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2022 Iowa First-Time Homebuyer Programs

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First-time homebuyers in Iowa will find a variety of programs that offer down payment and closing cost assistance, low interest loans and tax credits to incentivize people to buy homes in the state. Many programs have requirements such as income limits, minimum occupancy periods and payback rules if you refinance or sell before a specific time. Learn about these rules to see which program might help you buy your first home.

Iowa statewide and local first-time homebuyer programs

Iowa residents may qualify for one of several state or local homebuyer programs, some of which can be combined. One of the best resources for finding first-time homebuyer programs is the U.S. Department of Housing and Urban Development (HUD) list of community contacts for several cities in Iowa.

Program nameAssistance amountAssistance typeWhere it’s available
FirstHome$2,500 or $5,000 in down payment assistanceGrant or second loanStatewide
Homes for Iowans$2,500 or $5,000 in down payment assistanceGrant or second loanStatewide
East Central Iowa Council of Governments Home Buyers AssistanceUp to $24,999 for down payment, closing costs and inspection costsForgivable loanEast Central Iowa: Washington County, city of Coralville and city of Vinton
Southwest Iowa Planning Council Home Ownership AssistanceUp to 7% of the purchase price up to $7,000 in down payment assistanceForgivable loan and a low (1%) interest loanSouthwest Iowa
Oskaloosa First Time Homebuyer AssistanceUp to $2,500 in down payment assistanceForgivable grantCity of Oskaloosa

What to know about different types of down payment assistance

The goal of homebuyer assistance programs is to encourage renters to establish roots and build wealth through homeownership. However, there are different rules around how these down payment assistance programs work that could impact your eligibility and potential repayment plans.

  • Loans. Loans can have very low interest rates, sometimes as low as 1%. You may or may not have to make payments on a second mortgage while you own the home. With forgivable loans, the balance can be completely forgiven after a set time period.
  • Grants. Grants typically do not need to be repaid. However, if you sell or refinance before the end of the time stated in the grant paperwork, you might be required to repay some or all of the grant.
  • Tax credits. Many homebuyer assistance programs include a mortgage credit certificate. In Iowa, this federal tax credit can be used to reduce your federal income tax with an annual credit of 50% of the mortgage interest paid while you live in the home. The program depends on funding, and at the time of publication, there was no funding for this program in Iowa.

How Iowa first-time homebuyer programs work

The process of applying and qualifying for a first-time homebuyer program in Iowa starts with identifying programs that you may be eligible for and their potential repayment requirements. Most homebuyer programs depend on government funding, so it’s important to check on the current funding status in case they are temporarily unavailable. State and local housing agencies in Iowa will have the most up-to-date information.

First-time homebuyers in Iowa need to follow these steps to participate in a homeownership assistance program:

1. Start with homebuyer education. Most homebuyer assistance programs in Iowa require applicants to take a class online or in person. Taking the class and gaining extra knowledge about the homebuying process is a good way to learn more about homebuyer programs and to prepare for buying your first home.

2. Find a participating lender. Homebuyer assistance programs have numerous details and requirements, so the government and nonprofit agencies identify specific lenders in Iowa that are experienced with the programs.

3. Check out program requirements. Some Iowa homebuyer programs have limits on the price or location of the property or the income of buyers. You also may need to meet credit score and debt-to-income (DTI) ratio guidelines.

4. Learn about payback requirements. The goal of homebuyer programs is to encourage people to buy a home and live in it for a long time, which means most have a payback requirement if you refinance or sell before a specific period of residency has been met.

Iowa first-time homebuyer program requirements

Many first-time homebuyer programs have specific standards that applicants must meet to qualify for assistance, including a minimum credit score or a maximum debt-to-income ratio. These requirements occasionally change, so it’s best to confirm them with your lender or housing finance agency.

