Iowa Home Buyer Overview

According to the Iowa Association of Realtors, the median home sale price in Iowa was $218,000 in February 2023, representing a 10.2% increase compared to the previous year. Rising home prices can make it challenging for first-time buyers to save for a down payment and afford monthly mortgage payments. However, there are options to help you overcome these hurdles.

Iowa Home Buyer Stats

To give you a better idea of the financial aspects involved in buying a home in Iowa, here are some key statistics:

  • Average Home Sale Price in Iowa: $218,000

  • Minimum Down Payment in Iowa (3%): $6,550

  • 20% Down Payment in Iowa: $43,600

  • Average Credit Score in Iowa: 729

  • Maximum Iowa Home Buyer Grant: Up to $14,999 as a forgivable loan in Cedar Rapids

These down payment amounts are based on the state's most recent average home sale price. If you're eligible for a VA loan (backed by the Department of Veterans Affairs) or a USDA loan (backed by the U.S. Department of Agriculture), you may not need any down payment at all.

First-Time Home Buyer Loans in Iowa

While a 20% down payment is ideal, many first-time buyers don't have that amount saved. The good news is that you have options to buy a home with a lower down payment. Consider the following low-down-payment mortgage programs:

  • Conventional 97: Offered by Freddie Mac or Fannie Mae, this program requires a 3% down payment and a minimum FICO score of 620. Once you reach 20% home equity, you can usually stop paying mortgage insurance.

  • FHA Loan: Backed by the Federal Housing Administration, an FHA loan allows a down payment of 3.5% with a minimum credit score of 580. However, you will need to pay mortgage insurance premiums (MIP) until you refinance to a different type of mortgage, move, or pay off your loan.

  • VA Loan: Reserved for veterans and active-duty service members, a VA loan offers a zero down payment requirement. Minimum credit score requirements vary by lender but are often around 620. There is no ongoing mortgage insurance after closing, making VA loans highly desirable.

  • USDA Loan: Designed for individuals with low-to-moderate incomes purchasing homes in designated rural areas, a USDA loan requires no down payment. Credit score requirements vary by lender but often hover around 640, and the mortgage insurance rates are low.

Iowa First-Time Home Buyer Programs

The Iowa Finance Authority (IFA) provides various home loan programs to assist first-time and repeat home buyers in Iowa. These programs typically offer below-market interest rates and reduced closing costs. Here are two notable IFA programs:

  1. IFA FirstHome: This program offers special mortgages to eligible first-time home buyers in Iowa. To qualify, you must meet IFA financing guidelines, including having a credit score of 640 or higher, a debt-to-income ratio (DTI) below 45%, and meeting household income and home purchase price limits. Completing a homebuyer education course is also required.

  2. IFA Homes for Iowans: Unlike the FirstHome Program, Homes for Iowans is available to both first-time and repeat home buyers. It offers low-cost 30-year fixed-rate mortgages with lower interest rates and higher limits on income and purchase price. Eligibility requirements include having a credit score of 640 or higher, a DTI below 45%, and meeting income and purchase price limits. Completing a homebuyer education course is also necessary.

Iowa First-Time Home Buyer Grants

Iowa provides grants to assist eligible first-time home buyers with down payment and closing costs, making homeownership more accessible. The IFA offers down payment and closing cost assistance in the form of a second mortgage. Here are a couple of options:

  1. Iowa DPA Grant: This grant provides $2,500 in down payment assistance, which can be used towards your down payment and closing costs. It is a grant, meaning it doesn't need to be repaid.

  2. Iowa DPA Loan: If you need additional assistance, you can borrow up to $5,000 or 5% of the home purchase price as a second mortgage. There is no interest charged, and no monthly payments are required. However, the loan must be repaid in full when you sell the home, refinance, or complete your mortgage payments.

IFA Military Homeownership Assistance: Eligible military members and veterans may qualify for additional assistance through the IFA's Military Homeownership Assistance Program. The grant amount doubles to $5,000, and combined with the second mortgage, you can receive up to $10,000 in assistance.

IFA Mortgage Credit Certificate Program (MCC): This program provides eligible first-time home buyers with a federal tax credit, reducing their federal income tax liability. The credit allows borrowers to keep more of their income, making it easier to qualify for a mortgage and afford monthly payments.

Other Iowa First-Time Home Buyer Assistance

In addition to the IFA's programs, it's worth exploring any down payment assistance programs offered by your city or county. Conduct an internet search for "[your city or county] down payment assistance" or consult with your loan officer or real estate agent for recommendations.

Remember to review the specific eligibility requirements and application processes for each IFA home loan program. Working with a participating lender and consulting a housing counselor can help you navigate the application process and determine the best program for your needs.

Iowa offers a range of resources and programs to support first-time home buyers. By taking advantage of these opportunities, you can make your homeownership dreams a reality. Good luck with your home buying journey in Iowa!