delaware recognizes the challenges that homebuyers face and offers various resources and programs to assist them, particularly first-time buyers and those with limited financial resources. These programs can provide financial assistance, education, and counseling to help individuals achieve their dream of homeownership.
To qualify as a first-time homebuyer, you typically must not have not owned a principal residence in the past three years.
First-Time Homebuyer Programs
The Delaware State Housing Authority offers several programs specifically designed for those buying their first home. These programs may provide down payment assistance, reduced interest rates, and other incentives to make homeownership more affordable for first-time buyers.
The Delaware First-Time Homebuyer Tax Credit allows eligible first-timers to claim up to 35% of their annual mortgage interest in the form of a federal tax credit of up to $2,000 a year. Learn more on the DSHA website.
Down Payment Assistance
Down payment assistance programs can help homebuyers overcome the challenge of saving for a down payment. These programs may provide grants, loans, or other forms of assistance to help cover the upfront costs of purchasing a home.
Home Sweet Home is a limited fund for up to $12,000 for down payment and closing costs on a primary residence with a maximum sales price of $285,000. Delaware Diamonds is another limited fund, for up to $10,000 for down payment and closing costs, that is forgivable after 10 years. And First State Home Loan offers 3% of the final loan amount for down payment and closing costs.
Tools & Calculators
SoFi offers a range of tools and calculators to help Delaware homebuyers make informed decisions. These tools can assist in calculating mortgage payments, determining affordability, and comparing different loan options.
Run the numbers on your home loan.
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Mortgage calculator
Punch in your home loan amount and a new interest rate, and we’ll estimate your payoff date.
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Down payment calculator
Enter a few details about your home loan and we’ll provide your monthly mortgage payment.
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Home affordability calculator
Provide us with a few details and see how much you can afford to spend on a home purchase.
Using the free calculators is for informational purposes only, does not constitute an offer to receive a loan, and will not solicit a loan offer. Any payments shown depend on the accuracy of the information provided.
Refinancing Options in Delaware
Homeowners in Delaware have the opportunity to refinance their existing mortgage to secure a lower interest rate. The FHA Streamline Refinance program, available to FHA-insured homeowners, offers a simplified process for refinancing with minimal documentation and appraisal requirements.
VA loan holders may also benefit from refinancing options. The Interest-Rate Reduction Refinance Loan (IRRRL) allows VA loan borrowers to refinance their existing loan to obtain a lower interest rate, potentially reducing their monthly payments.
Closing Costs, Taxes, and Fees in Delaware
Closing costs associated with purchasing a home in Delaware typically range between 2% and 5% of the home’s purchase price. These costs may include appraisal fees, title insurance, loan origination fees, and other administrative charges.
The specific closing costs in Delaware can vary depending on the value of the property and its location. Higher-priced homes and properties in certain areas may incur higher closing costs.
The Takeaway
Delaware presents a diverse range of options for homebuyers, catering to different financial situations and preferences. By staying informed about current mortgage rates and exploring assistance programs, individuals can make strategic decisions that align with their financial goals and achieve successful homeownership in the First State.
Remember, homeownership is a significant financial decision, and it’s essential to consult with a qualified mortgage professional to assess your individual situation and explore all available options. With careful planning and informed choices, you can navigate the Delaware mortgage market and realize your dream of homeownership.
Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.FAQ
Will mortgage rates ever go back to normal?
“Normal” mortgage rates can be subjective and vary over time. The current rates may be considered normal relative to historical averages, but they can still fluctuate based on economic conditions. It’s essential to stay informed about market trends and consult with a mortgage expert to understand the current mortgage environment.
Will Delaware home prices ever drop?
Home prices are influenced by many factors, including supply and demand, economic conditions, and location. It’s advisable to consult with a real estate professional who can provide insights into the local housing market and help you make informed decisions.
Is it a good time to buy a house in Delaware?
The decision of when to buy a house involves personal circumstances, financial readiness, and market conditions. There is no one-size-fits-all answer. It’s important to assess your financial situation, consider long-term goals, and consult with a real estate professional to determine if buying a house in Delaware aligns with your current circumstances and future plans.
How do mortgage interest rates work?
Mortgage interest rates are determined by a combination of economic factors, including the Federal Reserve’s interest rate decisions, inflation, unemployment rates, and borrower-specific factors such as credit score, down payment, income, assets, and type of mortgage loan. Lenders use these factors to assess the risk associated with a loan and set the interest rate accordingly.
SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility for more information.
SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.
*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.
†Veterans, Service members, and members of the National Guard or Reserve may be eligible for a loan guaranteed by the U.S. Department of Veterans Affairs. VA loans are subject to unique terms and conditions established by VA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. VA loans typically require a one-time funding fee except as may be exempted by VA guidelines. The fee may be financed or paid at closing. The amount of the fee depends on the type of loan, the total amount of the loan, and, depending on loan type, prior use of VA eligibility and down payment amount. The VA funding fee is typically non-refundable. SoFi is not affiliated with any government agency.
¹FHA loans are subject to unique terms and conditions established by FHA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. FHA loans require an Upfront Mortgage Insurance Premium (UFMIP), which may be financed or paid at closing, in addition to monthly Mortgage Insurance Premiums (MIP). Maximum loan amounts vary by county. The minimum FHA mortgage down payment is 3.5% for those who qualify financially for a primary purchase. SoFi is not affiliated with any government agency.
Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article. Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
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More home loan resources.
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First-Time Homebuyer Guide
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First-Time Homebuyer Programs and Loans
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Mortgage Preapproval Process