Iowa First-Time Home Buyer: 2023 Programs and Grants

What to know about buying a house in Iowa

As an Iowa first-time home buyer, you have an advantage over those in other states. Home prices in Iowa are below average and increasing at a slower rate than elsewhere in the country. Also, you might be eligible for home-buying assistance. Iowa has programs that help with down payments and special mortgages that can make buying a home cheaper. Here’s how to get started.

In this article (Skip to ...)

• IA home buyer overview
• Home loan options
• IA home buyer programs
• First-time buyer grants
• Buying in Iowa’s cities
• Resources
• IA mortgage rates

Iowa home buyer overview

The median home sale price in Iowa was $218,000 in February 2023. That was a 10.2% increase year-over-year, according to the Iowa Association of Realtors.

For first-time buyers, home price inflation means higher housing costs, making it increasingly difficult to save for a down payment and afford monthly mortgage payments. But there is hope! The Hawkeye State offers plenty of assistance to first-time home buyers.

Iowa home buyer stats

Down payment amounts are based on the state's most recently available average home sale price. “Minimum” down payment assumes 3% down on a conventional mortgage with a minimum credit score of 620.

If you're eligible for a VA loan (backed by the Department of Veterans Affairs) or a USDA loan (backed by the U.S. Department of Agriculture), you may not need any down payment at all.

First-time home buyer loans in Iowa

If you’re a first-time home buyer in Iowa with a 20% down payment, you can get a conventional loan with a low interest rate and no private mortgage insurance (PMI).

Of course, few first-time buyers have saved enough for 20% down. But the good news is that you don’t need that much. Not by a long shot. Borrowers can often get into a new home with as little as 3% or even 0% down using one of these low-down-payment mortgage programs:

• Conventional 97: From Freddie Mac or Fannie Mae. 3% down payment and 620 minimum FICO score. You can usually stop paying mortgage insurance after a few years once you reach 20% home equity
• FHA loan: Backed by the Federal Housing Administration. 3.5% down and a 580 minimum credit score. But you’re on the hook for mortgage insurance premiums (MIP) until you refinance to a different type of mortgage, move, or pay off your loan
• VA loan: Only for veterans and active-duty service members. Zero down payment is required. Minimum credit score varies by lender but often 620. No ongoing mortgage insurance after closing. These are arguably the best mortgages available, so apply if you’re eligible
• USDA loan: For those on low-to-moderate incomes buying in designated rural areas. Zero down payment required. Credit score requirements vary by lender but often 640. Low mortgage insurance rates
• Iowa Finance Authority loans: May include below-market rates, fewer closing costs, and down payment assistance. More information below

Note that government loan programs (including the FHA, VA, and USDA home loans) require you to buy a primary residence. That means you can’t use these loans for a vacation home or investment property.

Depending on your mortgage loan, you could get into your new house with minimal cash out of pocket. These programs even let you use gifted money or down payment assistance (DPA) to cover the down payment and closing costs.

If you’re unsure which program to choose for your first mortgage, your lender can help you find the right match based on your finances and home-buying goals.

Iowa first-time home buyer programs

The Iowa Finance Authority (IFA) has different home loan programs to help first-time and repeat home buyers in Iowa buy a new home.

IFA loans typically have below-average interest rates compared to the rest of the market. They also come with lower closing costs, at least partly thanks to the free Iowa Title Guaranty Owner’s Certificate, which might replace costly title insurance.

IFA FirstHome

The FirstHome Program offers special mortgages to eligible Iowa first-time home buyers

To qualify, you must meet IFA financing guidelines. While IFA provides an online eligibility checker tool to see if you can get a FirstHome mortgage, here’s what you can expect.

• Credit score of 640 and a debt-to-income ratio (DTI) below 45%
• Meet household income limits. These vary based on the median income in the county where you’re purchasing
• Meet home purchase price limits. Currently $349,000 in most locations, but as high as $427,000 in targeted areas. Check to see if limits have changed by the time you read this
• Complete a homebuyer education course
• Purchase a single-family home that will be a primary residence

In addition, to qualify for a loan through the Iowa Finance Authority, you must fall into one of these categories:

• First-time home buyer (or)
• Haven’t owned a primary residence in the past three years (or)
• Eligible military member (or)
• Purchase a home in a targeted area

These mortgages are only available through a participating lender. But there are plenty to choose from. Pick yours using the IFA’s Find a Lender online tool. It will help with all your queries, including eligibility concerns.

IFA Homes for Iowans

Unlike the FirstHome Program, the Homes for Iowans Program is available to both first-time and repeat home buyers. This program offers low-cost 30-year fixed-rate mortgages with lower interest rates and higher limits on income and purchase price.

Eligible Iownas must:

• Have a credit score of 640 and a debt-to-income ratio (DTI) below 45%
• Meet income limit of $152,600, or 80% or less than the area median income (AMI) for a conventional loan
• Not exceed purchase price limit of $427,000
• Complete a homebuyer education course
• Purchase a single-family home that will be a primary residence

It is important to look into the specific eligibility requirements and application processes for each IFA home loan program. Working with a participating lender and talking to a housing counselor can help people who want to buy a home figure out how to apply and which program will work best for them.

Iowa first-time home buyer grants

Iowa’s first-time home buyer grants help eligible people get the money they need for a down payment and closing costs. This makes it easier for people to become homeowners.

IFA down payment assistance

Both the FirstHome and Homes for Iowans programs offer eligible home buyers down payment and closing cost assistance in the form of a second mortgage. The assistance can be up to 5% of the loan amount and is subject to repayment under certain conditions.

