How much of a down payment do I need to buy a house in Iowa?

Iowa offers down payment assistance of up to 5% of the price of your home through the Iowa Finance Authority. You don't need to be a first-time buyer to qualify, but they do tend to get the better deals. If you don't qualify, you may also be eligible for a zero down payment mortgage through VA or the USDA. In addition, conventional mortgages typically only require 3% down, and FHA mortgages just 3.5%.

How much are closing costs in Iowa?

Iowa has some of the lowest closing costs in the country, with a purchase mortgage only needing an average of $3,146 to close. If you're refinancing your home's mortgage, you'll only need about $2,043.

What does homeowners insurance cost in Iowa?

Homeowners insurance on a $300,000 home in Iowa will run about $3,017, which is $240 or 9% above the national average. Since the median home price in Iowa is just shy of $225,000, though, you'll likely pay considerably less than this.

What is the property tax rate in Iowa?

Iowa's tax rate as a percentage of property value is 15th in the nation, making it fairly expensive when considered against the value of your home. The rate itself is 1.29% on average for the state, but, since property values are still fairly low, the actual median taxes are only 28th in the nation at $1,569.

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Thinking about making a move to the Hawkeye State? There might not be any Avengers here, but it's still a great place to call home, with affordable housing and lots of wide, open space. Still, it's important to know what your expenses will be in your new home, starting with the bedrock of most budgets: your mortgage. Use our Iowa mortgage calculator to get a better idea of what your new home will cost you, or what you can afford in the lovely state of Iowa.

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Iowa housing market 2024

Iowa is a great place to find an amazing housing deal, especially if you're working remotely. The median sales price for a home in Iowa in January 2024 was $223,500, which is up 7.7% over the same period last year. It's also 44.45% under the national median home sales price in January 2024 of $402,343.

Although Iowa homes are pretty inexpensive compared to the national median, the market is softer than in many other areas. In January 2024, sellers only got about 96.5% of their asking price for their homes, although 17% sold above asking price. There was about three months of housing supply in Iowa in January 2024, which was steady from the year prior, but median days on the market for a home was about 47 days, up three full years from the year before.

Iowa may be an easier place to buy a home than many other states, but it's still not going to be a picnic. You'll help yourself considerably by talking to the best mortgage lenders before starting your housing search.

Here's a quick peek at some of the most important Iowa markets and how things are doing there.

Metropolitan Area	Median Home Value	1-Year Change
Cedar Rapids	$207,700	5.4%
Davenport - Moline - Rock Island	$172,000	4.0%
Des Moines	$281,700	5.6%
Waterloo - Cedar Falls	$174,500	(0.2%)

Data source: National Association of Realtors. Figures accurate as of Feb. 19, 2024.

How do I calculate my mortgage payment?

It's far more simple to use a mortgage calculator to determine your mortgage payment in Iowa than it is to try to do the math by hand, but if you're mathematically curious, the formula looks like this:

Your basic mortgage payment, made up of just your principal and interest charges (often known simply as "PI" or "P+I") is the result at the end of this calculation. Your payment is based on three basic factors: how much you borrow, at what rate you borrow it, and for how long you need to pay it back. Your payment will be the same each month, but the allocation of principal and interest are different, with increasingly more principal being paid off each month, causing the interest to be less the following month.

The mortgage payment that you see each month may be different from the basic PI, though, because other things can be included in your payment, if you and the bank agree to it. These include items like: principal, interest, real estate taxes, and homeowners insurance, commonly called PITI. Sometimes, extra fees like homeowners association (HOA) assessments are also included in the mortgage payment, as well as any optional insurance you choose for risks like natural disasters.

In addition, if you have a smaller than 20% down payment like most Americans, you will likely also have to pay for mortgage insurance. This will be private mortgage insurance (PMI) on a conventional loan. If you're getting an FHA loan, it'll be a mortgage insurance premium (MIP).

To calculate your new mortgage with these additional expenses included, just click "show additional inputs" on the mortgage calculator above and add your estimated figures. It will get you a very close estimate of what to expect.

