Thinking About Retiring in Delaware? Here's Why More People Are Making the Move.

Delaware combines no state sales tax, no state tax on Social Security benefits, relatively low property taxes, and easy access to the coast, which draws many retirees and their families. That popularity can also mean competition for housing, so it helps to understand your financing options before you make an offer. Whether you're planning your own retirement, helping a parent relocate, or shopping for a second home, I'm Edwin Santiago, an Originating Branch Manager at CrossCountry Mortgage. I'm licensed in Delaware and can help you sort through which loan fits your situation.

Why Delaware is becoming a retirement staple

Delaware's tax-friendly setup and coastal access are a big draw for retirees. There's no state or local sales tax, Social Security benefits aren't taxed at the state level, and property taxes generally run low compared with much of the country. That combination can keep more of a fixed retirement income in your pocket, which is exactly what draws so many retirees and their families to the state.

The competition is real, though. Sussex County, home to Rehoboth Beach and Lewes, ranks among the hottest second-home and retiree markets on the East Coast, and New Castle County up north pulls Wilmington-Philadelphia commuters. More buyers means you want your financing lined up before you start touring homes, so you can move fast when the right property appears.

Understanding the Delaware tax advantage

Delaware doesn't tax Social Security benefits at the state level, so what the federal government deposits into your account is what you keep for Delaware purposes. It also offers a pension exclusion for taxpayers age 60 and older, letting eligible residents shield a portion of pensions and some other retirement income. Spouses who each qualify can each use the exclusion. Rules and eligibility can change, so it's worth checking current guidance before you rely on any of these benefits.

There's no state or local sales tax, which is rare among the states, and property taxes generally run low compared with much of the country. Delaware also offers a Senior Property Tax Credit that can reduce the school portion of property tax for some qualifying homeowners age 65 and older, though eligibility and the benefit amount depend on your situation.

One honest caveat: retirement income above the exclusion is taxed at Delaware's graduated state rates, which can run high on larger taxable incomes. The tax picture is generally friendly for many retirees, but it's not a zero-tax state for every income stream, so it's worth checking your own mix before you commit.

How retirees can qualify for a mortgage

A common worry I hear is that a fixed retirement income won't qualify you for a loan. The good news is that lenders may consider Social Security, pensions, and retirement account distributions as qualifying income, subject to applicable program and underwriting requirements, and asset-based options can help in some cases when your income is modest but your savings are solid. A few programs tend to fit retirees well.

A conventional loan can work for borrowers who have steady income or significant assets, and the qualifying picture can be clearer for those putting money down. An FHA loan may offer more flexible credit and down payment guidelines for some borrowers, subject to program requirements. For those who qualify, a VA loan is an option for eligible Veterans, Active-Duty Service Members, and surviving spouses, and VA loans can be available without a down payment.

Helping your parents relocate to Delaware

If you're helping a parent move, the hardest part is often the paperwork, not the packing. Many older buyers come in with retirement income that's fine for day-to-day living but looks thin on a standard application, and their adult children end up asking whether they can co-sign or go on the loan together.

Adding a family member as a co-borrower may be an option when a parent's income or credit alone won't qualify, subject to the loan program's requirements. It's worth sitting down with a loan officer to review how the arrangement works, because all borrowers on the loan assume obligations and the loan counts against everyone who's on it. You'll also want to think about the realty transfer tax, which Delaware charges on home purchases and is one of the larger closing costs in the state, so it should be built into your cash-to-close estimate up front.

Buying a second home in Delaware

Second-home buyers at the beaches face a different set of rules, and Sussex County is one of the busiest markets for exactly this kind of purchase. The key is that occupancy and rental-use requirements vary by loan program, so your plans for the property can shape which loan fits.

A conventional loan is a common route for a second home, and the qualifying picture can be similar to a primary residence with program-specific occupancy expectations. If you plan to rent the property out for income, different rules may apply depending on the program, and it's worth talking through that intent with a loan officer before you choose your loan. Either way, the competition in the beach markets means a pre-approval before you tour is the practical move, so you can make a strong offer when the right home comes up.

How to get started

The right first step is a conversation about your income, your goals, and which loan fits. Retirees, families helping parents, and second-home buyers each come in with different paperwork, and matching the loan to your situation is the difference between a smooth process and a frustrating one.

I'm Edwin Santiago, an Originating Branch Manager at CrossCountry Mortgage, and I work with Delaware buyers on their mortgage options. Rates and terms change, and every loan is subject to underwriting approval, so the specifics get sorted out with your actual file in hand. If you're ready to explore your options, I can help you map out a path that fits your retirement plan.

All information provided in this publication is for informational and educational purposes only, and in no way is any of the content contained herein to be construed as financial, investment, or legal advice or instruction. CrossCountry Mortgage, LLC (“CrossCountry”) does not guarantee the quality, accuracy, completeness, or timeliness of the information in this publication. While efforts are made to verify the information provided, the information should not be assumed to be error free. Some information in the publication may have been provided by third parties and has not necessarily been verified by CrossCountry. CrossCountry its affiliates and subsidiaries do not assume any liability for the information contained herein, be it direct, indirect, consequential, special, or exemplary, or other damages whatsoever and howsoever caused, arising out of or in connection with the use of this publication or in reliance on the information, including any personal or pecuniary loss, whether the action is in contract, tort, or other tortious action.

Equal Housing Opportunity. All loans subject to underwriting approval. Certain restrictions apply. Call for details. All borrowers must meet minimum credit score, loan-to-value, debt-to-income, and other requirements to qualify for any mortgage program. CrossCountry Mortgage, LLC NMLS3029 (www.nmlsconsumeraccess.org).

CrossCountry Mortgage, LLC does not provide tax advice. Consult a tax advisor for further information.

CrossCountry Mortgage, LLC is an FHA Approved Lending Institution and is not acting on behalf of or at the direction of HUD/FHA or the Federal government.

CrossCountry Mortgage, LLC is not affiliated with or acting on behalf of or at the direction of the Veteran Affairs Office. Certificate of Eligibility required for VA loans.