Compare Current Mortgage Rates in Iowa

If you’re buying a home in Iowa, knowing the current mortgage rates can help you make an informed decision and avoid some financial pitfalls that impact many homebuyers.

Your mortgage interest rate directly impacts both your monthly mortgage payment and the total cost of homeownership. Rates are based on economic factors like inflation and the current federal funds rate. Other factors, like your credit score and down payment, can also influence your rate.

If you’re considering taking out a home loan in Iowa, here’s what you need to know about Iowa mortgage rates, what affects them, and how to get the best rate possible.

Mortgage lenders in Iowa set their interest rates based on certain factors, some of which are beyond your control as a buyer. These are the main external factors that can impact your rate:

• Current inflation rate: The inflation rate measures the rising costs of everyday goods and services over a set period — usually a year. Mortgage rates tend to rise in times of high inflation.
• Supply and demand: The local housing market plays an important role in determining mortgage interest rates. Cities or counties with more supply than demand — that is, fewer buyers and more homes — generally have lower rates. Areas with more buyers and fewer homes may have higher rates.
• Current federal funds rate: The Federal Reserve doesn’t set mortgage rates in Iowa. However, it does set the effective federal funds rate, which can affect mortgage rates. A lower federal funds rate generally means a lower mortgage rate and vice versa.

Aside from economic factors, mortgage lenders also set their rates based on your financial situation. This includes:

• Personal credit score: Your credit score ranges from 300 to 850 with a score of 670 or higher considered “good.” Lenders usually offer the lowest rates to those with good credit or better.
• Loan amount: Your rate may be lower if the loan is smaller. If you want the lowest rates, consider buying a less expensive home or saving for a larger down payment.
• Down payment: A larger down payment means you don’t have to borrow as much money from a lender. This can significantly reduce your interest rate and monthly payment amount.
• Loan term: Most mortgages come with 15-, 20-, or 30-year repayment terms. With a longer term, you can typically expect a higher interest rate; if you have a shorter term, your monthly payment will be higher but you’ll have a lower interest rate.
• Interest rate type: If you have a fixed rate, your interest rate will stay the same for the life of the loan. If you have a variable rate, it will change periodically over the loan term based on economic conditions.
• Home loan type: Different types of home loans exist in Iowa, including conventional, USDA, VA, FHA, and jumbo loans. Each type of mortgage has its own rates, requirements, and limits.
• Location: Mortgage rates tend to be higher in more expensive areas. In Iowa, you can expect higher rates in metros like Des-Moines-West Des Moines, Spirit Lake, Iowa City, and Cedar Rapids.

Iowa has two main first-time homebuyer programs, both of which are offered through the Iowa Finance Authority:

• FirstHome Program: This program offers below-market interest rates and lower fees than other options. Your credit score doesn’t affect the rate, and you could qualify with a down payment as low as 3%. The household income limit varies from $95,200 to $132,710, depending on household size and county. Properties must be no more than $481,000 — or $588,000 in specific areas. You must be a first-time buyer, meaning you can’t have owned a primary residence in the past three years. Ex-military members with an honorable discharge may also be eligible.
• Homes for Iowans Program: With this program, you can expect fewer mortgage fees and lower interest rates, independent of your credit score. You’ll need at least a 3% down payment to qualify for most programs. The household income limit is $161,560 and the home purchase price limit is $588,000. First-time and repeat buyers may qualify if they use the home as their primary residence.

Both of these programs also share the following criteria:

• 640 minimum credit score (non-traditional credit documentation accepted)
• 50% maximum debt-to-income ratio (DTI)
• Buyer must occupy the home within 60 days of closing
• First-time buyers getting a conventional loan must complete a homebuyer education program
• Property must be located in Iowa

If you qualify for either program, you can request a free Title Guaranty Owner’s Certificate. This protects you from financial loss due to any title issues up to a certain amount.

