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Now that the housing market is finally calming down after the pandemic[1], buyers are facing a new challenge: Soaring mortgage rates.[2]
In Iowa, the average 30-year fixed mortgage rate is 6.83% — up from 2021's historic lows. This raises the average monthly mortgage payment to $1,084 (assuming a 20% down payment at the median home value).
But buying a home in Iowa is still possible, even for first-time home buyers. Many markets are seeing frequent price drops and fewer offers, giving motivated buyers the upper hand in negotiating for the best price.
In this guide, you’ll learn how to buy a house in Iowa with confidence no matter what the market brings. Learn why you can trust our advice.
Whether you're actively house hunting or just starting to browse homes on Zillow, it's never too early to find a great local realtor to guide you on your search. An experienced agent can help you navigate a tricky housing market, explore your financial options, and negotiate the best deal possible.
Best of all, hiring a real estate agent comes at no extra cost to you — since the seller typically pays both their listing agent and your buyer's agent.
Ready to find a great local realtor, but not sure where to start? The best (and easiest!) option is to try a free agent matching service like Semya-Moya. Answer a few simple questions about your home buying goals, and Clever will match you with hand-picked agents from Keller Williams, RE/MAX, and other top brokerages in your area. Find a top local agent and make your home buying dreams a reality today!
Step 1: Save for a down payment
🔑 Key takeaway:
Your down payment can be less than 20% of the purchase price — $41,443 for the typical home in Iowa — but you'll have to purchase mortgage insurance and pay more interest over the life of your loan.
Your down payment is the first part of your home's purchase price that you pay at closing. Your mortgage lender will pay the remaining balance.
Typically, mortgage lenders in Iowa want you to contribute 20% of the purchase price as a down payment. That would be $41,443 for a $207,215 home — the typical home value in Iowa.
However, you have options to lower your down payment amount.
Government backed loans, like VA and FHA loans, allow you to contribute 0% and 3.5% of your home's purchase price respectively. Even conventional loans allow for down payments as low as 3-5% (though the minimum varies by lender).
But making a down payment of less than 20% comes with some risks.
First, because you're borrowing more money, you'll have a higher monthly payment and pay more in interest over the life of your loan.
Second, you may have to purchase mortgage insurance.
Conventional loans require private mortgage insurance (PMI) until your loan balance reaches 80% of the purchase price. FHA loans, on the other hand, require a mortgage insurance premium (MIP) for the life of your loans.
Mortgage insurance costs around 1% of your mortgage balance annually. However, rates vary based on your down payment and credit score. Typically, your mortgage insurance payment is added to your mortgage payment each month.
VA loans don't charge mortgage insurance. Instead, you'll pay a VA loan funding fee at closing, which can range from 1.4% to 3.6% of the purchase price.
» READ MORE: Everything you need to know about low-income home loans
Iowa down payment assistance programs
There are several programs available to first-time and low-income homebuyers in the state of Iowa. Financial aid can include grants or second mortgages with deferred or forgiven payments to help people afford their dream home.
Check out the following options to see if you may be eligible:
IFA FirstHome
The Iowa Finance Authority (IFA) has three DPA programs available for Iowa residents. The FirstHome Plus program offers a grant of $2,500 to first-time homebuyers to cover closing costs or a loan of up to $5,000 that must be paid after the first mortgage is completed.
Eligible borrowers must have a credit score of at least 640 and not exceed the maximum household income limit of their county. Home price limits and income requirements can be found here.
IFA Homes for Iowans
The Homes for Iowans program offers grants or loans for first-time homebuyers and those who haven't owned a home in the last three years. Grants of up to $2,500 or loans up to 5% of the purchase price are available. Loans must be paid back after the first mortgage is complete or when the home is sold or refinanced.
Eligible borrowers must have a credit score of at least 640, not earn more than the maximum household income limit of $139,580, and not purchase a home costing more than $381,000.
IFA Military Homeownership Assistance
The Military Homeownership Assistance program provides a $5,000 grant to eligible service members and veterans. This program can be used in conjunction with the FirstHome and Homes for Iowans programs.
U.S. Department of Housing and Urban Development
Additional programs for Iowa residents can be found on HUD's page here.
Step 2: Find a great real estate agent in Iowa
🔑 Key takeaway:
Interview multiple agents to find one who knows your target neighborhoods, has experience in your price range, and communicates well.
Your real estate agent will be your main ally during the home buying process. Besides finding and showing you properties, your agent will help you make offers, negotiate contracts, and navigate the closing process. Plus, they can recommend other service providers like title companies and inspectors to help you buy your home in Iowa.
Don't rush into choosing an agent. Instead, take the time to research and interview multiple real estate agents who have experience in the neighborhoods you're interested in. You should pay attention to a realtor's:
- Years of experience
- Number of transactions in the last year (the more the better!)
