Iowa Mortgage Rates

Living in Iowa

Iowa is known as the leading producer of corn in the U.S. and revered for its legendary state fair. But it’s also recognized frequently on “best places to live” lists due to the state’s low cost of living, relatively high median income and low unemployment rates.

Residents and visitors enjoy a vibrant mix of art, culture, sports and outdoor activities across the state’s cities and charming small towns. All these attributes make the Midwestern state a draw for industries like insurance and tech.

Homebuyers in Iowa can expect to encounter an active market. Home prices have increased steadily over the past few months. The median sales price in April 2019 was $164,000 — a 4.5% increase over last year, according to the Iowa Association of Realtors. Inventory levels are slightly higher than last year, but still relatively low at 4.2 months’ supply.

Rising prices and low inventory can signal favorable conditions for sellers, so buyers should be prepared to make purchasing decisions quickly.

The rules and costs of buying a home in Iowa

The laws that govern purchasing a home vary by state. Here’s what you need to know about buying a home in Iowa.

Home seller and buyer laws

Disclosures

Sellers are required by law to disclose any conditions that affect the value of the property by either completing a Residential Property Condition Disclosure Statement or by submitting a written statement. These conditions include any known issues with the roof or basement or other parts of the structure or major systems, as well as restrictive covenants or zoning issues.

Sellers must provide the disclosure statement before they accept an offer; otherwise, buyers have the right to cancel the contract or withdraw the offer with or without reason within three days of receiving the disclosure statement (five days if delivered by mail).

Foreclosure laws

Should you encounter difficulty paying your mortgage, know that Iowa primarily enforces a judicial process, meaning your lender will have to go through the courts to foreclose on your home. However, the state also permits a nonjudicial voluntary process as an alternative, which allows homeowners to voluntarily give up possession of the property by signing a written agreement.

Divorce laws

For homeowners going through a divorce, Iowa is an equitable distribution state, which means liabilities and assets are divided among spouses. The split is not necessary 50/50, though. The courts distribute assets and debts based on multiple factors including but not limited to the age of each partner, the length of the marriage and each party’s earning potential.

Legal representation

Iowa is an escrow state, meaning buyers do not have to be represented by a lawyer, as is the requirement in some states. Iowa buyers can use an escrow agent to process their closing.

Taxes

All Iowa home sales incur a real estate transfer tax, based on the purchase price. The rate is 80 cents per $500 of transaction cost. For a $200,000 home purchase, this would be a tax of $320. Buyers pay this tax, so your lender will disclose the exact amount of the tax as you near your closing date.

Once you own your home, you will be responsible for property taxes annually. The median tax in the state is $1,569 for a $122,000 home, according to Tax-Rates.org. Iowa ranks 28th in order of average amount of property taxes. Keep in mind that your tax rate will be based on the county in which you live and varies across the state. Residents in Johnson County pay the highest property taxes in Iowa — $2,526 on average — while Pocahontas County residents pay the lowest, at $561 on average.

Homebuyers can lower their tax liability by taking advantage of the state’s Homestead Credit, available to all buyers who occupy their home as their primary residence for at least six months of the year. Homeowners in the military or a nursing home may still be eligible for the credit.

Homebuyers who wish to claim the credit may do so by signing up in the tax assessor’s office in their county. Once you qualify, you will continue to receive the credit until you no longer qualify or you sell the property.

The state also provides a military property tax exemption to eligible veterans.

Conforming loan limits

In Iowa, the conforming loan limit for conventional mortgages is $484,350, the limit in place for much of the country.

Borrowers who finance their home with non-government loans are subject to these limits, and represent the maximum amount that government-sponsored entities Fannie Mae and Freddie Mac are willing to purchase.

Buyers looking to finance homes above conforming loan limits will need to do so with a jumbo loan, which typically carries a higher interest rate and stricter qualification guidelines.

Programs for homebuyers in Iowa

The Iowa Finance Authority administers multiple programs throughout the state to help make homeownership more affordable for Iowans. Additionally, buyers may qualify for other community and city programs within the state.

FirstHome Program

Borrowers who qualify can get fixed-rate conventional, FHA, VA, or USDA loans at competitive rates through this program. The conventional loan features include reduced mortgage insurance costs or no mortgage insurance at all, plus down payments as low as 3%. Borrowers can also request an Iowa Title Guaranty Owner’s Certificate at no charge, which provides protection in the event a title defect is identified.

Who qualifies

  • First-time buyers, qualified veterans, or any buyer purchasing in a targeted area
  • Buyers must have a 640 minimum credit score. Buyers without a credit score may provide non-traditional credit documentation depending on loan type.
  • Borrowers must meet income guidelines. Maximum income ranges between $73,100 and $100,050, depending on county and family size. In targeted areas, the maximum income ranges between $87,720 and $121,800.
  • Purchase price must be under $271,000 ($331,000 in targeted areas).
  • Debt-to-income ratio must be at 45% or below.
  • Buyers must occupy the home as a primary residence immediately after closing.
  • Homebuyer education may be required on conventional loans.

Learn More

Homes for Iowans Program

In this program, Iowans can finance a home with conventional, FHA, VA or USDA loans. Features include low interest rates, reduced fees, and reduced or no mortgage insurance on conventional loans. Borrowers also can put as little as 3% down on conventional mortgages. Buyers can also request an Iowa Title Guaranty Owner’s Certificate at no charge, which provides protection in the event a title defect is identified.

Who qualifies

  • First-time and repeat buyers
  • Buyers must have a 640 minimum credit score (Buyers without a credit score may provide nontraditional credit documentation depending on loan type)
  • Income must be $121,800 or below
  • Purchase price must be under $331,000
  • Debt-to-income ratio must be at 45% or below
  • Buyers must occupy the home as a primary residence within 60 days after closing
  • Homebuyer education may be required on conventional loans

Learn More

FirstHome Plus/Homes for Iowans Plus

Buyers who finance with either the FirstHome or Home for Iowans programs can combine the first mortgage with a $2,500 grant toward closing costs or the down payment.

Who qualifies

  • Buyers must meet eligibility requirements of the FirstHome of Homes for Iowans programs.

Learn More

Rate shopping tips

Getting a competitive interest rate on your mortgage can save you thousands of dollars over the life of the loan and can make your monthly payment more affordable. Use these tips to find the best rate on your mortgage.

Contact at least 3 lenders on the same day

Comparing the rates among lenders will ensure you find the most competitive rate available. Consider getting quotes from different types of lenders, e.g., national banks, credit unions, regional banks or online lenders. Because rates fluctuate daily, get your quotes all on the same day so you can make apples-to-apples comparisons.

Give each lender the same information

When you apply for your loan or seek preapproval, make sure you provide complete details about your finances to each lender. Initial quotes are subject to change based on your situation, so it’s best to avoid a rate increase because of incomplete information in your application.

Add up all the lender fees to confirm the costs

The interest rate on your mortgage is just one factor that determines the total cost of the loan. Lender fees, such as the origination fee and other closing costs, will also affect the total amount you’ll pay for financing. Review the annual percentage rate (APR) for each quote you receive to determine the cost of the loan. Also, consider any fees that may not be reflected in the APR. For example, some lenders do not include the appraisal fee or credit report fee.

Know when to lock in the rate

Consider locking in your rate to protect yourself from an increase. Some lenders offer a “float-down” feature, permitting you to take advantage of a rate decrease, usually at an additional cost. Communicate with your loan officer or mortgage contact to find your lender’s procedure and to determine the best time to lock in your rate.

The information in this article is accurate as of the date of publishing.