Program name Credit score minimumDTI ratio maximumMaximum income limitHow long you have to live in the home
FirstHome640 for loans45%$79,500 to $99,700 for a two-person householdN/A
Homes for Iowans640 for loans45%$139,580N/A
East Central Iowa Council of Governments Home Buyers AssistanceN/A30% front-end ratioUp to 80% of area median income5 years
Southwest Iowa Planning Council Home Ownership AssistanceN/AN/AUp to 80% of area median income5 years
Oskaloosa First Time Homebuyer AssistanceN/AN/A$139,5805 years

THINGS YOU SHOULD KNOW

Many homebuyer assistance programs are designed to improve the ability of low- to moderate-income households to buy a home. When these programs receive their funds from the federal government, they often need to follow HUD income limit guidelines, which vary by location and household size and are updated annually. You can use HUD’s median income lookup tool to find out the limits in your area.

National first-time homebuyer programs

While the loan programs listed below are not exclusive to first-time homebuyers, typically a first-time homebuyer in Iowa must qualify for one of these loans in order to be eligible for a state or local homebuyer assistance program. Iowa homebuyer assistance programs are usually an add-on to one of the following loan programs:

Conventional loans. A conventional loan is available from a variety of lenders and meets the guidelines established by Fannie Mae and Freddie Mac, such as loan limits and minimum credit scores. Most conventional loans require borrowers to pay private mortgage insurance if they make a down payment of less than 20%. Typically, conventional loans have stricter requirements for credit scores and debt-to-income ratios than federally guaranteed loans.

FHA loans. FHA mortgages are insured by the Federal Housing Administration (FHA) and require a down payment of 3.5%. FHA loans require two types of mortgage insurance, but they are usually easier to qualify for and can help borrowers with a lower credit score or a higher debt-to-income ratio.

VA loans. U.S. Department of Veterans Affairs (VA) mortgages are a benefit offered to veterans and active members of the military to reward them for their service. VA loans don’t require a down payment or mortgage insurance and have no limit on the amount that can be borrowed, as long as the applicant can prove they can repay the loan.

USDA loans. USDA loans are a program of the U.S. Department of Agriculture (USDA) and are designed to increase homeownership among low- and moderate-income households in rural areas. Borrowers must purchase a home within a designated rural area and are subject to income limits, but they don’t need to make any down payment.

FAQs about Iowa first-time homebuyer programs

Who qualifies as a first-time homebuyer in Iowa?

You can actually have owned a home before and still be considered a first-time homebuyer in Iowa. Iowa follows HUD’s definition of a first-time buyer, which is someone who hasn’t owned a home in the previous three years. There are some exceptions, too, such as considering someone a first-time homebuyer if they owned a property with a former spouse within the previous three years.

Can I qualify for down payment assistance in Iowa?

You may qualify for down payment assistance if you meet a lender’s qualifications for a mortgage and have a household income that falls within the limits for a homebuyer program in Iowa. In some cases, you’ll need to meet other requirements such as a minimum credit score and a maximum debt-to-income ratio. Even if you qualify, the ability to get down payment assistance in Iowa depends on whether the program is funded.

How much of a down payment do I need to buy a house in Iowa?

The down payment amount you need depends on the mortgage program you choose. You can also reduce your cash needs if you qualify for down payment assistance in Iowa. Down payment requirements can range from zero for VA and USDA loans to 3% for conventional loans and 3.5% for FHA loans.

Home price trends in Iowa major areas

Home prices in Iowa have been trending upward in recent years just as they have in other parts of the country. The median sales price in 2021 statewide was $195,000, 8.3% higher than the median sales price of $180,000 in 2020, according to the Iowa Association of Realtors.

In Polk County, which includes Des Moines, the median sales price for a home during the second quarter of 2021 was $217,624, which requires a median monthly mortgage payment for a 30-year fixed-rate loan of $826, according to the National Association of Realtors. This is up from $788 year over year.

In Linn County, which includes Cedar Rapids, the median sales price was $184,184 in the second quarter of 2021, which translates to a median monthly mortgage payment of $699, up from $664 compared to a year prior.

In Scott County, which includes Davenport, the median sales price was $189,776 in the second quarter of 2021, which translates to a median monthly mortgage payment of $720, up from $698 year over year.

 

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