Iowa first-time homebuyer assistance programs
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Embarking on your first home purchase is exciting, but can come with hurdles, including having enough funds set aside for a down payment. To help, the Iowa Finance Authority offers affordable mortgages and down payment assistance programs for first-time homebuyers throughout the state. The housing finance agency also offers servicemembers and veterans an assistance program regardless of first-time buyer status. Taking advantage of these types of programs can help you become a homeowner in Iowa that much sooner.
Iowa first-time homebuyer loan programs
The Iowa Finance Authority (IFA) has two main home loan programs: FirstHome for first-time homebuyers, and Homes for Iowans for first-time and repeat buyers. Both have income and purchase price limits and a minimum credit score requirement of 640 — although in some instances, you might be able to qualify with other credit documentation. The FirstHome and Homes for Iowans programs include conventional, FHA, VA and USDA loans.
The FirstHome program is specifically for first-time homebuyers, which the IFA defines a first-time buyer as someone who hasn’t owned a home in the past three years. If you’re a veteran or buying in a “targeted area,” however, you could still qualify.
FirstHome offers below-market interest rates and fees on various types of mortgages, and your credit score won’t impact your rate. If your income is less than 80 percent of the area median income (AMI), you might also be eligible for lower mortgage insurance premiums through this program. For a conventional FirstHome loan, you can choose between a 25- or 30-year term.
The borrower and property requirements include:
- 3 percent down payment for conventional loan
- 640 minimum credit score
- Maximum 45 percent debt-to-income ratio
- Must complete homebuyer education course for conventional loan
- Must meet IFA income limits, which vary by county and range from $86,900 to $109,000 for a household of two
- Must be a primary residence
- Must be a single-family home
- Must not exceed purchase price limit of $349,000 in most areas, or up to $427,000 in targeted areas
IFA Homes for Iowans
Similar to FirstHome, the Homes for Iowans program is available to both first-time and repeat homebuyers. Although you’re required to have a minimum 640 credit score, that number won’t affect your mortgage rate. The eligibility requirements are the same as the FirstHome program, with these exceptions:
- Must meet income limit of $152,600, or 80 percent or less than the area median income (AMI) for a conventional loan
- Must not exceed purchase price limit of $427,000
Iowa down payment assistance
IFA FirstHome and Homes for Iowans DPA
The IFA doesn’t offer separate down payment assistance (DPA) programs for first-time homebuyers, but rather, assistance in conjunction with the FirstHome and Homes for Iowans programs. The assistance can be either in the form of a grant or second mortgage:
- FirstHome or Homes for Iowans grant – Up to $2,500
- FirstHome or Homes for Iowans second mortgage – $5,000 or up to 5 percent of the home’s purchase price, whichever is less, to be repaid if you refinance or pay off your first mortgage or sell your home
Note that you can’t combine the down payment assistance options from both the FirstHome and Homes for Iowans programs.
IFA Military Homeownership Assistance Program
The IFA’s Military Homeownership Assistance Program can be paired with either a FirstHome or Homes for Iowans mortgage to help eligible service members, veterans and surviving spouses with the down payment and closing costs. The program offers a grant of $5,000. To be eligible, the requirements include:
- Must be approved before closing
- Must work with an IFA-approved lender
- Must be buying a single-family home, condominium, townhome or four-unit home (as long as one of the four units is your primary residence)
The funding for this program might be limited, however, so it’s important to check with the IFA to see what’s currently available.
Other first-time homebuyer loan programs
First-time homebuyers in Iowa might find that government-backed loan programs, such as FHAloans, are also worth considering. These types of loans typically have less stringent credit requirements and lower down payment minimums.
Fannie Mae’s HomeReady and Freddie Mac’s HomePossible programs also offer affordable conventional mortgages that come with a 3 percent down payment requirement, which can be ideal for first-time buyers.
For more first-time buyer loans to consider, head to Bankrate’s first-time homebuyer loans and programs guide.
First-time homebuyers in Iowa can go to the Iowa Finance Authority website to explore loan and down payment assistance programs through the agency. You can also work with a participating mortgage lender to determine what you qualify for and what documentation is needed to start the loan process.
It’s important to shop around, too, with different lenders to find the most competitive mortgage rates in Iowa. Getting the best rate ensures you’ll save the most on interest throughout the life of your loan.