Things to know before buying a house in Iowa

Iowa has extremely affordable real estate prices compared to the rest of the country, but the taxes on that property may be on the high side. On average, Iowa counties collect about 1.29% of a home's assessed fair market value, making it the 15th most expensive state in the nation for taxes. If your home is assessed at $122,000, you'll be paying $1,569 each year.

Iowa is warming due to climate change, and flooding is becoming more common. For a residential home buyer, climate change might not yet have a significant impact, but because the economy is largely driven by agriculture, there could be knock-on effects from high temperatures, including droughts and dangerous flooding. Tornadoes and snowstorms are considered major hazards in the state. Iowa currently averages about 50 tornadoes a year, but it's unknown what impact climate change may have on this.

Tornadoes and flooding can cause damage that goes beyond your basic homeowners insurance policy, so depending on where you move in Iowa, it may be important to also secure wind and flood insurance. Ask your insurance agent about specific hazards your home may encounter, so that you're prepared for what may come. It's often cheaper to insure your home than to try to dig out financially after an event that's not covered at all. Once you know what insurance will cost, you can plug that number into the Iowa mortgage calculator to help give you a better estimate of your overall payment.

Tips for first-time home buyers in Iowa

If you've been considering buying your first home in Iowa, but need a hand, The Iowa Finance Authority can help. It offers three different programs to help you afford your first home.

FirstHome Grant Program

The FirstHome Grant gives $2,500 to home buyers who qualify to help cover their down payment or closing costs. The qualifications are simple. A recipient must:

Be a first time home buyer
Have a household income under $95,200 in most areas for a household of two
Buy a home priced under $481,000 in most areas
Occupy the home as a primary residence

FirstHome Loan Program

The FirstHome Loan is a second loan, up to 5% of the home's sales price. There's no monthly payment required, but you will have to repay it if you sell, refinance, or at the end of 30 years, whichever happens first. The requirements are the same for the FirstHome Grant program, meaning that a recipient must:

Be a first time home buyer
Have a household income under $95,200 in most areas for a household of two
Buy a home priced under $481,000 in most areas
Occupy the home as a primary residence

Homes for Iowans

The Homes for Iowans program is also a second mortgage with no monthly payment that can be used to pay for your down payment or closing costs, up to 5% of the home's sales price. It's different from the FirstHome program in that you don't have to be a first-time buyer to use it, and the limits are considerably higher.

The household income limit for Homes for Iowans is $161,560, making it accessible to considerably more Iowans, and the home purchase limit is $588,000, allowing for even more purchasing power.

Advice for all first-time borrowers

Whether you qualify for down payment and closing cost assistance in Iowa or not, you can still apply for other loans with appealing terms for first timers, like FHA loans or conventional loans. Both have low down payment requirements, making them easier to secure, and can be used on a vast array of homes. USDA loans are also going to be possible in much of the state, depending on how big of a city you want to live in.

In order to qualify for any mortgage, you'll want to work hard to make yourself into the best candidate. Here are a few tips:

Boost your credit score with on-time payments and low credit card utilization
Pay off debt to improve your debt-to-income ratio
Secure a steady job (or don't leave your current job)
Save for both closing costs and your down payment

In addition, guard your credit carefully by not opening any new accounts or applying for credit too soon before your loan application. Each time you apply or open a new credit account, your credit will take a little hit. Inquiries take two years to fall off your credit report, so plan accordingly.

FAQs

Iowa offers down payment assistance of up to 5% of the price of your home through the Iowa Finance Authority. You don't need to be a first-time buyer to qualify, but they do tend to get the better deals. If you don't qualify, you may also be eligible for a zero down payment mortgage through VA or the USDA. In addition, conventional mortgages typically only require 3% down, and FHA mortgages just 3.5%.
Iowa has some of the lowest closing costs in the country, with a purchase mortgage only needing an average of $3,146 to close. If you're refinancing your home's mortgage, you'll only need about $2,043.
Homeowners insurance on a $300,000 home in Iowa will run about $3,017, which is $240 or 9% above the national average. Since the median home price in Iowa is just shy of $225,000, though, you'll likely pay considerably less than this.
Iowa's tax rate as a percentage of property value is 15th in the nation, making it fairly expensive when considered against the value of your home. The rate itself is 1.29% on average for the state, but, since property values are still fairly low, the actual median taxes are only 28th in the nation at $1,569.

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