Iowa First-Time Home Buyer Programs of 2021

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The Iowa Finance Authority is the state gateway to affordable mortgages. The IFA offers assistance to first-time home buyers as well as those who have previously owned a home. It also provides a military homeownership program for service members and veterans.

Buying your first home might be the highest financial hurdle you’ll ever face. It’s not just all the paperwork — or the thought of a 30-year payment commitment. It’s saving for the down payment that makes so many potential buyers think twice.

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Yet these days it’s common to put less than 20% down. The Iowa Finance Authority offers assistance, grants and first-time home buyer programs designed to help you reach the number you need for that down payment.

National first-time home buyer programs

No search for mortgage assistance is complete without checking into nationally available loan programs. Millions of first-time buyers have taken advantage of the low- or no-down-payment loans offered by these government-backed or government-sponsored providers.

Conventional mortgage

Best for:

Low down payments, limited mortgage insurance premiums

What you need to know:

A conventional mortgage is a home loan that isn’t guaranteed or insured by the federal government. Conventional mortgages that conform to the requirements set forth by Fannie Mae and Freddie Mac allow down payments as low as 3% for first-time buyers or lower-income home buyers. Unlike FHA loans, conventional loans allow borrowers to eventually cancel their mortgage insurance or avoid mortgage insurance altogether if they put at least 20% down.

VA loans

Best for:

Military, low down payments

What you need to know:

The U.S. Department of Veterans Affairs helps service members, veterans and surviving spouses buy homes. VA loans are especially generous, providing competitive interest rates, often requiring no down payment or mortgage insurance. Although there is no official minimum credit score, most VA-approved lenders require scores of at least 640.

FHA loans

Best for:

Low credit score, low down payments

What you need to know:

This is the go-to program for many first-time home buyers with lower credit scores. The Federal Housing Administration allows down payments as low as 3.5% for those with credit scores of 580 or higher. The FHA will insure loans for borrowers with scores as low as 500 but requires a 10% down payment for a score that low. Mortgage insurance is required for the life of an FHA loan and cannot be canceled.

USDA loans

Best for:

Low down payments, rural

What you need to know:

A USDA home loan is a zero-down-payment mortgage for eligible rural and suburban home buyers. USDA loans are issued by the U.S. Department of Agriculture through the USDA Rural Development Guaranteed Housing Loan Program. There are income limitations, which vary by region. Applicants with credit scores of 640 or higher receive streamlined processing. Those with scores below that must meet more stringent underwriting standards.

Iowa Finance Authority highlights and eligibility requirements

Like all state housing authorities, the IFA has income and home purchase price limits that help define eligibility. You’ll generally need a credit score of 640 or higher, and a debt-to-income ratio of 45% or lower.

Highlights

  • IFA loan programs have interest rates that are typically lower than the going market rate.

  • Mortgages have fixed interest rates and 30-year terms.

  • It has conventional loans that allow 3% down payments and have no — or low — mortgage insurance fees.

Eligibility

  • Borrowers who have not owned their primary residences in the past three years qualify as first-time buyers.

  • Service members and veterans generally have first-time home buyer requirements waived.

  • Repeat buyers can qualify for some programs by purchasing a home in specific Iowa neighborhoods.

  • The home must serve as your primary residence.

  • A credit score of 640 is required, but nontraditional documentation can be allowed for borrowers without credit scores.

Iowa Finance Authority first-time home buyer programs

FirstHome Program

Best for:

First-time home buyers, low down payments, low mortgage insurance

What you need to know:

This program offers 25- and 30-year fixed-interest-rate mortgages. Government-backed loans may offer zero-down payments, while conventional loans allow 3% down and may feature reduced or no mortgage insurance fees. Limits on property price and income apply. Assistance with down payments and closing costs is available with either a grant of $2,500, or a second loan of $5,000 or 5% of the purchase price.

Homes for Iowans

Best for:

First-time home buyers, low down payments, repeat home buyers

What you need to know:

This program is available to first-time as well as repeat home buyers. The down payment will depend on the type of loan program chosen. Household income and home purchase price limits are higher than the FirstHome program. Assistance with down payments and closing costs is available with either a grant of $2,500, or a second loan of $5,000 or 5% of the purchase price.

Military Homeownership Assistance Program

Best for:

Military, down payment assistance, closing costs assistance

What you need to know:

If you are active military, a veteran or the surviving spouse of an eligible veteran, you may qualify for a $5,000 grant to apply toward your down payment or closing costs. You may also combine this benefit with one of the Plus grants offered under the FirstHome or Homes for Iowans program to accrue up to $7,500 in assistance. Sometimes there will be a gap in state funding and applications for the program end up wait-listed. That means your grant will be applied at some point after you close your loan, as a reduction to your principal balance, when the legislature appropriates more money for the program.

Mortgage Credit Certificate Program

Best for:

Tax credits

What you need to know:

You can save up to $2,000 on your federal taxes each year for the life of your loan with a mortgage credit certificate. It’s a tax credit against half of the mortgage interest you pay annually.

Your next step

If these programs look good to you, it may be time to talk to an IFA participating lender for more details. The lender will determine if you’re likely to qualify and let you know what information you’ll need to gather to complete a loan application.

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