Mortgage

Iowa First-Time Dwelling Purchaser: 2022 Applications and Grants

What to know about buying a house in Iowa

As an Iowa first–time home buyer, you’ll find things less challenging than in most other states. Home prices are low and are rising more slowly than elsewhere.

You may also be in line for home buying help. The Hawkeye state has special mortgages with low rates and worthwhile down payment assistance programs that can make your purchase more affordable.

Here’s what you should know to get started.

Verify your home buying eligibility in Iowa. Start here (Feb 12th, 2022)

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Iowa home buyer overview

In December 2021, the Iowa Association of Realtors reported: “Median Sales Price increased 5.6 percent to $190,000 for Single–Family Detached homes and 10.6 percent to $201,000 for Townhouse–Condo homes.” For our calculations, we’ll split the difference and say the average home price was $195,500 that month.

The good news for every Iowa first–time home buyer is that median price is way lower than the national average, which was $375,000 the same month.

And at 5.6% year–over–year, home prices in Iowa are rising much more slowly than they are nationwide. Across the country, home values climbed 17.4% from October 2020 to October 2021.

Iowa Home Buyer Overview

Average Home Sale Price in Iowa
$195,500

Minimum Down Payment in Iowa (3%)
$5,865

20% Down Payment in Iowa
$39,100

Average Credit Score in Iowa1
726

Maximum Iowa Home Buyer Grant2
Up to $14,999 as a forgivable loan in Cedar Rapids

Down payment amounts are based on the state’s most recently available average home sale price. “Minimum” down payment assumes 3% down on a conventional mortgage with a minimum credit score of 620.

If you’re eligible for a VA loan (backed by the Department of Veterans Affairs) or a USDA loan (backed by the US Department of Agriculture), you may not need any down payment at all.

Verify your home buying eligibility in Iowa. Start here (Feb 12th, 2022)

First–time home buyer loans in Iowa

If you’re a first–time home buyer in Iowa with a 20% down payment, you can get a conventional loan with a low interest rate. And you never have to pay for private mortgage insurance (PMI).

Of course, few first–time buyers have saved enough for 20 percent down. But the good news is, you don’t need that much. Not by a long shot.

Borrowers can often get into a new home with as little as 3% or even 0% down using one of these low–down–payment mortgage programs:

Conventional 97 – From Freddie Mac or Fannie Mae. 3% down payment and 620 minimum FICO score. You can usually stop paying mortgage insurance after a few years once you reach 20% home equityFHA loan – Backed by the Federal Housing Administration. 3.5% down and a 580 minimum credit score. But you’re on the hook for mortgage insurance until you refinance to a different type of mortgage, move home, or pay off your loanVA loan – Only for veterans and service members. Zero down payment is required. Minimum credit score varies by lender but often 620. No ongoing mortgage insurance after closing. These are arguably the best mortgages available, so apply if you’re eligibleUSDA loan – For those on low–to–moderate incomes buying in designated rural areas. Zero down payment required. Credit score requirements vary by lender but often 640. Low mortgage insurance ratesIowa Finance Authority loans – May include below–market rates, fewer closing costs, and down payment assistance. More information below

Note that government loan programs (including the FHA, VA, and USDA home loans) require you to buy a primary residence. That means you can’t use these loans for a vacation home or investment property.

Depending on the mortgage loan you choose, you could potentially get into your new house with minimal cash out of pocket.

These programs even let you use gifted money or down payment assistance (DPA) to cover the down payment and closing costs.

If you’re not sure which program to choose for your first mortgage, your lender can help you find the right match based on your finances and home buying goals.

Find the best first-time home buyer loan for you (Feb 12th, 2022)

Iowa first–time home buyer programs

The Iowa Finance Authority (IFA) has a Firsthome Program that offers special mortgages to eligible first–time home buyers in Iowa.

IFA loans typically have below–average interest rates compared to the rest of the market. And they come with lower closing costs, at least partly thanks to the free Iowa Title Guaranty Owner’s Certificate, which might replace costly title insurance.

You’ll need a credit score of 640 or higher and an income that’s low or moderate for your area to qualify. Use the IFA’s online eligibility checker tool to see if you can get a Firsthome mortgage.

These mortgages are only available through an IFA–approved lender. But there are plenty to choose from. Pick yours using the IFA’s Find a Lender online tool. It will help with all your queries, including eligibility concerns.

Iowa first–time home buyer grants

The IFA’s down payment assistance program comes in two forms.

One option is a $2,500 down payment grant. Grants are free money and don’t have to be repaid.

If you need more, you could borrow up to $5,000 as a second mortgage. No interest is charged and there are no monthly payments. But you will have to repay your loan in full when you sell the home, refinance, or finish paying down your mortgage. Most similar programs also require you to remain in residence in the home.

