A Guide For First-Time Home Buyers In Iowa (IA): Programs And Grants To Know

Iowa is a great place to live for more than its friendly people, wide-open spaces and laid-back Midwestern vibe. It also ranks as one of the top states for low cost of living, excellent education, low crime and a diverse economy.

First-time home buyers in Iowa have access to several mortgage programs and grants, which can help make buying a home achievable and more affordable. With the help of these programs, you can secure a low-interest home loan, increase your down payment or secure tax credits to lower your federal income tax bill.

You can jump-start the home buying process in Iowa once you know which programs can help you realize your homeownership aspirations.

Benefits Of Being A First-Time Home Buyer In Iowa

With a median household income just 6% below the national median, Iowans get excellent value when shopping for a home. You can start house hunting by exploring Iowa homes for sale. Exploring listings should give you an idea of how much house you can buy at various prices.

The Iowa Finance Authority (IFA) offers the FirstHome Program, which gives qualified applicants access to mortgage and down payment assistance programs through a partner network of more than 400 lenders across the state. The FirstHome Program allows Iowans and participating local lenders to access IFA’s down payment and closing assistance programs.

Note that each lender’s terms may differ, and some may not offer all the available programs and grants for first-time home buyers in Iowa.

Qualifying For First-Time Home Buyer Assistance In Iowa

The requirements to qualify for first-time home buyer programs in Iowa include:

• You must be a first-time home buyer or haven’t owned a home in the past 3 years.
• The home must be your primary residence in Iowa.
• You must meet all credit score and debt-to-income ratio (DTI) requirements.
• You must meet income and home purchase price requirements.
• You must meet any additional eligibility criteria a lender or program requires.

Requirements For Buying A House In Iowa: IFA Programs

Take a glance at homeownership stats in Iowa.

First-Time Home Buyer Loan Programs In Iowa (IA)

For many people, purchasing a home is a significant and expensive investment. State and federal first-time home buyer programs can make the dream of homeownership a reality for many.

To help achieve this goal, Iowa has the IFA, a unique and highly effective resource that assists first-time and repeat home buyers. The IFA finances, administers, advances and preserves affordable housing to promote community and economic development for Iowans.

IFA FirstHome

The FirstHome Program connects first-time home buyers to affordable 25- or 30-year fixed-rate mortgages from participating lenders throughout Iowa. FirstHome typically offers interest rates that are lower than market rates.

Applicants can choose a grant of up to $2,500 to cover down payment and closing costs or a second loan of up to 5% of the home’s sale price.

Program Eligibility Guidelines:

• Household income limit: $95,200 – $132,710
• Must be a first-time buyer, a military member who hasn’t used a program like FirstHome before to finance a home purchase or purchasing in a targeted area
• Debt-to-income ratio no higher than 50%
• At least a 640 FICO^® Score
• Home purchase price limit: $481,000 (up to $588,000 in targeted areas)
• Minimum 3% down payment required
• Must complete a home buyer education program if using a conventional loan

Benefits Of FirstHome

• Interest rates: Rates are typically below the market rate with fewer fees, and your credit score doesn’t affect the interest rate.
• Down payment: Down payment and closing cost assistance programs help with upfront costs. Your down payment may be 3% with reduced mortgage insurance if your income is less than 80% of an area's median income.
• Free title guarantee: If you qualify, you can request a free Iowa Title Guaranty Owner’s Certificate at closing. The certificate covers certain title defects. Iowa Title Guaranty will defend the title and cover all related legal fees when a title defect is discovered.

IFA Homes For Iowans

The Homes for Iowans program is open to first-time and repeat home buyers. Homes for Iowans has a higher home purchase price limit of $588,000 and an increased income limit of $161,560.

Another benefit of this loan program is a home buyer’s ability to pair up with other IFA programs and increase their total down payment assistance.

Program Eligibility Guidelines:

• Household income limit: $161,560
• Debt-to-income ratio no higher than 50%
• At least a 640 FICO^® Score
• Home purchase price limit: $588,000

Benefits Of Homes For Iowans

• Interest rates: Your interest rate isn’t affected by your credit score and has fewer mortgage fees.
• Down payment: Depending on the loan type, you can make a 3% down payment. This may include reduced mortgage insurance if you earn less than 80% of the median area income.
• Free title guarantee: If you qualify, you can request a free Iowa Title Guaranty Owner’s Certificate at closing. The certificate covers certain title defects. Iowa Title Guaranty will defend the title and cover all related legal fees when a title defect is discovered.

Iowa First-Time Home Buyer Grants

First-time and repeat Iowa home buyers can also take advantage of grants – which usually don’t require repayment – to help with down payment and closing costs.

• FirstHome: Qualifying home buyers can receive a grant of up to $2,500 for down payment and closing cost assistance.
• Homes for Iowans: While this second loan program doesn’t offer grants, you may qualify to pair it with IFA programs with grant options.

Military Homeownership Assistance

The Military Homeownership Assistance Program helps active-duty service members and veterans become homeowners. The program offers $5,000 grants to qualified buyers that they can apply toward down payment or closing costs. Grant recipients can combine this program with the FirstHome or Homes for Iowans programs for a maximum of $7,500 in funding assistance.

