Iowa’s Aid for Those Purchasing a Home for the First Time

Purchasing your first home can be an exciting milestone in your life, but saving up enough funds for a down payment can be challenging. Fortunately, the Iowa Finance Authority offers affordable mortgages and down payment assistance programs for first-time homebuyers throughout the state, as well as assistance programs for servicemembers and veterans, regardless of their first-time buyer status. By taking advantage of these programs, you can become a homeowner in Iowa sooner than you thought possible.

The Iowa Finance Authority has two main home loan programs: FirstHome for first-time homebuyers, and Homes for Iowans for first-time and repeat buyers. Both programs have income and purchase price limits, and a minimum credit score requirement of 640. However, in some instances, you may be able to qualify with other credit documentation. The FirstHome and Homes for Iowans programs include conventional, FHA, VA, and USDA loans.

The FirstHome program is designed specifically for first-time homebuyers, which the IFA defines as someone who hasn’t owned a home in the past three years. Veterans or those buying in a “targeted area” may 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 Homes for Iowans program is available to both first-time and repeat homebuyers. Although you’re required to have a minimum 640 credit score, that number won’t affect your mortgage rate. The eligibility requirements are the same as the FirstHome program, with the exception of the income limit, which is $152,600 or 80 percent or less than the area median income (AMI) for a conventional loan. Additionally, you must not exceed the purchase price limit of $427,000.

The IFA does not offer separate down payment assistance (DPA) programs for first-time homebuyers but provides assistance in conjunction with the FirstHome and Homes for Iowans programs. The assistance can be either in the form of a grant or second mortgage. For example, the FirstHome or Homes for Iowans grant can provide up to $2,500, while the second mortgage can be up to $5,000 or up to 5 percent of the home’s purchase price, whichever is less, to be repaid if you refinance or pay off your first mortgage or sell your home. Note that you cannot combine the down payment assistance options from both the FirstHome and Homes for Iowans programs.

The IFA’s Military Homeownership Assistance Program can be paired with either a FirstHome or Homes for Iowans mortgage to help eligible service members, veterans, and surviving spouses with the down payment and closing costs. The program offers a grant of $5,000. To be eligible, you must be approved before closing, work with an IFA-approved lender, and be buying a single-family home, condominium, townhome, or four-unit home (as long as one of the four units is your primary residence). However, the funding for this program might be limited, so it’s important to check with the IFA to see what’s currently available.

Besides the Iowa Finance Authority’s programs, government-backed loan programs such as FHA loans, which typically have less stringent credit requirements and lower down payment minimums, may be worth considering. Fannie Mae’s HomeReady and Freddie Mac’s HomePossible programs also offer affordable conventional mortgages that come with a 3 percent down payment requirement, which can be ideal for first-time buyers.