To qualify for an Iowa home buying grant, you’ll need:

A household income of $139,580 or lessA home sale price of $381,000 or lessA credit score of 640 or moreA reasonable debt load (your debt–to–income ratio must be 45% or less)

Those are the main criteria but check for more conditions.

Also note that military home buyers may be in line for additional help.

The IFA’s Military Homeownership Assistance program gives extra help to eligible service members and veterans. The grant doubles to $5,000 and – with one of those second mortgages – it’s possible to receive a loan of up to $10,000.

Be sure to compare the IFA’s offerings with ones that may be offered by your city or county. Then pick the one that suits you better or best.

Verify your home buying eligibility in Iowa. Start here (Feb 12th, 2022)

Buying a home in Iowa’s major cities

Home prices in Iowa’s three biggest cities have been rising more slowly than even the statewide average. Indeed, in Davenport, they actually fell a little last year.

And the prices themselves are lower than the statewide average price. So, if you’re an Iowa first–time home buyer, you may find it more affordable to purchase in one of these cities.

Still, do check out the down payment assistance programs (DPAs) that are available where you’re buying. Providing you’re eligible, they could help a lot.

Des Moines first–time home buyers

In December 2021, the median list price of homes in Des Moines was $180,000. That was an increase of 3.1% year–over–year according to Realtor.com.

If you want to buy a home at that median price, your down payment options might fall between:

$5,400 for 3% down payment$36,000 for 20% down payment

The City of Des Moines says it doesn’t have a down payment assistance program as such. But it does give money to nonprofit partners who may be able to help. There’s a list of partners at that link and you can ask each what assistance it can provide.

Cedar Rapids first–time home buyers

In December 2021, the median list price of homes in Cedar Rapids was $162,000. That was an increase of 1.9% year–over–year according to Realtor.com.

If you want to buy a home at that median price, your down payment options might fall between:

$4,860 for 3% down payment$32,400 for 20% down payment

At the time this was written, the Cedar Rapids website said its down payment assistance program was closed but was likely to reopen later in the year. So check to see its status by the time you read this.

When the program is open, it offers $1,000–$14,999 as a loan. But that loan is forgiven after five years, subject to conditions.

For more information, including eligibility criteria, download the PDF brochure. You can also contact the Homeownership Program Coordinator by calling (319) 286–5874.

Davenport first–time home buyers

In December 2021, the median list price of homes in Davenport was $149,900. That was a decrease of –3.3% year–over–year according to Realtor.com.

If you want to buy a home at that median price, your down payment options might fall between:

$4,500 for 3% down payment$29,980 for 20% down payment

The City of Davenport offers outright grants (that don’t have to be repaid) to eligible first–time home buyers. You can receive 50% of your down payment and all your reasonable closing costs up to a total of $10,000.

Download the PDF brochure for eligibility criteria and conditions. And you can call the Community and Economic Development department on (563) 326–7765 for help.

Where to find home buying help in Iowa

All the organizations we’ve listed above should provide advice freely to any first–time home buyer in Iowa or within their local areas.

In addition to our selection, the U.S. Department of Housing and Urban Development (HUD) provides lists for statewide, regional, and local resources:

Statewide and regional first-time home buyer resources in Iowa

Community contacts – Find out if your community offers homeownership assistanceEast Central Iowa Council of Governments – Benton, Iowa, Johnson, Jones, Linn, Washington countiesHomeowner education programs – Learn how to purchase and maintain a home of your ownHabitat for Humanity – Through volunteer labor, builds and rehabilitates houses for families in needIowa Finance Authority statewide homebuyer programs – The Iowa Finance Authority offers several homebuying assistance programs which are available wherever you live in the State of IowaIowa Northland Regional Council of Governments – Bremmer, Buchanan, Butler, Chickasaw, and Grundy countiesSouthern Iowa Council of Governments – Adair, Adams, Clarke, Decatur, Madison, Ringgold, Taylor and Union countiesSouthwest Iowa Planning Council – Cass, Fremont, Harrison, Mills, Montgomery, Page, Pottawattamie, and Shelby countiesU.S. Department of Agriculture Rural Housing – Homebuyer programs in rural communities

Local home buyer resources in Iowa

What are today’s mortgage rates in Iowa?

You can see today’s live mortgage rates in Iowa here.

When you’re ready to start the home buying process, make sure you get personalized rate quotes from at least three mortgage lenders.

Don’t just look at advertised rates online; actually apply for preapproval and compare the interest rates and fees you’re offered. That’s the only way to know you’re getting the best deal possible on your new home loan.

Show me today’s rates (Feb 12th, 2022)

1 Source: Experian.com 2021 study of 2020 data

2Based on a review of the state’s available DPA grants at the time this was written

The information contained on The Mortgage Reports website is for informational purposes only and is not an advertisement for products offered by Full Beaker. The views and opinions expressed herein are those of the author and do not reflect the policy or position of Full Beaker, its officers, parent, or affiliates.

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