Today's mortgage and refinance rates in Iowa

Buying a home in Iowa

According to Zillow, the typical home value in Iowa is much lower than the typical value of $259,906 across the US. The typical home value in Iowa is $157,584, and Zillow expects the value to increase to $167,000 by September 2021.

First-time homebuyer programs in Iowa

The Iowa Finance Authority has several financial assistance programs for first-time homebuyers who borrow from participating lenders:

  • FirstHome grant: Depending on your income, you may qualify for a $2,500 grant to put toward a down payment or closing costs. You don't have to repay the grant.
  • FirstHome loan: If you qualify, you can borrow up to 5% of your home purchase price or $5,000, whichever is less. You'll repay the IFA when you sell the home, refinance your mortgage, or completely pay off your mortgage.
  • Homes for Iowans grant: If you don't qualify for the FirstHome program, you might be eligible for Homes for Iowans. The IFA will give you $2,500, and you don't have to pay it back.
  • Homes for Iowans loan: Borrow up to 5% of your mortgage amount or $5,000 — whichever amount is smaller — for closing costs or a down payment. Repay the loan when you pay off your mortgage, sell, or refinance.
  • Military Homeownership Assistance Program: If you're an active-service military member or a veteran, you may be eligible for a $5,000 grant. You don't have to pay back the grant, and you can combine this assistance with FirstHome or Homes for Iowans assistance.

Historic mortgage rates for Iowa

By looking at the average mortgage rates in Iowa since 2010, you can see trends for 30-year fixed mortgages, 15-year fixed mortgages, and 5/1 adjustable mortgages:

Seeing how today's rates compare to historic Iowa mortgage rates may help you decide whether you'd be getting a good deal by getting a mortgage or refinancing now.

How 30-year fixed mortgage rates work

You'll pay a higher interest rate on a 30-year fixed mortgage than on a shorter-term fixed-rate mortgage. The 30-year fixed rates used to be higher than adjustable rates, but recently 30-year terms have been the better deal.

Monthly payments are relatively low for a 30-year term, because you're spreading payments out over a longer period of time than you would with a shorter term.

You'll ultimately pay more in interest with a 30-year term than you would for a 15-year mortgage, because a) the rate is higher, and b) you'll be paying interest for longer.

How 15-year fixed mortgage rates work

A 15-year fixed-rate mortgage is more affordable than a 30-year term in the long run. The 15-year rates are lower, and you'll pay off the loan in half the amount of time.

However, your monthly payments will be higher on a 15-year term than a 30-year term. You're paying off the same loan principal in half the time, so you'll pay more every month.

How ARMs work

With an adjustable-rate loan, your rate stays the same for the first few years, then changes periodically. For example, your rate is locked in for the first five years on a 5/1 ARM, then your rate increases or decreases once per year.

ARM rates are at all-time lows right now, but a fixed-rate mortgage is still the better deal. The 30-year fixed rates are comparable to or lower than ARM rates. It could be in your best interest to lock in a low rate with a 30-year or 15-year fixed-rate mortgage rather than risk your rate increasing later with an ARM.

If you're considering an ARM, you should still ask your lender about what your individual rates would be if you chose a fixed-rate versus adjustable-rate mortgage.

Refinancing your mortgage in Iowa

Rates are at historic lows right now, so it could be worth it to switch your current mortgage for one with a lower rate — especially if the new rate would be significantly lower.

You don't necessarily need to refinance with the same lender you used for your initial mortgage. A different company may offer you a better deal this time around. Shop around for a lender who will offer the lowest rate based on your credit score and debt-to-income ratio, and the one that charges relatively low fees.

How to get a low interest rate on your mortgage

Here are some tips for landing a good interest rate on your mortgage:

  • Save more for a down payment. With a conventional loan, you may be able to put down as little as 3%. But lenders reward a higher down payment with a better interest rate. Mortgage rates should stay low for a while, so you may have time to save a bigger down payment.
  • Increase your credit score. Many lenders require a minimum credit score of 620 to receive a mortgage. But you can land a better interest rate with a higher score. The most important factor for boosting your score is to pay all your bills on time.
  • Lower your debt-to-income ratio. Your DTI is the amount you pay toward debts each month, divided by your gross monthly income. Most lenders want to see a DTI of 36% or less for a conventional mortgage, but a lower DTI can result in a lower rate. To improve your DTI, pay down debts or consider opportunities to increase your income.
  • Choose a USDA or VA loan. If you're eligible, you might consider a USDA loan (for low-to-moderate income borrowers buying in a rural area) or a VA loan (for military families). These types of mortgages typically charge lower rates than FHA or conventional loans — and you don't need any money for a down payment.

Improving your financial situation and choosing the right type of mortgage for your needs can help you get the best interest rate possible.

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