DSHA First State Home Loan DPA Delaware: 3% Down Payment Assistance (2026 Guide)

First State is DSHA’s 3% down payment assistance second mortgage for Delaware buyers. I’m John Thomas, Branch Manager and Division Vice President of Sales with the John Thomas Team with AnnieMac Home Mortgage in Newark, Delaware, and First State is the DSHA program I get the most questions about. It is the backbone of Delaware’s down payment assistance system — the 3% second mortgage that pairs with almost every DSHA first mortgage and covers most of what a buyer needs to reach closing. The single thing I correct most often on First State files is the math itself: buyers assume the 3% is calculated on the purchase price, and it is not — it is 3% of the final first mortgage amount after financed upfront mortgage insurance, which on an FHA file moves the number by several hundred dollars in the buyer’s favor. Over 20+ years and 3,000+ Delaware buyers I have originated First State at every price point and under both the Welcome Home and Open Door tracks. This guide walks through how the program works right now — including the April 15, 2025 income calculation rule, the DSHA income and sales price limits effective for reservations on or after June 8, 2026, how First State compares to Keys4You (4%) and Take5 (5%), and real-dollar examples at $300K, $400K, and $500K.

Watch: DSHA First State Home Loan DPA Program explained by John Thomas — how the 3% DPA works, who qualifies, and how to apply.

What Is the DSHA First State Home Loan in Delaware?

The DSHA First State Home Loan is a down payment assistance program from the Delaware State Housing Authority. Structured as a zero-interest deferred second mortgage, it provides 3% of your final first mortgage loan amount toward your down payment and closing costs. The program was previously known as the Preferred Plus DPA Program and now sits inside DSHA’s Delaware Mortgage Program suite.

The key thing to understand: First State is a DPA second loan — it cannot be used by itself. It must be paired with a DSHA first mortgage, which means you must first qualify for either the Welcome Home program (first-time buyers) or the Open Door program (first-time and repeat buyers). First State is one of several DPA options under those two tracks, and it is the most commonly used because it has been continuously funded and works at every price point.

Buyers who don’t need down payment assistance can use DSHA’s Smart Start Home Loan instead — the unassisted DSHA first mortgage under Welcome Home or Open Door, with no down payment assistance and no closing cost assistance attached. That absence is the point: because you are not taking a DPA second lien, Smart Start prices at the lowest DSHA interest rate in its track. Most of my Delaware buyers still pair with First State or Keys4You for the cash relief, but Smart Start is the right call if you have already saved what you need.

Note on DSHA’s April 2026 Delaware Mortgage Program rebrand: In April 2026, DSHA launched the Delaware Mortgage Program — a single rebrand event that retired the longtime “Kiss Your Landlord Goodbye” campaign, consolidated program information at destatehousing.com, renamed Home Again to Open Door, branded the existing 4% DPA as Keys4You and opened it to both Welcome Home and Open Door, and launched Take5 as a 5% DPA exclusive to Welcome Home. Before April 2026 the 4% DPA had no official product name and was Home Again-exclusive (DSHA reintroduced it in 2025), and there was no Take5. First State’s 3% DPA has been available under both first-mortgage tracks throughout — only the program names changed around it.

First State Home Loan at a glance:

• DPA amount: 3% of your final first mortgage loan amount (after financed upfront MIP on FHA loans)
• Interest rate: 0% — zero interest for the life of the loan
• Monthly payment: None — fully deferred
• Term: 30 years, or until a payoff trigger occurs (sale, refinance, transfer of title, no longer primary residence)
• Loan type: Second mortgage, recorded as a lien against the property
• Minimum credit score: 620 (660 for manual underwriting or manufactured homes)
• Pair with: Welcome Home OR Open Door first mortgage (required)
• Where: Delaware only — all three counties
• Residence type: Primary residence only

How Much Does the First State Home Loan Give You? Real Examples at $300K, $400K, and $500K

Because First State is calculated on your final first mortgage loan amount — not your purchase price — the dollar amount depends on which loan type you use and whether upfront mortgage insurance is financed into the loan. Here is how the math works at four common Delaware price points using FHA financing:

Purchase Price	FHA Base Loan (after 3.5% down)	Final FHA Loan (with financed UFMIP)	First State DPA (3%)
$300,000	$289,500	$294,566	$8,837
$350,000	$337,750	$343,660	$10,310
$400,000	$386,000	$392,755	$11,783
$500,000	$482,500	$490,944	$14,728

FHA upfront MIP is 1.75% of the base loan amount and is typically financed into the final loan, which is why the First State 3% lands slightly above 3% of the base loan. For conventional, VA, or USDA first mortgages the math works differently because upfront premium structures differ.