The IFA’s home-buying assistance comes in two forms. To qualify for either, you’ll need:

• A household income of $139,580 or less
• A home sale price of $381,000 or less
• A credit score of 640 or more
• A reasonable debt load (your debt-to-income ratio must be 45% or less)

Those are the main criteria but check for more conditions. Exact requirements are subject to change and may differ by the time you read this.

Iowa DPA Grant

One option is a $2,500 down payment grant that can be used toward your down payment and closing costs. Grants are free money and don’t have to be repaid.

Iowa DPA Loan

If you need more, you could borrow up to $5,000, or 5% of the home purchase price, as a second mortgage. No interest is charged, and there are no monthly payments. But you must repay your loan in full when you sell the home, refinance, or finish paying down your mortgage. Most similar programs also require you to remain in residence in the home.

IFA Military Homeownership Assistance

Also note that military home buyers may be in line for additional help. The IFA’s Military Homeownership Assistance Program gives extra help to eligible service members and veterans. The grant doubles to $5,000, and, with one of those second mortgages, it’s possible to receive a loan of up to $10,000.

IFA Mortgage Credit Certificate Program (MCC)

The IFA MCC provides eligible first-time home buyers a federal tax credit, reducing their federal income tax liability. This credit allows borrowers to keep more of their income, making qualifying for a mortgage and affording monthly payments easier.

Other Iowa first-time home buyer assistance

Be sure to compare the IFA’s offerings with any that your city or county may be providing. Then pick the one that suits you best.

You can ask your loan officer or real estate agent for recommendations, or do an internet search for "[your city or county] down payment assistance.”

Buying a home in Iowa’s major cities

The three largest cities in Iowa have lower median home prices than the state as a whole. Therefore, if you’re an Iowan looking to buy your first home, you might find one of these cities more affordable.

Still, check out any the down payment assistance programs (DPAs) where you’re buying. Provided you’re eligible, they could help a lot.

Des Moines first-time home buyers

The median list price of homes in Des Moines was $209,900 in March 2023. That was an increase of 8.2% year-over-year, according to Realtor.com.

If you want to buy a home at that median price, your down payment options might fall between:

• $6,300 for 3% down payment
• $41,980 for 20% down payment

The City of Des Moines says it doesn’t have a down payment assistance program. But it does give money to nonprofit partners who may be able to help. There’s a list of partners at that link, and you can ask each what assistance it can provide.

Cedar Rapids first-time home buyers

The median list price of homes in Cedar Rapids was $189,000 in March 2023. That was an increase of 13.2% year-over-year, according to Realtor.com.

If you want to buy a home at that median price, your down payment options might fall between:

• $5,670 for 3% down payment
• $37,800 for 20% down payment

The City of Cedar Rapids offers first-time home buyers $1,000–$14,999 in down payment and closing cost assistance. This comes in the form of a loan forgiven after five years, subject to conditions.

Call (319) 286-5874 to talk to the Homeownership Program Coordinator and find out more, including if you qualify.

Davenport first-time home buyers

The median list price of homes in Davenport was $155,000 in March 2023. That was a decrease of 3.1% year-over-year according to Realtor.com.

If you want to buy a home at that median price, your down payment options might fall between:

• $4,650 for 3% down payment
• $31,000 for 20% down payment

The City of Davenport offers outright grants (that don’t have to be repaid) to eligible first-time home buyers. You can receive 50% of your down payment and all reasonable closing costs up to a total of $10,000.

Eligibility criteria and conditions are available through the city’s website. You can also call the Community and Economic Development department at (563) 326-7765 for help.

Where to find home buying help in Iowa

All the organizations listed above should provide free advice to any first-time home buyer in Iowa or within their local areas.

In addition to our selection, the U.S. Department of Housing and Urban Development (HUD) provides lists of statewide, regional, and local resources.

Statewide and regional first-time home buyer resources in Iowa

• Iowa Finance Authority statewide homebuyer programs: The Iowa Finance Authority offers several home buying assistance programs, available wherever you live in the State of Iowa. Visit the FirstHome Program for more details. View all participating lenders and a list of home-buyer education classes
• Iowa Northland Regional Council of Governments: Bremmer, Buchanan, Butler, Chickasaw, and Grundy counties
• East Central Iowa Council of Governments: Benton, Iowa, Johnson, Jones, Linn, Washington counties
• Southwest Iowa Planning Council: Cass, Fremont, Harrison, Mills, Montgomery, Page, Pottawattamie, and Shelby counties
• U.S. Department of Agriculture Rural Housing: Homebuyer programs in rural communities
• Community contacts: Find out if your community offers homeownership assistance
• Homeowner education programs: Learn how to purchase and maintain a home of your own
• Habitat for Humanity: Through volunteer labor, builds and rehabilitates houses for families in need

Local home buyer resources in Iowa

• City of Des Moines: Homebuyer programs
• City of Cedar Rapids: First-time home buyer program
• City of Davenport: First-time home buyer grants for eligible buyers
• Council Bluffs
• City of Iowa City and Housing Fellowship
• Oskaloosa
• Sioux City
• Waterloo: Operation Threshold
• Wright County

What are today’s mortgage rates in Iowa?

You can see today’s live mortgage rates in Iowa here. Use a mortgage calculator to see how your down payment, interest rate, homeowners insurance, and property taxes affect your monthly mortgage payment.

When you’re ready to start the home-buying process, get personalized rate quotes from at least three mortgage lenders. Instead of looking at advertised rates online, apply for preapproval and compare the interest rates and fees offered. Because that is the only way to ensure you receive the best possible deal on your new home loan.

¹Source: Iowa Association of REALTORS Housing Statistics Report

²Source: Experian.com study of 2022 and 2021 data

³Based on a review of the state's available DPA grants at the time this was written