First-time homebuyers are not slowing down, despite the challenges of this year and the often-discussed obstacles young buyers face, such as increasing student loan debt and wage stagnation. According to the 2020 Home Buyers and Sellers Generational Trends Report from the National Association of REALTORS® (NAR®), 33 percent of buyers this year were first-time homeowners, which is about the same percentage as the last three years.
But the hardest part of buying a home for the first time? The cost, of course! The 2019 Profile of Home Buyers and Sellers from NAR® reported that 26 percent of first-time buyers said saving for the downpayment was the most difficult part of the buying process, citing student loans and credit card debt as obstacles.
Finances are a tricky topic for many of us and saving up enough to buy a home is no simple feat. But did you know there are many first-time homebuyer programs, loans and grants for Iowa residents? These assistance programs are designed to make home-buying easier for people who have never done it before!
The 20 First-Time Home Buyer Programs, Loans and Grants You Should Know About
We compiled a list of some of the best first-time homebuyer programs, loans and grants from a combination of federal, state, county and city providers. It’s by no means a complete list of every program offered by every single agency in the state, but it should help you get started.
Many of these programs can be used in combination with financing from a lender. However, not every lender in the state accepts all of these programs’ assistance. If you’re already working with a lender, talk to them about which of these programs is right for you and which ones they can accept. if you’re not already working with a lender, many of these program providers have preferred lenders they work with and can put you in touch with.
To jump to a certain section, click on any of the links below:
- Federal programs and loans
- State programs and loans
- County and regional programs and loans
- City programs and loans
Federal First-Time Home Buyer Programs, Grants and Loans
Most federal programs designed for first-time buyers are through loan programs backed by federal agencies or government-sponsored lending entities, such as Freddie Mac and Fannie Mae. Check out these four first-time home buyer programs and loan packages below to find out which one might be a good option for you.
The Good Neighbor Next Door program was created to help revitalize communities in need while rewarding community heroes. This program offers a 50% discount on the listing price of homes for full-time law enforcement officers, teachers (pre-K through 12th grade), firefighters and EMTs. Program details include:
- Homes must be in an approved revitalization area and listings can be found on the HUD site.
- Homes are only available through the program for seven days.
- Revitalization areas are determined by Congress and criteria include household income, homeownership rate and the number of FHA-insured mortgage foreclosures.
The HomeReady® mortgage from Fannie Mae is designed for buyers with low incomes, limited cash for a downpayment or a credit score below 620. Income eligibility limits vary by area, so use the Fannie Mae map to determine what the income limit is in your desired area. Any lender approved by Fannie Mae can issue a HomeReady® loan so talk to your lender about using this loan package. Loan details include:
- Your downpayment can be as low as 3%.
- The sources of the downpayment can include gifts and grants with no minimum personal funds required.
- First-time buyers are required to take homeownership education.
- The private mortgage insurance (PMI) is cancellable once equity is 20%.
The Home Possible® loan from Freddie Mac is similar to Fannie Mae’s loan package. It offers flexibility to buyers who have low incomes, low credit scores or are struggling to build up a downpayment. Downpayments can be as low as 3% and the sources can include family and employer assistance, secondary financing and sweat equity. Any lender approved by Freddie Mac can issue a Home Possible® loan so talk to your lender about using this loan package. Additional details include:
- Buyers’ income must be below area limits set by Freddie Mac.
- Lenders can grant or gift closing costs to the buyer if 3% is contributed from the buyer’s personal funds.
- First-time buyers are required to take homeownership education.
- The private mortgage insurance (PMI) is cancellable once equity is 20%.
The Native American Direct Loan (NADL) is a loan program for veterans who are Native American or who have a Native American spouse. The buyer (or their spouse) must be a member of a tribe with a Memorandum of Understanding with the VA explaining how the program will work on trust lands. They must also have a valid VA home loan Certificate of Eligibility and meet VA credit standards. The benefits of a NADL include:
- No required downpayment
- No PMI
- Limited closing costs
- A low, fixed interest rate for the life of the loan
State First-Time Homebuyer Programs, Loans and Grants
Residents of Iowa have access to downpayment and closing costs assistance, forgivable home loans and homebuyer education through various statewide nonprofits, government agencies and regional organizations. Check out the loans, program and grants below to find out what might work best for you.
The Iowa Finance Authority (IFA) offers mortgage programs, grants and loans for downpayment assistance, programs for veterans, low-cost title coverage and mortgage credit programs to buyers across the state of Iowa.
To find out more about all of the resources they provide and what you might qualify for, go to www.iowafinance.com.
These are a few of the programs that might be helpful for first-time buyers:
>> FirstHome Program
This program helps first-time buyers find affordable mortgages with low interest rates and small downpayments. Buyers may also request a free Iowa Title Guaranty Owner’s Certificate at closing. FirstHome also includes a downpayment assistance program by providing buyers with either a grant or a loan that can also be paired with a FirstHome mortgage.
The grant provides buyers with $2,500 to use for a downpayment and/or closing costs while the loan offers up to 5% of the home’s sale price or $5,000, whichever is less. The loan is repayable at the time of sale, refinance or when the first mortgage is paid in full with no monthly payments required. Buyers can use either the grant or the loan, but not both.
To be eligible, buyers must meet income requirements and be a first-time buyer or military member who has not previously used a mortgage assistance program.
>> Military Homeownership Assistance Program
This program provides a $5,000 grant to service members, veterans and surviving spouses of eligible service people. The grant can be used on downpayments and closing costs and this program can be used in combination with the FirstHome program.
>> Mortgage Credit Certificate Program
The Mortgage Credit Certificate program allows buyers to save up to $2,000 on their federal taxes, every year for the life of the mortgage. Tax credit valued at 50% of the annual mortgage interest paid is awarded to the homeowners as long as the home is the primary residence.
