Iowa FHA Loans

Since it was established in 1934, the Federal Housing Administration (FHA) has worked to not only improve nationwide housing standards, but to provide accessible home financing options for families that would otherwise not qualify. Its programs are specifically tailored to the first-time home buyer and buyers with challenged credit histories.

An FHA loan is a mortgage that is insured by the FHA (now part of the U.S. Department of Housing and Urban Development, or “HUD”), meaning they pose less risk to lenders; this translates to lower down payments and more flexible credit requirements for the borrowers. 

Typical down payments for an FHA loan are between 3.5% to 10% of the purchase price. Compared to the common 5% to 20% down payment requirement for a traditional Iowa mortgage, FHA loans lower the barrier to homeownership for those who haven’t yet amassed a sizable down payment. 

FHA loan requirements in Iowa are also much more flexible, with credit scores as low as 500 being considered. Those with bankruptcies in the past can also be approved, provided the borrower has reestablished credit history with good payment habits.

If you’re looking for an Iowa mortgage to buy your first home or refurbish an existing home, consider an FHA loan because they offer several unique benefits over conventional mortgage loans:

• Competitive interest rates: Because FHA loans in Iowa are insured by the federal government, specialized lenders like Griffin Funding are able to offer very competitive interest rates.

• Low down payment requirements: The typical down payment for an Iowa FHA mortgage loan is 3.5% of the purchase price, provided the borrower is well qualified. 

• Flexible credit criteria: A low credit score, limited borrowing history, or past bankruptcy is not a deal killer with Iowa FHA loans. As long as your credit profile shows responsible pay habits in recent years, and your FICO is at least 500, you may still be considered for a mortgage pre-approval.
• Flexible structure: The FHA 203(k) program offers borrowers the benefit of using one single mortgage to finance both the home purchase and the cost of any renovations or repairs. There are also options to utilize fixed- or adjustable-rate mortgages to suit your needs.

While qualifying criteria for FHA home loans in Iowa are generally much more flexible than with conventional mortgages, there are basic requirements that you should meet:

• Credit score: You should aim to have a credit score of at least 580 to be considered for the lower 3.5% down payment option. FICO scores of 500 to 579 are still considered, but borrowers in this credit bracket will generally need to make a larger down payment – typically up to 10%. If you want help managing your credit, the Griffin Gold app can help you monitor your credit, manage your finances, and submit the strongest application possible for your home loan.
• Down payment: You will need to show proof of funds to make the required down payment of at least 3.5%. Fortunately, gift funds from family members and other eligible parties will count.
• Steady income and employment: You’ll need to show verifiable proof of at least two years’ consistent employment history. There is no set minimum income amount from this employment, so those who’ve just graduated college or recently changed careers may still qualify.
• Debt-to-income ratio (DTI): This number is the percentage of your gross monthly income (before taxes) that goes toward paying bills and other debts. Most lenders will want to see a DTI of no more than 45%. That being said, at DTI as high as 57% will be considered, provided there are other strengths in the borrower’s application.
• Property requirements: When you find a home to purchase, it will need to meet certain condition standards set by the FHA. These standards are there for your protection, and ensure that the property is safe, sound, and structurally secure.

There are FHA loan limits in Iowa, and they are calculated by the Department of Housing and Urban Development (HUD) based on median home prices in each county or population area.

The current Iowa FHA loan limit for a single-family home is set at $498,257. As home values continue to rise in certain areas, this may eventually be raised accordingly. But for the time being, all counties in Iowa fall under this standard loan limit.

It’s important to note that you can potentially buy a home with a purchase price that exceeds the FHA loan limit in Iowa. In this case, you would just need to cover the difference between the loan limit and the purchase price with a down payment.

Getting started on an FHA loan application in Iowa is simple. Here are the basic steps:

1. Check your eligibility: Make sure you get your credit score to at least 500 (preferably 580 or higher). You’ll also need at least two years of income and employment stability, and a DTI of no higher than 57% (though preferably 45% or below).
2. Gather documents: Prepare your proof of employment history and income, bank statements, tax returns, and your valid government-issued identification.
3. Get pre-approved: Apply now with Griffin Funding to start the pre-approval process. You can quickly complete an application online, or call us and complete it over the phone with the guidance of a mortgage professional.
4. Begin house hunting: Once pre-approved for an FHA loan in Iowa, you may begin working with a real estate agent to find a home that meets Iowa’s FHA loan limits while staying within your pre-approval amount.
5. Approval and closing: Submit your official loan application to secure funds and make the purchase. Our knowledgeable mortgage professionals will walk you through the process and answer any questions you have along the way.

Buying your first home, or buying a home after coming back from financial hardships, can be a daunting endeavor. Conventional mortgage loans all cater to low-risk buyers with high income and low debt, leaving a large proportion of the population unable to secure an approval.

FHA loans aim to bridge that gap by providing opportunities for more people to realize their dream of homeownership with competitive interest rates, low down payment requirements, and flexible credit criteria.

If you’ve struggled to get approved for a conventional mortgage in Iowa or are a first-time home buyer with limited credit history, reach out to the team at Griffin Funding to see if an FHA loan could be the answer to getting into the home of your dreams. Our dedicated team of Iowa FHA loan specialists will walk you through the process and get you set up for success. Give us a call or fill out an application today.