While the spouses of eligible veterans or honorably discharged service members can qualify for this grant, they may be waitlisted if state funding is limited or there’s a high number of applicants.

Program Eligibility Guidelines:

• The borrower must meet the IFA’s military service requirements.
• The borrower must work with an IFA-approved lender.
• The borrower must receive approval before closing on their home.
• The borrower must purchase an eligible Iowa home.
• The borrower must make the home their primary residence.

Other Relevant Homeowner Assistance Programs In Iowa

Iowa also offers other assistance programs that can benefit both home buyers and homeowners, including:

IFA Mortgage Credit Certificate Program (MCC)

Home buyers can save up to $2,000 every year on their federal income taxes for the life of their mortgage. The program provides a tax credit worth up to 50% of the annual mortgage interest you pay.

Iowa Homeowner Assistance Fund

Qualified homeowners facing financial difficulties who are at least 30 days behind on their mortgage payments, property taxes or other property expenses can use this program to help prevent foreclosure.

Additional Assistance And Resources For Buying A House In Iowa

Owning a home is about more than a financial investment. Iowa home buyers can also benefit from taking home buyer and homeownership courses:

• Iowa homeowner education programs: The U.S. Department of Housing and Urban Development (HUD) offers several homeowner education programs in Iowa. The courses help buyers navigate the home buying process and avoid common mistakes and pitfalls.
• Iowa Habitat for Humanity: The Iowa chapter provides housing education, advocacy and opportunities for homeowners to donate time and resources to building housing for others.
• U.S. Department of Agriculture Rural Housing: Provides resources, education and support for rural communities and residents with diverse needs. The program also assists rural Iowans in buying or renting affordable housing.
• Location-specific Iowa assistance: In some Iowa cities and counties, first-time home buyers can benefit from additional homeowner education and resources.

Additional First-Time Home Buyer Loans And Programs In Iowa

In addition to Iowa state housing programs, all Iowans can take advantage of nationwide programs and government-backed and traditional mortgages, including:

• Conventional loan: A conventional loan is a type of mortgage offered through a private lender that isn’t backed by a government agency. Some conventional loans allow you to finance the purchase of a new home with a 3% down payment.
• Federal Housing Administration (FHA) loan: An FHA loan is backed by the Federal Housing Administration. FHA loans are popular with first-time home buyers and low- to moderate-income buyers because they have lower credit score and down payment requirements.
• Department of Veterans Affairs (VA) loan: Backed by the U.S. Department of Veterans Affairs, VA loans are available for active-duty service members, veterans and eligible spouses. Because VA loans have less stringent eligibility requirements, they’re typically easier to qualify for and usually don’t require a down payment.
• U.S. Department of Agriculture (USDA) loan: U.S. Department of Agriculture (USDA) loans benefit home buyers in rural and remote areas. Eligible low- to moderate-income home buyers can secure a low-interest loan with no down payment through approved lenders. Please note that Rocket Mortgage^® doesn’t offer USDA loans at this time.
• Good Neighbor Next Door: This program, administered by HUD, allows law enforcement officers, teachers (pre-K through 12th grade), firefighters and emergency medical technicians to purchase homes in revitalization areas at a 50% discount. Buyers must commit to living in the house for at least 3 years.

FAQs On First-Time Home Buyer Programs In Iowa

Read through our answers to frequently asked questions about first-time home buyer programs in Iowa to learn more about the assistance you may qualify for.

What credit score do I need for first-time home buyer assistance in Iowa?

The FirstHome and Homes for Iowans programs require a minimum FICO^® Score of 640. Home buyers with bad credit can take steps to improve their chances of getting approved for a loan.

How much does a first-time home buyer have to put down in Iowa?

How much a first-time home buyer in Iowa puts down will depend on the mortgage. VA loans typically offer zero down payment, and a borrower may put down 3% with a conventional loan. If you need help covering your upfront costs, check with your lender to see what Iowa down payment assistance you may qualify for.

Is there an assistance program for first-time home buyers who are veterans in Iowa?

The Iowa Finance Authority (IFA) offers veterans and eligible service members a grant of up to $5,000 toward down payment and closing costs through the Military Homeownership Assistance Program. Borrowers can combine the grant with the FirstHome and Homes for Iowans programs.

Is there a first-time home buyer tax credit in Iowa?

While availability will depend on state funding, Iowa offers a first-time home buyer tax credit through its mortgage credit certificate (MCC) program. The tax credit is a percentage of your annual mortgage interest. It reduces your federal income tax liability, saving you money.

The Bottom Line

Located in the middle of the U.S. heartland, Iowa is known for its wide-open spaces and idyllic, rolling farm country. But the Hawkeye State is much more than an agricultural powerhouse. Iowa has many friendly small towns, progressive cities and a quality school system.

Iowa boasts a lower cost of living, especially for housing. Iowans have a relatively high median income compared to its low average home value – which is excellent news for first-time home buyers. With several state and federal programs available and some savings for a down payment (depending on the loan type), Iowans are in an ideal part of the country to purchase a house.

If you’re ready to take advantage of the benefits buying a home in Iowa offers, you can start the application process today.