The first-time homebuyers savings account was established by the Iowa Senate and is a special account that allows future buyers to make tax-deductible contributions to a savings account that can only be used by a designated person for a downpayment and closing costs for a home in Iowa. If you have not purchased a home yet, this would be a good resource as you save. The first-time homebuyer savings account can be opened at any financial institution in Iowa.
(Federal Home Loan Bank Des Moines)
The Home$tart and Home$tart Plus programs are downpayment and closing costs assistance grants offered to buyers by the Federal Home Loan Bank Des Moines (FHLB Des Moines). Qualified buyers can receive a grant of up to $7,500 in the Home$tart program and a grant of up to $15,000 in the Home$tart Plus program. Buyers must complete homebuyer education, meet income requirements and enroll in the program through a financial institution that is a member of the FHLB Des Moines.
County and Regional First-Time Home Buyer Programs, Grants and Loans
Many counties and regional governments in Iowa offer downpayment assistance and homebuyer education programs to residents. Below are just a few of the programs available. To find out if there are first-time buyer programs in your area, check your county and region websites.
The Polk County Housing Trust Fund offers downpayment assistance to qualified buyers in the form of a 10-year pro-rata forgivable loan. Buyers who meet income requirements and are buying a newly constructed home in Polk County are eligible for a 0% interest loan of up to $15,000 and must match the amount dollar for dollar. Homebuyer education classes must be completed.
The Dallas County Local Housing Trust Fund provides assistance to homeowners making repairs and fixing code violations by issuing 5-year forgivable loans of up to $10,000. Buyers must meet income requirements and own a home in Dallas County. Loans do not accrue interest and can be used to make repairs to the structure, the foundation, systems (electrical, plumbing, etc.), weatherization (insulation, siding, windows) and handicap accessibility. This is a good resource for any buyers looking at older homes in need of maintenance in Dallas County.
The Fayette County Local Housing Trust Fund provides financial assistance to homebuyers purchasing older houses in need of maintenance and repair for roofing, plumbing, electrical systems, energy efficiency problems and handicap accessibility. Funds are dispersed via loans and grants and are capped at $10,000. Buyers must meet income requirements and properties must be built no less than 20 years from the date of application for funds.
To learn more about program requirements, click here.
The Northeast Iowa Regional Housing Trust Fund serves the counties of Allamakee, Clayton, Fayette, Howard and Winneshiek. The program is certified by the IFA and provides financial assistance to buyers to make needed repairs to roofing, furnace repair and replacement, energy efficiency, electrical systems, plumbing and handicap accessibility. Funds are capped at $10,000 per project and buyers must meet income requirements.
Other county and regional assistance programs in Iowa include:
- Great River Housing, Inc.
- Homeward, Inc.
- Housing Trust Fund of Johnson County
- Housing Trust Fund for Linn County
- East Central Iowa Council of Governments
- Iowa Northland Regional Housing Council
- Muscatine Municipal Housing Agency
- North Iowa Area Council of Governments
- Northwest Iowa Regional Housing Trust Fund, Inc.
- Scott County Housing Council
- Siouxland Interstate Metropolitan Planning Council
- Southern Iowa Council of Governments Housing Trust Fund
- Southwest Iowa Housing Trust Fund
City First-Time Home Buyer Programs, Grants and Loans
There are many assistance programs and homebuyer education offered by city governments, nonprofits and housing agencies for first-time buyers. The list below covers just a few of the programs available. To find out if your city offers first-time home buyer programs, go to the city website.
Des Moines & Cedar Rapids
The Neighborhood Finance Corporation (NFC) is a nonprofit that offers downpayment assistance, home improvement loans and mortgage assistance to buyers in Des Moines and Cedar Rapids. The NFC focuses on areas in need of revitalization so buyers must be purchasing homes within NFC-approved areas. The downpayment assistance program offers a $10,500 30-year loan at 0% interest for eligible buyers. The purchase program offers up to $10,000 in a forgivable loan for home improvements. All buyers must meet income requirements and may be asked to complete homebuyer education.
The city government of Cedar Rapids offers residents a downpayment and closing costs assistance program. Eligible buyers can receive from $1,000-$14,999 in a loan that is forgivable after five years. Buyers must meet income requirements, purchase an eligible property within city limits and meet financing criteria.
The Waterloo Housing Authority offers a downpayment assistance program for first-time buyers with low incomes. To qualify for a loan, buyers must complete homebuyer education, be a resident of Waterloo, be a first-time buyer, be able to cover closing costs from personal funds and must meet income requirements. The Waterloo Housing Authority also offers a closing cost assistance grant as a separate program. Eligible buyers must use conventional financing and can receive $1,500 in closing costs assistance.
The City of Dubuque Housing & Community Development Department offers multiple programs for buyers purchasing houses within city limits. These include home loans for first-time buyers, loans for moderate-income first-time buyers, housing vouchers funded by HUD, loans for buyers purchasing in the True North area and more.
To learn more about which program is right for you, click here.
The Community Development Department of the Sioux City government offers a downpayment assistance program to residents. Eligible buyers can receive up to $14,999 in a loan to assist with purchasing a single-family home in Sioux City. Buyers must meet financial requirements and the property must meet certain conditions.
Buying a home for the first time is both exciting and stressful. It takes a lot of time, planning and effort to save for a downpayment and closing costs while securing financing and researching loan options. Make financing a little easier by looking into the many first-time homebuyer programs, loans and grants that exist to help with mortgages, downpayments and closing costs.
Looking for more information about buying a house for the first time? Check out our First-Time Homebuyer series! You’ll learn everything you need to know about becoming a homeowner, from financing to inspections to closing.