Step-by-Step Example: A Newark Buyer at $350,000

Here is a composite scenario built from the pattern I see most often, so you can follow First State from pre-approval to closing. Meet Sarah, a first-time buyer purchasing a townhome in Newark, Delaware:

• Household: Sarah and her husband. Only Sarah is on the Note and Mortgage. Her income is $82,000.
• Program match: Welcome Home + First State. Sarah’s $82,000 is comfortably under the New Castle County non-targeted Welcome Home limit of $122,700 for a 1–2 person household. Under the April 15, 2025 income rule her husband’s $65,000 does not count toward the limit, because he is not on the Note.
• Credit and counseling: Sarah’s credit score is 680, above the 660 threshold, so no housing counseling is required.
• Purchase price: $350,000 townhome. Sarah writes the offer asking for 3% in seller concessions toward closing costs.
• Loan structure: FHA first mortgage at $343,660 (after financed UFMIP) plus First State DPA at $10,310.
• Cash to close: Down payment $12,250 minus First State DPA $10,310 leaves $1,940 toward down payment. Closing costs of roughly $9,000 are covered by $10,500 in seller concessions. Sarah reaches closing with well under $3,000 out of pocket.

That is a typical Delaware First State structure — the 3% DPA does most of the down payment work, negotiated seller concessions cover closing costs, and the buyer keeps cash reserves. Your actual numbers will differ based on county, credit, loan type, and how the offer is negotiated.

Who Qualifies for the First State Home Loan DPA?

Because First State requires a DSHA first mortgage, you must qualify for either Welcome Home or Open Door, and First State adds its own overlay on top. Here is the full eligibility picture:

• Minimum 620 credit score for all borrowers on the loan
• 660 credit score if the loan is manually underwritten or you are buying a manufactured home
• Housing counseling if your credit score is 659 or below — 8 hours of HUD-approved home buyer counseling, typically a one-day online course costing about $125
• Qualifying income under the limit for your first mortgage track (Welcome Home or Open Door) in your county — see the income limits below
• Sales price at or below the DSHA maximum for your county
• Must use a DSHA-approved lender — the John Thomas Team with AnnieMac Home Mortgage is a DSHA-approved lender
• Must occupy the property as your primary residence
• Must sign a Note and Mortgage for the First State second mortgage at closing
• Property must be in Delaware (all three counties eligible)

What Are the Welcome Home and Open Door Income Limits for 2026?

DSHA sets income limits based on the first mortgage track you use, the county you are buying in, and your household size. If you are using First State under Welcome Home, Welcome Home’s limits apply. If you are using it under Open Door, Open Door’s limits apply, and they are higher. The figures below are the DSHA limits effective for reservations on or after June 8, 2026.

Welcome Home Income Limits (First-Time Buyers)

County	Area	1–2 Person Household	3+ Person Household
New Castle	Non-Targeted	$122,700	$141,105
New Castle	Targeted Areas	$147,240	$171,780
Kent & Sussex	Non-Targeted	$111,400	$128,110
Kent & Sussex	Targeted Areas	$133,680	$155,960

Open Door Income Limits (First-Time and Repeat Buyers)

Open Door limits run higher than Welcome Home, which is what makes the track work for dual-income households and buyers who exceed the Welcome Home caps:

County	1–2 Person Household	3+ Person Household
New Castle	$147,240	$184,050
Kent & Sussex	$133,680	$167,100

DSHA Sales Price Limits

County	Non-Targeted Maximum	Targeted Area Maximum
New Castle	$659,385	$805,916
Kent & Sussex	$566,354	$692,211

What Counts as a DSHA Targeted Area in Delaware?