- Experience in your price range
- Overall review score
- Individual reviews and complaints
Finding a great real estate agent shouldn't be complicated. Let Semya-Moya do the hard part and match you with experienced local realtors who are experts in your market.
Enter your zip code below to compare top agents from trusted brands like Keller Williams, Berkshire Hathaway, and Coldwell Banker, then choose the best fit for you. It's 100% free, and there's no obligation.
Step 3: Get preapproved for a mortgage
🔑 Key takeaway:
Once you're preapproved for a mortgage, it's imperative that your financial situation doesn't change. If your credit drops, it can derail the process and keep you from closing on your house.
Here are some easy ways to ensure your credit doesn't change after you receive your preapproval letter:
- Avoid opening new credit accounts
- Don't close any accounts that have been open for a long time
- Make all of your credit card payments on time
» LEARN MORE: What factors do mortgage lenders consider?
A mortgage preapproval letter is an offer to lend you up to a certain amount of money to purchase a home. It shows sellers that you are a serious buyer who is financially qualified to make an offer on a home.
Most sellers in Iowa will require preapproval before showing you their home.
You don't have to decide on one lender right now. In fact, you should compare interest rates and preapproval amounts from several lenders to make sure you're getting the absolute best terms when you buy your Iowa home.
Step 4: Choose the right location
🔑 Key takeaway:
Search for neighborhoods where:
- Home prices are within your price range
- Home values are on the rise
- The local amenities support your lifestyle
Currently, the typical home value in Iowa is $207,215, but don't worry if that doesn't perfectly match your budget. Home prices vary dramatically from city to city and even from neighborhood to neighborhood!
Also, look at past home value trends. This will give you an idea of how much your home's value could go up over the next few years.
To give you an idea of how appreciation could impact what your house is worth in the future, consider these examples from three neighborhoods in Council Bluffs:
Home value appreciation in Council Bluffs
| Neighborhood | 2015 | Current | Appreciation |
|---|---|---|---|
| Huntington Avenue | $115,351 | $171,550 | 32.8% |
| Twin City | $115,607 | $187,660 | 38.4% |
| Downtown | $56,412 | $96,684 | 41.7% |
Step 5: Start house hunting in Iowa
🔑 Key takeaway:
Listing prices in Iowa have spiked over the past year, and the slim inventory may complicate things for house hunters. It might be challenging to find a house that checks all your boxes, so keep an open mind but also keep an eye on your budget. Your realtor can help you find decent options — and while they may not find the house of your dreams, you might be pleasantly surprised with what they come up with.
Searching for homes in Iowa is the fun part of the home buying process! You'll get to look at a variety of homes and discover what you really want in a home.
Make a list of everything you want in a home and prioritize them. At the top of the list should be the items that are most important to you. This will help you separate your "must-haves" from your "nice-to-haves."
Your agent can help you understand if your wants are realistic for your budget and favorite neighborhoods or if you need to rethink what you're looking for.
Look at current housing inventory
The timing of your house hunt in Iowa can have a big impact on your number of options. For example, in Iowa, June has historically seen the most homes for sale. Searching in this season could give you more options and a greater likelihood of finding your dream home.
On the other hand, December gives you the fewest choices in Iowa. Historically, there are 50.2% fewer homes for sale than during Iowa's peak season.
Housing inventory in Iowa by season
Step 6: Make an offer
🔑 Key takeaway:
Homes are sitting on the market for longer than average, but the limited inventory in Iowa is keeping very few listings available at the end of each month. While listings don’t close quickly in the state, you may find fierce competition for new houses or those in desirable urban areas. Work with your realtor closely so you can make a strong offer when you find a home you like.
Once you find a Iowa house you love, it's time to make an offer. Your real estate agent will help you write a compelling offer that gives you the best shot of convincing the homeowner to sell to you.
Currently, in Iowa, homes stay on the market for 68 days before going under contract. However, every market goes through seasonal changes. During busier months, homes get snatched up more quickly than others.
Historically, Iowa homes sell fastest in May, where the average property is only on the market for 58 days. If your home search falls around this time, you should be prepared to move quickly and potentially make offers on several homes before yours is accepted.
On the other hand, if you buy in January, you have a bit more time to search. Homes typically stay on the market 18 days longer than Iowa's annual average.
Average time homes spend on market in Iowa
» LEARN MORE: What should an offer include?
Step 7: Inspections and appraisals
Inspections and appraisals are an opportunity for you to better evaluate the home's condition and value before officially purchasing it. You may have an opportunity after this step to renegotiate the terms of your contract with the seller if something unexpected pops up.
🔑 Key takeaway:
- Inspections: A licensed professional checks the house for any unseen, unexpected, or potential issues.
- Appraisals: An appraiser hired by your lender examines the house to determine how much it's worth.
