Have your eye on a home in the Hawkeye State? Residential real estate in Iowa is fairly reasonable, with a median sales price of $210,000 — a good $150,000 below the current national median price tag of $382,600. Still, embarking on your first home purchase can come with hurdles, including having enough funds set aside for a down payment and closing costs, not to mention the home itself.

To help, the Iowa Finance Authority (IFA) offers affordable mortgages and down payment assistance programs for aspiring homeowners throughout the state — many of them geared towards novices. Taking advantage of these types of programs can help you become a first-time homebuyer in Iowa that much sooner.

Iowa first-time homebuyer loan programs

The IFA has two main home loan programs: FirstHome and Homes for Iowans. 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 financial and income information. The FirstHome and Homes for Iowans programs include conventional, FHA, VA and USDA loans.

IFA FirstHome

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 50 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 $95,200 to $132,710 for a household of two
  • Must be a primary residence
  • Must be a single-family home
  • Must not exceed purchase price limit of $481,000 in most areas, or up to $588,000 in targeted areas

IFA Homes for Iowans

The Homes for Iowans program is available to both first-time and repeat homebuyers. Your credit score won’t affect your mortgage rate, though a 640 minimum is required. The eligibility requirements are the same as the FirstHome program, with these exceptions:

  • Must meet income limit of $161,560, or 80 percent or less than the area median income (AMI) for a conventional loan
  • Must not exceed purchase price limit of $588,000

Iowa down payment assistance

IFA FirstHome and Homes for Iowans DPA

The IFA doesn’t offer separate down payment assistance. You can opt for the aid in conjunction with the FirstHome and Homes for Iowans mortgage programs.

With FirstHome, the assistance can be either in the form of a $2,500 grant or a second mortgage. With Homes for Iowans, there’s only the second mortgage. The loan terms are the same for both:You can finance up to 5 percent of the home’s purchase price, with no maximum. There are no monthly payments; the loan is repayable when the home is sold, refinanced or the first mortgage is paid in full.

The funds can be used for both down payments and closing costs.

IFA Military Homeownership Assistance Program

The IFA’s Military Homeownership Assistance Program offers a grant of $5,000 to help eligible service members, veterans and surviving spouses. It can be paired with either a FirstHome or Homes for Iowans mortgage, or used with a non-IFA mortgage (but applicants must use an IFA-approved lender).

Other requirements include:

  • Must be approved for the grant before closing
  • 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 Iowa homebuyer assistance programs

Along with the state, several Iowa municipalities provide help to first-time homebuyers.

Des Moines homebuyer assistance

City funding for residents of Des Moines, Iowa is available through four different nonprofit organizations, in partnership with the City of Des Moines. These nonprofits are HOME, Inc., Greater Des Moines Habitat for Humanity, Neighborhood Finance Corporation and Neighborhood Development Corporation. For more information about homebuyer assistance programs in Des Moines, residents are encouraged to reach out to these nonprofits directly.

Iowa City homebuyer assistance

Iowa City, GreenState Credit Union and Hills Bank have formed a partnership to address the racial homeownership gap in Iowa City. The municipality provides down payment assistance up to $24,999 for eligible residents; eligibility criteria include household income under 80 percent  of the area median income, qualifying for financing through GreenState Credit Union or Hills Bank, completion of a homebuyer education program and the contribution of at least $250 toward the cost of the down payment.

Other Iowa first-time homebuyer loans

FHA Loans

Federal Housing Administration (FHA) loans, insured by that government agency, have less stringent credit requirements and lower down payment minimums than conventional loans. Homebuyers with credit scores as low as 580 are eligible for an FHA loan as long as they make a 3.5 percent down payment. Homebuyers with credit scores as low as 500 are eligible as long as they make a 10 percent down payment.

VA Loans

VA loans are guaranteed by the U.S. Department of Veteran Affairs and are intended to help eligible veterans, active-duty service members and surviving spouses purchase a primary residence, refinance a current mortgage or cover renovation costs. These loans are attractive to first-time homebuyers because they include no required down payment, no private mortgage insurance (PMI); they also offer competitive interest rates.

USDA Loans

To qualify for a USDA loan, you must live in designated rural areas. For first-time homebuyers meeting this criteria, USDA loans are a good option because they don’t require a down payment. However, compared to conventional loans, USDA loans come with additional upfront and annual fees.

Get started

To learn more about Iowa homeownership and down payment assistance programs, consider starting with the Iowa Finance Authority website. You can also learn more about low- or zero-down payment mortgages in Bankrate’s guide to first-time homebuyer loans and programs.

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.

Additional reporting by Kate Peters