Iowa First-Time Buyer Programs You Probably Don't Know About (And How Much They Can Save You)
Let me walk you through the programs that could put homeownership within reach, even if you think you can't afford it yet.
Give me a minute, you might be surprised!
When I tell first-time buyers in Iowa about all the programs available to help them purchase a home, the most common response I get is: "Wait, really? Why doesn't everyone know about this?"
Great question. The truth is, many of these programs don't advertise heavily, and some real estate professionals aren't even aware of all the options available. But if you're a first-time buyer in Iowa, these programs could save you thousands of dollars – or even make the difference between buying now or waiting another few years.
Let me walk you through the programs that could put homeownership within reach, even if you think you can't afford it yet.
Iowa Finance Authority (IFA) FirstHomes Program
This is the big one that most people miss. The Iowa Finance Authority offers first-time homebuyers up to $5,000 in down payment and closing cost assistance – and here's the kicker: it's a forgivable loan.
Here's how it works:
Get up to $5,000 toward your down payment or closing costs
The "loan" is forgiven at 20% per year over five years
Stay in your home for five years, and you never have to pay it back
Income limits: $97,200 for a family of two, $120,000 for a family of four (2024 limits)
Available statewide, not just in certain areas
Real example: Sarah and Mike were looking at a $180,000 home in Ankeny. With this program, they got $5,000 toward their down payment, which meant they only needed to bring $4,400 to closing instead of $9,400. That made the difference between buying this year versus saving for two more years.
USDA Rural Development Loans
Don't let the word "rural" fool you – USDA loans are available in way more places than you'd think, including many suburban areas around Des Moines, Cedar Rapids, and other Iowa cities.
The benefits are huge:
Zero down payment required – yes, you read that right
Competitive interest rates
No private mortgage insurance (PMI)
Can finance closing costs into the loan
Where it's available: You might be surprised. Areas like Altoona, Bondurant, Norwalk, and many suburbs qualify. You can check eligibility on the USDA website, but I always verify current boundaries since they update regularly.
Income limits: Generally 115% of the area median income, which for most of Iowa means household incomes up to about $90,000-$100,000.
VA Loans for Iowa Veterans
If you're a veteran or active military, this might be the best deal available anywhere. Iowa has a strong veteran population, and VA loans offer incredible benefits that many veterans don't fully understand.
VA loan advantages:
Zero down payment
No private mortgage insurance
Competitive interest rates
More flexible credit requirements
Can be used multiple times
Iowa-specific bonus: Iowa doesn't tax military retirement pay, making it an even better state for military families to settle in long-term.
FHA Loans with Down Payment Assistance
While FHA loans are available nationwide, Iowa has several local programs that can help cover that 3.5% down payment requirement.
Local assistance programs include:
City-specific down payment assistance (Des Moines, Cedar Rapids, Davenport all have programs)
Employer-assisted housing programs
Non-profit organization grants
Example: The City of Des Moines offers up to $15,000 in down payment assistance for qualified buyers purchasing in targeted neighborhoods. Combined with an FHA loan, you could potentially buy with very little money down.
Iowa Great Places Housing Tax Credits
This one's newer and not well-known yet. If you buy in certain designated "Iowa Great Places" communities, you can get state tax credits that effectively reduce the cost of your home.
How it works:
Available in designated communities working on revitalization
Tax credits up to $2,500 per year for five years ($12,500 total)
Must be your primary residence
Income restrictions apply
Qualifying communities include parts of Burlington, Council Bluffs, Keokuk, and several smaller towns working on downtown revitalization.
Conventional Loans with Local Assistance
Even if you don't qualify for government programs, many local organizations offer down payment assistance for conventional loans:
Examples:
Habitat for Humanity: Not just home builds – they also offer down payment assistance in many Iowa communities
NeighborWorks: Provides homebuyer education and down payment assistance
Local credit unions: Many Iowa credit unions have first-time buyer programs with reduced rates or down payment help
The Income Tax Benefits You're Missing
Iowa offers additional tax benefits for homeowners that renters don't get:
Mortgage interest deduction on both federal and state returns
Property tax deduction on state returns
Iowa's homestead credit reduces your property tax bill
Real numbers: On a $200,000 home with a $180,000 mortgage, you could save $2,000-$4,000 annually in taxes compared to renting.
How to Access These Programs
Here's the thing – many of these programs have limited funding or specific application periods. Some are first-come, first-served. Others require you to complete homebuyer education courses first.
Steps to take:
Get pre-qualified first – you need to know your budget before exploring assistance programs
Complete a homebuyer education course – many programs require this, and it's valuable regardless
Work with a lender familiar with these programs – not all lenders are experienced with every assistance program
Apply early – some programs run out of funding during busy buying seasons
Common Myths That Cost You Money
Myth 1: "These programs are only for low-income buyers" Reality: Many programs have income limits around $90,000-$120,000 for families
Myth 2: "The paperwork is too complicated" Reality: Yes, there's paperwork, but the potential savings of $5,000-$15,000 make it worth a few extra forms
Myth 3: "These programs take forever to process" Reality: Most add only 1-2 weeks to your timeline, and you can often get pre-approved for the assistance before house hunting
Stacking Programs for Maximum Benefit
Here's where it gets really interesting – you can often combine programs. For example:
Use an FHA loan with 3.5% down
Get $5,000 from Iowa Finance Authority for down payment assistance
Receive $3,000 from a local down payment assistance program
Take advantage of tax credits if buying in a qualifying area
Real example: Jennifer qualified for an FHA loan on a $165,000 home in Cedar Falls. She combined the Iowa Finance Authority assistance with a local program and ended up bringing less than $1,000 to closing on a home she thought she couldn't afford for another three years.
The Bottom Line
If you're renting in Iowa and think you can't afford to buy, you might be wrong. These programs exist because Iowa wants to encourage homeownership and keep families in the state long-term.
I've seen these programs turn "someday" into "this year" for dozens of families. The key is knowing they exist and working with professionals who understand how to navigate them.
Don't assume you can't afford to buy until you've explored what's actually available. The programs are there – you just need to know where to look.
