First-Time Homebuyer Programs in Iowa

The down payment on a new home is often the biggest hurdle for first-time homebuyers. In Iowa, where the average home value is $220,188, you would need a $44,038 down payment to avoid private mortgage insurance.

Fortunately, there are first-time homebuyer programs available in Iowa to help you achieve homeownership. There are also mortgages that allow first-time homebuyers to put less down on a home, but these usually have income requirements and require mortgage insurance. MoneyGeek explores several state-specific and government-backed first-time homebuyer programs for people from different financial backgrounds.

Iowa offers grants and loans to assist first-time homebuyers with down payments and closing costs. We compiled the first-time homebuyer programs offered by the Iowa Finance Authority to help you find the best option for your particular needs and situation.

The FirstHome Program, offered by the Iowa Finance Authority, provides affordable mortgage options for first-time homebuyers. It offers lower-than-market interest rates, regardless of the borrower's credit score, and requires as little as 3% down, depending on the loan type. FirstHome also offers reduced mortgage insurance for borrowers with qualifying incomes.

Participants may qualify for down payment and closing cost assistance through grants or loans. Borrowers can also receive a free Iowa Title Guaranty Owner's Certificate to protect their home’s title.

The Homes for Iowans Program helps first-time and repeat homebuyers in Iowa with affordable, 30-year fixed-rate mortgages. The program provides lower-than-market interest rates and requires as little as a 3% down payment. For borrowers with incomes below 80% of the Area Median Income (AMI), reduced mortgage insurance coverage is available. Buyers may also request a free Iowa Title Guaranty Owner’s Certificate at closing to protect their home’s title. This program is available statewide and can be paired with down payment assistance for additional support.

IFA's Down Payment and Closing Costs Assistance program helps first-time homebuyers cover upfront costs. It offers two options:

• Grant Option: Provides a $2,500 grant for down payment and closing costs. This grant does not need to be repaid.
• Loan Option: Offers a second loan of up to 5% of the home’s sale price, with no maximum limit and no monthly payment. Repayment is deferred until the home is sold, refinanced or the first mortgage is fully paid.

The Military Homeownership Assistance Program provides a $5,000 grant to eligible service members and veterans. This grant is designed to help cover down payments and closing costs for purchasing a home in Iowa. The grant can be combined with other mortgage programs like FirstHome and Homes for Iowans, but it is contingent on the availability of funds. Eligible applicants must secure a first mortgage from an IFA-participating lender.

Aside from statewide first-time homebuyer programs in Iowa, city-specific programs are also available to help you pursue homeownership in a city of your choosing. Check out the table below for some of the cities in Iowa that provide first-time homebuyer programs for potential residents.

Zero-down-payment loan programs in Iowa allow you to purchase a home without putting money down. USDA and VA loans are two government-backed options that require no down payment.

USDA loans are designed to assist low to moderate-income homebuyers in rural areas. They are issued by the U.S. Department of Agriculture through its Rural Development Guaranteed Housing Loan program, providing an opportunity for eligible individuals to purchase homes without a down payment.

USDA loans offer several benefits, including no down payment, competitive interest rates and reduced mortgage insurance costs. They are available to buyers who meet specific criteria and allow them to secure affordable housing in designated rural areas. The program aims to promote homeownership in communities with limited access to conventional financing options.

To qualify for a USDA loan, your property must be 2,000 square feet or below and located in a USDA-eligible rural area with a population of less than 35,000. You must meet certain income limits, which vary by location. For instance, in Cedar County, Iowa, the income limit is $79,900, whereas in Franklin County, Iowa, it is $69,350 for a four-person, low-income household.

VA loans are a specialized form of mortgage assistance issued by the U.S. Department of Veterans Affairs. These loans are designed to support veterans, active-duty service members and certain members of the National Guard and Reserves. By offering favorable terms, VA loans aim to make homeownership more accessible for those who have served.

VA loans provide several benefits, including a no down payment requirement, which can significantly reduce initial costs for homebuyers. Borrowers do not need to pay for private mortgage insurance (PMI), a common requirement in conventional loans. These loans also typically feature lower interest rates than private loans, making them a cost-effective option. As of November 2024, the APR for a 15-year fixed-rate VA loan in Iowa is 5.94%, while a 30-year fixed-rate VA loan has an APR of 6.17%.

To qualify for a VA loan, applicants must meet specific eligibility criteria. This includes certain length of service or service commitments, duty status and character of service. You must meet income limits that vary based on your location. A valid Certificate of Eligibility (COE) is also required to confirm your eligibility status.

First-time homebuyers in Iowa can take advantage of low-down-payment loan programs that allow them to finance their home with a down payment of 3.5% or less. These programs include conventional, FHA and FHA 203(k) loans.

FHA loans and conventional loans are often compared as they are the two most common types of mortgages. FHA loans require a minimum down payment of 3.5%, while conventional loans can require as low as 3% for first-time homebuyers. Conventional loans typically have stricter credit score and debt-to-income ratio requirements, making them less accessible to some borrowers.

As of November 2024, the current APR for a 15-year fixed-rate conforming loan in Iowa is 6.07%. In comparison, the APR for a 15-year fixed-rate FHA loan is 8.08%. APRs on FHA loans can be higher due to more fees and extra costs associated with government-backed loans.

Use our FHA vs. conventional loan calculator below to compare FHA and conventional mortgage programs and determine the best option for you.

We have addressed frequently asked questions about first-time homebuyer programs in Iowa to help you identify the best option and bring you closer to homeownership.

Explore additional MoneyGeek resources for first-time homebuyers in Iowa to help you with the homebuying process.