Targeted areas are specific census tracts DSHA designates to expand homeownership opportunity. Buying inside one matters for three reasons: higher income limits, higher sales price limits, and more flexible program requirements. On the Welcome Home track in particular, buyers who are over the standard income limit sometimes qualify simply because of where the home sits — which is why I check the tract before ruling anyone out.

DSHA currently designates these census tracts as targeted areas:

County	Targeted Census Tracts
New Castle	0006.02, 0019.02, 0021.00, 0023.00, 0029.00, 0030.02
Kent	0425.00
Sussex	0505.03, 0507.11

You can check whether a specific address falls inside one of these tracts using the FFIEC Geocoding Map, which is the tool DSHA points buyers to. Send me an address and I will run it before you write the offer — it takes about two minutes and occasionally changes which program a buyer should be using.

What Properties Are Eligible for First State DPA?

You must be purchasing in Delaware as your primary residence. All three counties — New Castle, Kent, and Sussex — are eligible. These property types are approved:

• Single-family residences
• Townhomes and row homes
• Warrantable condominiums
• 2–4 family units (FHA, VA, or USDA financing)
• Double-wide manufactured homes (FHA only, and requires a 660 credit score)

Not eligible:

• Investment properties
• Second homes and vacation homes
• Non-warrantable condos
• Co-ops
• Mobile homes on leased land
• Single-wide manufactured homes

How Does First State Compare to Keys4You, Take5, and Other DSHA DPA Options?

DSHA offers several DPA options across the Welcome Home and Open Door tracks. You can use only ONE DSHA DPA second loan per transaction — they cannot be stacked. First State is the most widely used because it has been continuously funded and works at every price point. Here is how the active options compare:

DPA Program	Amount	Available Under	Structure	Best For
First State (this page)	3% of final loan	Welcome Home + Open Door	0% deferred second	Most Delaware buyers — widely available, smallest rate trade-off of the three DPA tiers
Keys4You	4% of final loan	Welcome Home + Open Door	0% deferred second	Buyers who need more DPA and can accept a slightly higher first-lien rate
Take5	5% of final loan	Welcome Home only	0% deferred second	First-time buyers needing maximum cash-to-close reduction
Diamond in the Rough	5% of final loan	Welcome Home only	0% deferred second	Renovation buyers using FHA 203(k) Limited
Smart Start	None — unassisted	Welcome Home + Open Door	First mortgage only, no second lien	Buyers who already have their down payment and want the lowest DSHA rate in their track

A note on the 4% DPA history: before April 2026 the 4% DPA had no official product name and was Home Again-exclusive (DSHA reintroduced the 4% option in 2025, available only with Home Again at that point). The April 2026 Delaware Mortgage Program rebrand renamed Home Again to Open Door, branded the 4% DPA as Keys4You, and opened it to buyers under both tracks. The same rebrand launched Take5. Any site still describing the 4% DPA as “Home Again only,” or still using the old program name, is out of date.

A note on Delaware Diamonds and Home Sweet Home: these two programs — the essential workers grant and the forgivable loan — are not currently funded. DSHA has refunded programs like these periodically and they may return, but as of September 2026 they are not available to pair with First State or any other first mortgage. I will flag it here and tell you directly if that changes.

First State vs. Keys4You in one sentence: First State gives you 3% DPA with a slightly lower first-lien interest rate; Keys4You gives you 4% DPA with a slightly higher first-lien rate — same zero-interest deferred structure, same eligibility, a different trade-off between cash at closing and rate over the life of the loan.

The right DPA for you turns on three things: how much cash you need at closing, how the first-lien rate changes at each DPA level, and which county and household tier you fall into. At pre-approval I will show the math side by side so you can see what each option actually costs over the life of the loan.