Home inspections in Iowa
Having your Iowa home inspected by a licensed inspector gives you peace of mind about the condition of the property before you commit thousands of dollars to purchase it.
Your inspector should check out the following parts of the property:
- Roof
- Foundation
- Electrical system
- HVAC system
- Plumbing
If the home has a septic system, you should also pay for a septic inspection to make sure it doesn't have any problems that wouldn't be covered in a typical home inspection.
Iowa-specific inspections
Sellers in Iowa are required to fill out a disclosure form before accepting a buyer's offer. Although most property issues can be found with a general home inspection, doing more specialized tests before closing is highly recommended.
In Iowa, buyers should consider having these inspections completed to make sure a potential house is safe:
- Radon testing: If the seller hasn't performed a radon test within the past year, it's wise to get a test as soon as possible. Radon can be dangerous in high levels, and it can easily slip into a home undetected.
- Termite inspection: Sellers in Iowa are required by law to disclose any known termite and pest issues, but early infestations can often go unnoticed. Consider having a professional pest inspection to get rid of any unwanted critters and prevent future infestations.
Appraisals
Appraisals determine the value of the property. If you're using a mortgage to buy your new home, your lender will order an appraisal to make sure the home is worth the money that it's loaning you.
» LEARN: 3 options for buyers after a low appraisal
Step 8: Close on your new home!
🔑 Key takeaway:
Before you close on your new home, you and your agent will do a final walkthrough of the property to ensure that it's still in the expected condition.
To become a legal homeowner in Iowa, you'll have to complete two final tasks. On closing day, you'll meet at the title company to finalize your paperwork and settle the closing costs.
Prepare to review and sign several important documents that will transfer the title to your name. If you don't fully understand something, be sure to ask for clarification before signing.
Some common documents you'll need to sign include:
- The finalized loan application
- The deed
- The mortgage promissory note
After signing the paperwork, you’ll have to pay your closing costs. The title company makes this simple by collecting the total amount you owe, and then taking care of appropriately distributing these funds.
If you want to know exactly where your money is going, homebuyer closing costs can typically be divided into four categories:
- Lender fees: Fees paid to your mortgage lender for originating and underwriting your loan. Additional expenses related to your loan may also apply here.
- Title and escrow charges: Fees paid to the title company for facilitating the closing, conducting title searches, and providing title insurance.
- Prepaid costs: Ongoing fees associated with homeownership. Some lenders require new homebuyers to pay for certain expenses up front, such as property taxes and homeowners insurance.
- Other closing costs: Miscellaneous costs that vary according to each buyer's needs. Common expenses in this category can cover pest inspection fees, disaster certification fees, and real estate attorney fees.
Buyers in Iowa typically pay 3–5% of the purchase price in closing costs. For a $207,200 home — the typical home value in Iowa — that's between $6,216 and $10,360!
Ready to make your home-buying dreams a reality? The first step is to find a top local realtor who's an expert negotiator with proven experience in your market.
Enter your zip code below to compare the best agents from trusted brands like Keller Williams, Berkshire Hathaway, and Coldwell Banker, then choose the best fit for you. It's 100% free and there's no obligation.
Frequently asked questions
Do I need a real estate attorney in Iowa?
In Iowa it's required for a real estate attorney to be part of every home sale. While your agent can make recommendations, remember you get to make the final decision. Interview lawyers before hiring them to make sure they have the experience you need.
What are the steps to buy a house in Iowa?
- Save for down payment
- Get pre-approved for a mortgage
- Choose your preferred Iowa neighborhoods
- Partner with the right real estate agent in Iowa
- Go house hunting
- Make a strong offer
- Inspections and appraisals
- Do a final walkthrough and close
Does Iowa have a first time home buyer program?
Yes! The Iowa Finance Authority's FirstHome Program is offered to first-time buyers, veterans, and buyers in target counties. The program offers low interest rates that don't change based on your credit score. For those earning less than 80% of their area's median income, reduced mortgage insurance coverage and down payment assistance is also available.
Eligible participants must have a credit score of at least 640 and stay within the household income and home purchase price limits set for their county. Borrowers also can't exceed a debt-to-income ratio of 45%.
Why trust us?
Semya-Moya is a free agent-matching service that has helped more than 82,000 people buy and sell homes. We partner with over 2,700 top-performing agents nationwide at national brokers including Keller Williams, RE/MAX, Century 21, and more. We also help buyers save money with cash back after closing — no strings attached.
We’ve earned buyers’ trust with a rating of 4.9 out of 5 stars on Trustpilot and over 1,800 customer reviews.
Our team of industry-leading researchers is committed to making homeownership more accessible by educating buyers through guides like this one. We've spent thousands of hours analyzing publicly available data, surveying consumers, and interviewing industry experts. Our research has been featured in The New York Times, Business Insider, Inman, Housing Wire, and many more.