Iowa also offers down payment assistance to help reduce costs and make homeownership more affordable. This includes:

• Down payment assistance grant or 2nd Loan: Iowa Finance Authority offers these two options to help cover your down payment and closing costs. You could receive a grant of up to $2,500 or use the 2nd Loan program and receive up to 5% of the home’s sale price. The grant is free, but the loan must be repaid when you refinance, sell, or pay off your mortgage.
• Military Homeownership Assistance: Qualifying service members and veterans could get a grant of up to $5,000 to use with one of Iowa’s first-time buyer programs.
• Combined Down Payment Assistance: With this, you could receive up to $5,000 from the Military Homeownership Assistance program and $5,000 from the 2nd Loan for a total of $10,000.

If you’re trying to get the lowest mortgage rate in Iowa possible, here are some things you can do:

• Set a realistic homebuying budget: Calculate your budget using an online calculator. Be sure to account for the interest rate, loan term, property taxes, homeowners insurance, and down payment amount.
• Save for a down payment: Try to save as much as you can for a down payment. This can lower your monthly payment, save you money in interest charges, and potentially get you a lower rate. In addition, many lenders will require you to pay for private mortgage insurance if you put down less than 20% on a conventional loan. 
• Build your credit score: If your credit score needs work, just improving your score by 40 points will help. Make payments on time every month, reduce your debt load, and check your credit reports for any errors bringing down your score.
• Shop around for lenders: Before getting a home loan, it’s important to shop around and compare different mortgage lenders in Iowa to ensure you’re getting the best rates. Compare interest rates as well as lender fees and terms. 
• Choose which type of interest to get: The interest rate on fixed-rate loans never changes, meaning you’ll always know what to expect when your monthly payment comes due. Variable-rate loans may fluctuate over time or with the market.
• Compare loan types: Determine which types of loans you qualify for, and which best suits your needs. Some loans may have lower interest rates than others, but some might have additional insurance or upfront fees.
• Get pre-approved: Pre-approval can give you a better idea of what you qualify for and at what rates. Getting pre-approved will lower your credit score by a few points as it counts as a hard inquiry. However, you can get pre-approved with multiple lenders within a 45-day period and it’ll only impact your score once rather than multiple times.
• Get a rate lock: A rate lock lets you keep your current interest rate for a set period of time. This can be a good option if you qualify for a lower interest rate right now.
• Use discount points: When you buy discount points, you spend more money upfront to get a lower interest rate. One point is equal to 1% of your loan amount.
• Refinance your current loan: Once you have a mortgage, you can refinance it for a lower interest rate.

These are the main types of home loans in Iowa:

Conventional

• 3% minimum down payment
• 620 minimum credit score
• 43% maximum DTI
• 15- or 30-year terms
• Fixed or variable rate
• Loan amounts range from $766,550 to $1,149,825
• Private mortgage insurance (PMI) is required if less than 20% down

USDA

• No minimum down payment
• No minimum credit score
• Property must be located in a rural neighborhood
• Income limits apply
• 30-year term
• Fixed-rate only
• Geared toward first-time buyers
• Area loan limit of $398,600 
• Available through the United States Department of Agriculture

VA

• Credit score requirements vary
• No minimum down payment
• No PMI
• Must meet military service eligibility requirements
• 15- to 30-year terms
• Fixed or variable rate
• Lower closing costs
• Backed by the Department of Veterans Affairs
   

FHA

• 500 minimum credit score
• 3.5% minimum down payment (if your score is 580 or above)
• $498,257 to $1,724,725 loan limits (depending on location)
• Mortgage insurance is usually required
• 15- to 30-year terms
• Fixed or variable rate
• Meant for first-time buyers
• Regulated by the Federal Housing Administration

Jumbo

• Higher credit score or down payment requirements than most loans
• 43% maximum DTI
• 15- to 30-year terms
• Fixed or variable rate
• Higher loan limits