When First State Is Not a Good Fit

First State fits most Delaware DSHA buyers — but not everyone. Here is when a different option usually makes more sense:

• You need maximum cash at closing. If 3% will not get you close enough to zero cash-to-close and you can accept a slightly higher first-lien rate, Take5 (5%) under Welcome Home or Keys4You (4%) under either track will give you more relief.
• You are prioritizing the lowest rate and already have your cash. The Smart Start unassisted first mortgage prices at the lowest DSHA rate in its track precisely because no DPA second is attached.
• Your qualifying income exceeds both Welcome Home and Open Door limits. If you are over Open Door’s higher caps, First State and every other DSHA DPA is off the table. Conventional, FHA, VA, or USDA financing outside DSHA remains available, and can often pair with New Castle County DPS or Wilmington First Start, which use their own income rules.
• You are doing major renovation work. If you are using FHA 203(k) Limited to roll renovation costs into the loan, Diamond in the Rough (5%) is built for that path under Welcome Home.
• You expect to sell or refinance within two to three years. First State is repaid in full at sale or refinance with no forgiveness, so on a short hold you would be repaying the assistance quickly while carrying the rate trade-off the whole time.

When Do You Have to Pay Back the First State DPA?

First State is a soft second mortgage recorded as a lien against the property. The rate is 0% for the full life of the loan and no monthly payments are ever required. You repay it when one of these trigger events occurs, whichever comes first:

• You sell the home — the balance is paid at settlement from sale proceeds
• You refinance the first mortgage — the balance must be paid off, or in some cases subordinated, though subordination is not guaranteed
• The home stops being your primary residence — if you convert it to a rental or move out, the balance comes due
• Transfer of title — any transfer of ownership triggers repayment
• 30 years from the date of the Mortgage Note — the loan matures

Because the loan carries no interest, you repay exactly what you borrowed. If you received $10,310 at closing and sell ten years later, $10,310 is what comes off the settlement statement.

When First State must be repaid, in one paragraph: you owe the First State balance only when you sell the home, refinance the first mortgage, transfer title, stop using the property as your primary residence, or reach the 30-year maturity — whichever comes first. No monthly payments. No interest. You pay back what you borrowed.

Can You Combine First State with Other DPA Programs?

This is one of the most common questions I get, and the answer is clean: DSHA DPA second loans cannot be stacked. You pick ONE DPA option per transaction. You cannot combine First State with Keys4You, Take5, Diamond in the Rough, Delaware Diamonds, or Home Sweet Home. DSHA’s program rules state that a borrower may use only one DPA second loan program.

What you can combine First State with is non-DSHA assistance — seller-paid closing costs negotiated into your offer, a documented gift from a qualified family member, and in some cases municipal or county programs such as New Castle County DPS, Wilmington First Start, Dover First Start, or Sussex County Housing Trust Fund, depending on lien position and program compatibility. Each of those programs counts income differently from DSHA, so eligibility does not carry across automatically. At pre-approval I map every assistance source you qualify for and show where they can legally layer.

What About Delaware Transfer Tax When Using First State?

Common Mistakes to Avoid with First State DPA

After 20+ years and 3,000+ Delaware buyers, these are the mistakes I see most often on First State files, and how to avoid each one:

• Assuming First State is forgivable. It is not. Every dollar comes back when you sell, refinance, transfer title, or hit 30 years. The forgivable program buyers are usually thinking of is Home Sweet Home, which is not currently funded. Deferred is not forgiven.
• Not planning for the refinance trigger. The First State balance must be paid at refinance, or in rare cases subordinated, and subordination is not guaranteed. If rates drop meaningfully, run that math before you assume a refinance is free.
• Choosing the wrong DPA tier. Some buyers automatically take the largest DPA when First State at 3% would have left them with a lower first-lien rate and an equally comfortable cash-to-close after seller concessions. More DPA is not automatically better.
• Ignoring the April 15, 2025 income rule. Plenty of dual-income Delaware households still assume every adult’s income counts. Welcome Home counts only borrowers on the Note or Mortgage; Open Door counts only qualifying income on the application. If you ruled DSHA out on income years ago, the rule you were told may no longer apply.
• Trying to stack DSHA DPA programs. One DPA second loan per transaction. Pick one.
• Missing the builder contract transfer tax trap. New construction buyers routinely sign builder contracts requiring the full 4% transfer tax instead of the DAR 2%/2% split. First State helps, but negotiate concessions before you sign, not after.
• Skipping the targeted-area check. If the home sits in a targeted census tract, the income and sales price limits are higher. I have seen buyers written off as over-income who qualified once the tract was checked.

