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Iowa First-Time Homebuyer Programs

The path to homeownership can be overwhelming. The upfront costs alone can cause prospective buyers to sweat, especially when it’s their first time going through the homebuying process.

Do not fear, however — help is available for first-time buyers looking for a home in Iowa, with several state programs that can assist with mortgage and closing costs, among other features.

Iowa first-time homebuyer programs

The state’s first-time homebuyer programs are available through the Iowa Finance Authority (IFA), which provides a number of financial services and assistance programs for Iowa residents. The Iowa Department of Revenue also offers a specialized savings account for first-time buyers.

In January 2019, we researched the current information available on first-time homebuyer programs in Iowa, which included reviewing program websites and Iowa Finance Authority guidelines. Here’s what first-time homebuyers in Iowa need to know.

Eligibility for Iowa assistance

All of these programs require potential buyers to live in Iowa, and all of the IFA programs require borrowers to use an IFA-qualified lending institution.

Note: You can check current mortgage rates for your area here.

FirstHome and FirstHome Plus

Features

  • Below-market interest rates — not tied to the borrower’s credit rating
  • 25- or 30-year, fixed-rate mortgage terms
  • Fewer fees
  • No minimum down payment for FHA, VA and USDA Rural Development home loans except as prescribed by the program
  • 3% minimum down payment for conventional loans
  • Up to $2,500 in FirstHome Plus grants to help with the down payment and closing costs

Eligibility

  • First-time homebuyer, military veteran or buyer purchasing a property in a “targeted area” where a significant portion of families earn at least 80% less than the statewide median
  • Credit score of at least 640
  • Household income limits vary by county (view current income limits)
  • Maximum debt-to-income ratio of 45%
  • Purchase price limited to $271,000 or $331,000 if the property is located within a defined targeted area
  • One-unit property intended as a personal residence

How it works

The IFA’s FirstHome program and FirstHome Plus program work together as comprehensive mortgage assistance for first-time homebuyers.

The FirstHome program provides lower interest rates to qualified buyers and requires lenders to limit fees, such as home inspection, survey and title inspection fees, to ones that are “reasonable and customary.” (View the full list of acceptable fees.) The FirstHome Plus program offers up to $2,500 in down payment and closing cost assistance, provided in the form of a grant.

Not sure if you’re eligible? You can check your eligibility on the IFA website. Eligible buyers can work with a participating lender located throughout the state to begin the application process. If you’re applying for a conventional loan through this program, you may be required to take the FinallyHome homebuyer education course or undergo a similar first-time homebuyer education program.

Homes for Iowans and Homes for Iowans Plus

Features

  • Below-market interest rates — not tied to the borrower’s credit rating
  • 25- or 30-year, fixed-rate mortgage terms
  • Fewer fees
  • No minimum down payment for FHA, VA and USDA Rural Development home loans
  • 3% minimum down payment for conventional loans
  • Up to $2,500 in Homes for Iowans Plus grants to help with the down payment and closing costs

Eligibility

  • Credit score of at least 640
  • Household income limits of $121,800
  • Maximum debt-to-income ratio of 45%
  • Maximum purchase price of $331,000
  • One-unit property intended as a personal residence

How it works

Like the FirstHome program, the Homes for Iowans program and the Homes for Iowans Plus program provide mortgage and down payment assistance for Iowans. Unlike FirstHome, these programs are not restricted to first-time buyers — although first-time buyers are welcome to apply. However, just like with the FirstHome program, new buyers taking out a conventional loan may need to go through a first-time homeowners education program before the loan can close.

To begin your home loan application, work with a participating lender.

Military Homeownership Assistance Program

Features

  • $5,000 grant to assist with down payment and closing costs for current service members and veterans

Eligibility

  • How a buyer can qualify:
    • Served as active duty for at least 90 days, cumulatively, between Aug. 2, 1990, and April 6, 1991, or between Sept. 11, 2001, and now
    • Is federally designated as an injured service person and served as active duty between Aug. 2, 1990, and April 6, 1991, or between Sept. 11, 2001, and now
    • Is the surviving spouse of a service person who would have otherwise been eligible
  • The property is located in Iowa and will be occupied by the service member or their spouse as a primary residence
  • Qualifying properties include single-family residences, condominiums, townhomes and multifamily homes of up to four units — as long as one unit serves as the primary residence

How it works

The funds received from this program can be combined with a FirstHome Plus program or Homes For Iowans Plus program grant — which, together, provide up to $7,500 in assistance to help make homeownership more achievable for service members. Funding is subject to availability based on appropriations from the state legislature, but a waitlist will open once the state’s funds have been exhausted for the fiscal year.

Buyers interested in applying for this program can work with a qualifying lender to begin the process. Proof of military service is required and buyers can only take advantage of this program one time.

First-time homebuyer savings accounts

Features

  • Contribute up to $2,000 tax-free per year to a dedicated down payment savings account ($4,000 for married couples who file taxes jointly)
  • Lifetime maximum tax-free savings of $20,000 (or $40,000 for married couples filing jointly)
  • Accounts can be created for any beneficiary — such as you, your child or your grandchild

Eligibility

  • Iowa resident using an Iowa-based financial institution
  • First-time homebuyer or a buyer who has not owned a home in at least three years
  • Contributions must remain in the account for at least 90 days before use
  • Contributions cannot remain in the account for longer than 10 years
  • Account funds must be used to cover the down payment and closing costs for a single-family home that serves as the beneficiary’s primary residence

How it works

Many Iowa financial institutions offer this type of savings account. Check with your local banks to begin your application process.

National first-time homebuyer programs

In addition to these Iowa-specific programs, a number of national programs can help first-time buyers afford a home they love. These programs are offered by agencies including the FHA, VA and USDA and can help you save for a down payment, make your mortgage more affordable or decrease your federal income tax liability. Check out our guide to first time homebuyer programs to find out more.

 

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