Buying your first home is an exciting milestone, but it can also be a daunting process, especially when it comes to securing a mortgage. As a first-time homebuyer in Iowa, you have access to various resources and programs that can make this journey smoother. Here are some essential tips to help you navigate the mortgage process and why choosing a local Iowa bank, like American State Bank, can be beneficial.

1. Understand Your Mortgage Options

There are several types of mortgages available, each with its own set of requirements and benefits.

Mortgage Loan Options

  • Fixed-Rate Mortgages: Mortgage in which your rate is fixed throughout the term of your loan. This means you can pay the same amount each month, which makes it easier to plan for your finances.
  • Adjustable-Rate Mortgages: Your rate is fixed for a certain term, and then is subject to change moving forward. These mortgages offer lower closing costs and more financial flexibility. They’re ideal for borrowers who plan to move soon, expect to earn a higher income, or think mortgage rates will drop in the future.

Mortgage Loan Programs

  • Conventional Loans: These are not insured by the government and typically require a higher credit score and a larger down payment.
    • American State Bank’s Conventional Loan Features:
      • 3% down plus closing costs for first-time homebuyers; or 5% down plus closing costs for repeat homebuyers
      • Minimum credit score: 620
      • No income or community restrictions
      • Manufactured home allowed
  • VA Loans: Available to veterans and active-duty service members, these loans offer competitive rates and often require no down payment.
    • American State Bank’s VA Loan Features:
      • No down payment required
      • Closing costs cannot be financed
      • Minimum credit score: 640
      • No income or community restrictions
      • Manufactured homes are not allowed
      • Must have VA Certificate of Eligibility and sufficient entitlement
  • USDA Loans: Designed for rural homebuyers, these loans also offer no down payment options.
    • American State Bank’s USDA Loan Features:
      • No down payment required
      • Closing costs cannot be financed
      • Minimum credit score: 640
      • Eligible areas: communities with a population less than 20,000
      • Combined household income for all adults living in the house must be below $90,300 for Clarke County
      • Manufactured homes are not allowed
  • FHA Loans: Backed by the Federal Housing Administration, these loans are more accessible for first-time buyers with lower credit scores and smaller down payments.

2. Take Advantage of First-Time Homebuyer Programs

Iowa offers several programs to assist first-time homebuyers:

  • Iowa Finance Authority (IFA) Programs: The IFA provides down payment and closing cost assistance, as well as lower interest rates for eligible buyers.
  • Local Grants and Assistance: Many cities and counties in Iowa offer grants and assistance programs to help with the costs of buying a home.
    • First Home Plus: This grant in the amount of up to $2,500 will be applied toward closing costs or the downpayment. Income qualifications vary on a county-by-county basis.
      • Features:
        • Maximum home purchase price in the amount of $294,000
        • Must be a first-time homebuyer and occupy the subject property as their primary residence
        • Minimum credit score requirement is 640
        • Maximum debt to income ratio is 45%
    • Homes for Iowans Plus: This grant is in the amount of $2,500 to be applied toward closing costs and the downpayment.
      • Maximum allowable household income is $141,680
      • Maximum home purchase price is $360,000
      • Available for first-time homebuyers who are purchasing a home in Iowa
      • Minimum credit score is 640
      • Maximum debt to income ratio is 45%
    • Military Homeownership Assistance Programs: This grant is in the amount of $5,000 to be applied toward closing costs or the downpayment.
      • Must be an eligible service member or veteran to meet qualifications
    • Clarke County Development Corporation Lot Program: This is available for new construction taking place inside of the Osceola city limits.
      • Price of the lot must be under $30,000
      • Must provide CCDC with cost and plans of home and purchase building permits
      • If approved by the CCDC, they will bring a check for the lot purchase to the loan closing

3. Get Pre-Approved for a Mortgage

Before you start house hunting, get pre-approved for a mortgage. This will give you a clear idea of how much you can afford and show sellers that you are a serious buyer. American State Bank offers a straightforward pre-approval process to help you get started.

4. Budget for All Costs

Remember, the cost of buying a home goes beyond the purchase price. Be sure to budget for:

  • Down Payment: Typically, 3-20% of the home’s price.
  • Closing Costs: Usually 2-5% of the loan amount.
  • Home Inspection and Appraisal Fees: Essential for ensuring the home’s value and condition.

5. Work with a Local Iowa Bank

We’re your banker, neighbor, and friend! Choosing a local bank like American State Bank has several advantages:

  • Personalized Service: Local banks understand the Iowa housing market and can offer tailored advice and support.
  • Community Focus: By banking locally, you support your community and benefit from a bank that invests in local development.
  • Accessibility: With branches in your area, it’s easier to get in-person assistance and build a relationship with your banker.

6. Stay Informed and Educated

The mortgage process can be complex, but staying informed can make it more manageable. American State Bank provides resources and guidance to help you understand your options and make informed decisions. Prior to closing, if borrowers provide proof of completing and passing the mortgage education program located on the American State Bank website, they will receive a $100 credit toward closing costs on their new mortgage loan.

Get Started Today

Navigating the mortgage process as a first-time homebuyer in Iowa doesn’t have to be overwhelming. By understanding your options, taking advantage of available programs, and working with a local bank like American State Bank, you can confidently take the steps towards owning your first home.