Are you ready to leap into homeownership?
If you're like many people, obstacles are standing in your way. Maybe a downpayment of ten to twenty percent is unattainable. Perhaps your credit score only qualifies you for a mortgage with poor loan terms.
Recognize these challenges? Fear not. If you are a first time home buyer in Iowa, these hurdles don't have to trip you up.
Whether you need help with the down payment or flexible lending options for low-income or low-credit buyers, the state of Iowa has you covered. Cities, banks, associations, and the federal government all offer options for Iowa's first time home buyers.
Is the perfect program for you out there? Keep reading to find out more about your options including homebuyer assistance in Mason City, Iowa.
Mortgage Assistance: Iowa Finance Authority Programs
The first stop on our journey through Iowa's first time home buyer programs are two programs provided by the Iowa Finance Authority: FirstHome Program and Homes for Iowans Program. The programs feature both conventional loans and federal government loans, and both include 30-year, fixed rate mortgages.
You can use these programs anywhere in the state of Iowa including Mason City.
For the program's purposes, a first-time home buyer is a person:
- who has not owned their primary residence in the past three years, or
- who is a military veteran who has not previously used a mortgage revenue bond program
- who intends to buy a home in a Targeted Area
You can enroll in the FirstHome Program if you are a first time home buyer purchasing a primary residence in Iowa. It's available to you if you are an Iowan or if you are moving to Iowa and intend to buy for the first time.
Are you a repeat home buyer? The Homes for Iowans Program opens up homeownership for both first and second time home buyers buying a place to call home in Iowa.
The primary benefits of the Iowa Finance Authority's programs are the relaxed rules and restrictions compared to conventional mortgages and other government programs.
It works for people who earn low-to-mid incomes who would otherwise struggle to save for a downpayment.
You won't be asked for a minimum down payment, and the mortgages typically have lower interest rates and fewer fees than the typical loan.
It's also an opportunity to take out a conventional loan with only a three percent down payment.
To qualify for First Home, you must be a first time home buyer and the limit of your home purchase price is $271,000. Income restrictions exist, but they vary according to county and household size.
Homes for Iowans raises the purchase ceiling to $331,000. It also features a strict household income limit of $121,800 regardless of whether you are a first time home buyer or not.
In addition to being a first time home buyer as defined by the program, you must also meet the following eligibility requirements:
- Minimum credit score of 640
- Maximum debt-to-income ratio 45 percent
- Occupy the home as a primary residence immediately
These requirements are the bare minimum. The bank may require a higher credit score or down payment depending on your case.
Down Payment Assistance: City Programs in Iowa
The FHA offers programs in some of Iowa's largest cities including:
- Cedar Rapids
Here's a brief overview of what they offer.
Cedar Rapids Down Payment Assistance
The City of Cedar Rapids helps new home buyers secure down payment assistance through its First Time Home Buyer Program. The downside of the Cedar Rapids program is it features limited funding that doles out on a first come, first served basis.
While no loan is ever guaranteed, being last in line may cause you to miss out on financial assistance.
Dubuque Down Payment Program
Does the Quad Cities appeal? The City of Dubuque also offers a down payment program. It provides $5,000 loans for down payment and closing costs for home buyers in the city. The benefit of these loans is that they come with no interest and feature long terms.
Moreover, Dubuque increases its offer based on your income. If you earn less than 30 percent of the area median income, you can receive as much as $25,000 to help you buy a home.
Waterloo Forgivable Down Payment Loan
Moving to Waterloo? The city offers an entirely different program. The Waterloo Down Payment Assistance Program helps buyers afford their down payments by providing a second, forgivable mortgage. If you accept the loan and then sell the house within five years, you need to pay it back. The amount paid back funds new loans to other home buyers.
Down Payment Grands: Federal Home Loan Bank of Des Moines
The Federal Home Loan Bank of Des Moines offers two programs to help Iowans cover down payments and closing costs: Home$tart and Home$tart Plus.
These are grant programs available to home buyers of all types in all parts of Iowa including Mason City. The baseline qualifications include earning up to 80 percent of the median income in the area in which you intend to purchase the home.
You must also qualify for mortgage financing with your lender. If you are a first-time homebuyer, you must also complete an education class to receive the grant.
Home$tart Plus applicants also need to be one public housing assistance.
If you qualify, you may receive up to $7,500 on Home$tart or $15,000 on Home$tart Plus.
You can use the money as a down payment, to cover closing costs, or to rehabilitate the house you buy.
If you receive the grant, it's a good idea to stay in your home for five years. Selling before the five-year mark will require you to return at least a portion of the grant. The amount you repay depends on how long you owned the home, and the repayment comes from the proceeds of the sale.
Mortgage Assistance: Federal Government Programs
Just as in other states, people intending to buy a home in Iowa can avail of federal programs from the FHA, HUD, VA, and USDA. You may find more opportunities when using these programs in Iowa because there are rural and semi-rural communities to choose from and house prices are lower than elsewhere in the country.
FHA loans are available from lenders across the state. These loans are government-backed loans, which loosens up the requirements for borrowers.
The benefits of FHA loans are the option to borrow with a minimum credit score of 500 and a down payment as low as 3.5 percent.
FHA loans are some of the easiest mortgage loans to qualify for, and if you lift your credit score to 580, you'll get even better perks.
As a bonus, you can use an FHA loan on virtually any property in Iowa as long as your income and the property price qualify.
The Department of Housing and Urban Development's (HUD) Good Neighbor Next Door Program is available for teachers, police officer, firefighters, and emergency response professionals who want to buy but can't afford to save.
The program offers a 50 percent discount on the home price if you meet the requirements and buy in a "revitalization area."
If you are a public servant hoping to buy a house, you can get discounts in select areas in the cities of:
- Cedar Rapids
- Des Moines
- West Des Moines
- Council Bluffs
- Sioux City
The FHA and HUD also add revitalization areas to their lists regularly. If your preferred city isn't on the list, keep in touch with your FHA lender or real estate agent.
VA loans are available in Iowa as they are elsewhere in the country.
These loans are provided by lenders but backed by the Department of Veterans Affairs. In addition to VA mortgages, Iowa veterans may also qualify for homeownership assistance in the form of a $5,000 grant or a 100 percent property tax exemption for 100 percent disabled service-connected veterans.
To learn more about VA benefits available to residents of Iowa, visit the Iowa branch fo the VA office.
Because Iowa offers many rural and semi-rural properties, it is a prime hunting ground for USDA Rural Development loans.
One of the perks of single family guaranteed loan programs offered by the USDA is that it provides a minimum of 90% loan note and can even extend it to 100% for eligible borrowers. That means you could buy without spending a penny on a down payment.
Another benefit is that the loans aren't just for the property price. You can also use them to:
- install special features for family members with disabilities
- pay real estate taxes
- buy essential household equipment
- invest in energy efficiency features
- pay for site preparation costs
- fund repairs and rehabilitation of existing houses
Where can you buy in Iowa? Use the USDA's address checker to see if the property you want is available.
It's Great to Be a First Time Home Buyer in Iowa
Local, state, and federal programs make homeownership for the average Iowan easier than ever. If you are a first time home buyer in Iowa, you may be able to score very favorable loans, low down payments, and even grants to get you on your way.
Are you interested in making Mason City your home? Learn more about buying in and around our family-friendly city on our blog.