How Do You Apply for the DSHA First State Home Loan?

You apply through a DSHA-approved lender — DSHA does not take applications directly. Here is how the process runs with our team:

1. Call 302-703-0727 or apply online. The initial credit pull for pre-qualification is a soft pull, so it does not affect your score. There is no application fee and no upfront fee.
2. Pre-approval review. We review your qualifying income (borrowers on the Note and Mortgage for Welcome Home; loan-application income for Open Door), credit, debts, cash for closing, and target county to confirm which DSHA track and which DPA option fits.
3. Program selection. We show you the math side by side for First State vs. Keys4You, and Take5 where Welcome Home applies — interest rate, DPA dollar amount, monthly payment, and cash-to-close for each.
4. Housing counseling if needed. Required when your credit score is 659 or below. We connect you with an approved Delaware counseling agency, typically a one-day online course costing about $125.
5. Pre-approval letter issued. Your letter names the DSHA program, the DPA amount, and your purchase price range so your agent can write strong offers.
6. Go under contract and close. DSHA loans close like any other mortgage. Delaware settlements are handled by a licensed attorney or title company, and at closing you sign both the first mortgage and the First State second mortgage.

Full pre-approval typically takes 24–48 hours once we have your documentation, because underwriting is done in house rather than sent to a remote hub. You can also schedule a free 30-minute consultation if you would rather talk through your situation before applying.

Ready to Use First State DPA to Buy Your Delaware Home?

Related Delaware DPA and Mortgage Guides

First State sits inside a larger Delaware DPA and first-time buyer ecosystem. For deeper reading on the programs and concepts referenced above:

• DSHA Welcome Home Mortgage Loan — the first-mortgage track First State pairs with for first-time buyers.
• DSHA Open Door Mortgage Loan — the track for repeat buyers and higher-income households (renamed from Home Again in DSHA’s April 2026 rebrand).
• DSHA Smart Start Home Loan — the unassisted DSHA first mortgage, for buyers who already have their down payment and want the lowest DSHA rate in their track.
• DSHA Keys4You 4% DPA — the 4% sibling to First State, available under both tracks.
• DSHA Take5 5% DPA — the 5% option under Welcome Home only, for maximum cash-to-close reduction.
• DSHA Diamond in the Rough 5% DPA — the renovation-specific 5% DPA paired with FHA 203(k) Limited under Welcome Home.
• DSHA Loan Programs in Delaware — the full DSHA pillar guide covering every program and how they fit together.
• Delaware Down Payment Assistance Programs — every active DPA in Delaware, state, county, and city.
• Delaware First Time Home Buyers Guide 2026 — the pillar first-time buyer resource.
• Delaware Mortgage Credit Certificate (MCC) — the MCC was a federal tax credit for Delaware first-time buyers that ended August 15, 2025. Many national sites and tax preparers still reference it as active; our MCC page explains how it worked and when it ended.
• Delaware FHA Loans — the first mortgage most often paired with First State.
• Delaware Conventional Loans — the conventional first mortgage option with DSHA programs.
• Delaware First-Time Home Buyer Transfer Tax Exemption — how to reduce the buyer-side 2% transfer tax.

Serving Delaware home buyers statewide: we originate DSHA First State DPA loans for buyers purchasing in Newark, Wilmington, Middletown, Bear, New Castle, Dover, Smyrna, Milford, Georgetown, Seaford, Lewes, Rehoboth Beach, Millsboro, and throughout all three Delaware counties. Our office is at 248 E Chestnut Hill Rd in Newark, Delaware, and we handle closings statewide. See John Thomas Team on Google for reviews, directions, and local office information.

About the Author – John Thomas, Delaware’s DSHA DPA Expert

DSHA First State Home Loan DPA FAQ

Last Updated: September 2026 · John Thomas Team with AnnieMac Home Mortgage · Mortgage content reviewed by John R. Thomas, NMLS #38783.
John R. Thomas, NMLS #38783 | AnnieMac Home Mortgage NMLS #338923 | 248 E Chestnut Hill Rd, Newark, DE 19713 | 302-703-0727 | delawaremortgageloans.net
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