In this blog, we will cover everything you need to know about buying a house in Iowa. Iowa is becoming a very popular state for homebuyers, especially first-time homebuyers and people relocating to the state. A frequently asked question is can I buy a house in Iowa with bad credit?
Quite honestly, the state of Iowa truly flies under the radar when it comes to unique places where you can invest in real estate. When you consider the low cost of living in the state, safe cities, a top-notch education system, and beautiful four seasons, you will definitely understand why we are telling you that this is the best place you could ever buy property. In the following paragraphs, we will cover and discuss buying a house in Iowa.
What Is Needed For Buying Your First Home In Iowa?
However, if you are a first-time buyer, it is most likely that your credit score isn’t that good, and now you are wondering whether it is possible to get a mortgage in the state to finance your potential investment. The answer is yes, you can!
Not all mortgage options require a near-perfect credit score! We will tell you all about it in this guide. But before we get to that, how much do you know about Iowa as a state?
About The State of Iowa
In this paragraph, we will cover the steps to buying your first home in Iowa. Iowa is a U.S state located in the Midwestern region of the country, bordered by the Missouri River and Big Sioux River to the west and Mississippi River to the east. In terms of other border states, Iowa is bordered by six states:
Illinois to the east and southeast, Wisconsin to the northeast, Missouri to the south, Minnesota to the north, Nebraska to the west, and South Dakota to the northwest. Iowa is the 26th largest state in terms of total area, and its capital, which is the most populous in the state, is Des Moines.
The state’s leading economic drivers include agriculture, manufacturing, financial services, processing, information technology, biotech, and green energy production. It is regarded as one of the safest states to live in in the United States.
Population of Iowa
We will continue and give you more information about the state o Iowas. are some more facts about the state of Iowa. Population Iowa has a population of 3,190,370 people, with 70% of residents born there, 23% born in a different state, and 5% foreign-born. Also, white people make up 86% of the population, Hispanics 7%, African-Americans 5%, Asians 3%, and natives 1.4%, while others make up the remaining 1.3%.
Population Growth In Iowa
Population growth The population grew by 4.73% in the last ten years. Median Income The household median income in the state stands at $61,830, while the individual median income is $32,693. Tax rate The state has an income tax rate of 3.9%, the fourth lowest among all states in the U.S. Property tax rate stands at 1.53%, the 11th highest in the country.
Economy Iowa has a Gross State Product of about $179.5 billion and has been experiencing a 1.1% growth annually over the last five years. Cost of living Iowa’s cost of living index stands at 80.1, making it the least expensive state to live in, in the country. It is 10% lower than the national average.
Why Buying a House In Iowa Is a Good Idea
Education Compared to other U.S states, Iowa has the 8th best education system. Over 62% of the residents have attained some level of education, from an associate degree to a master’s degree or higher. There are 328 school districts and 88 colleges across the state.
Weather Iowa experiences a humid continental climate, with hot summers, cold winters, and wet springs. Summers are warm and humid, with temperatures averaging 23 degrees Celsius. During the winter, the temperature can fall to -10 degrees Celsius. Median home prices The average cost of a typical home in Iowa is about $199,400. Home prices jumped by 5% this year compared to last year.
Renting Versus Buying a House In Iowa
Renting vs. homeownership With Iowa being the cheapest state to buy property, it doesn’t make financial sense to rent, especially if you plan to settle. So, more people buy than they rent.
The Best Mortgage Option For Buying a House In Iowa
Which mortgage options can you qualify for with bad credit? As we told you in the beginning, not all mortgage options in Iowa require you to have a perfect credit score. The average credit score in the state is 620 FICO, which is the score you need to present to many lenders to secure a mortgage. But there are options that you could secure even with a credit score that’s as low as 500 FICO.
Buying a House in Iowa With Bad Credit
Gustan Cho Associates are mortgage brokers licensed in 48 states including Iowa. Over 75% of our clients are borrowers who could not qualify at other mortgage companies. We have a national reputation for being able to do mortgage loans other lenders cannot do. Gustan Cho Associates has over 190 wholesale mortgage lenders including dozens of lenders with no lender overlays on government and conventional loans. Gustan Cho Associates has hundreds of non-QM and non-traditional non-QM loans for homebuyers who cannot qualify for conforming loan programs.
Buying a House in Iowa With Non-QM Loans
Non-QM loans – regardless of the type of property you are looking to buy in Iowa – family home or investment property – these loans are the best alternative. The best thing about these loans is that you don’t need a consistent income or a perfect credit score to qualify, which is why they are very popular among self-employed individuals and first-time home buyers.
Buying a House In Iowa With 500 Credit Scores
Talking of the credit score, you will be able to qualify for these loans with a score of 500 FICO. You will, however, need to have a 20 to 30 percent down payment for you to secure a mortgage. There are several Non-QM loans in Iowa, including jumbo loans, bank statement loans, no-doc loans, and state income loans, among others. You will select the one you want based on your investment.
Buying a House In Iowa With FHA Loans
FHA loans – these are other loans that borrowers would be able to secure with a credit score that’s as low as 500 FICO. This is a government-backed loan that’s insured by the Federal Housing Administration (FHA).
You will need a 10% down payment to qualify for a loan on FHA loans with a under 580 credit scores. To qualify for FHA loans with a 3.5% down payment home purchase loan, you need a 580 credit score. The lowest credit score you can qualify for an FHA loan is 500 FICO.
Buying a House in Iowa With VA Loans
VA loans – they are loan options that are available for military veterans, active-duty members, or their spouses. The Department of Veterans Affairs established them to facilitate the members of the military, veterans, or their surviving spouses to buy homes. These loans don’t need any down payment and don’t have any limits when it comes to credit scores. You just need to find a mortgage or lender who offers them! These loans are also readily available in Iowa.
Tips For Buying a House in Iowa
In this section, we will cover and discuss tips for buying property in Iowa. As you’ve probably deduced from what you have read above, the state of Iowa is one of the best (if not the best) places to buy a home, considering the cost of living, an excellent education system, and the fact that it is one of the safest states to live. However, navigating the property market can be pretty challenging, especially for first-time home buyers. The good news, though, is that we are going to give you some tips on how you can successfully do it. But before we do, let’s look at how the property market in Iowa has been performing, shall we?
Buying a House in House in Iowa in a Sellers Market
Considering everything we have said about Iowa, and despite the home prices went up by an impressive 6.5% this year compared to last year, we believe the upward trajectory isn’t slowing down anytime soon. Also, in September, for instance, close to 3000 homes were sold, which is a number that has been building up over the last couple of months and years. This number is also expected to keep going up in the coming months as more and more people keep coming into the state, and more properties are being developed.
How To Buy Your First Home In Iowa
Having said that, here are some helpful tips on buying your first property in Iowa: Your finances must be in order first – before anything else, if you are planning to buy a house, not just in Iowa, but anywhere else in the country, you must plan on how you are going to pay for it. Many people apply for mortgages, and that’s probably what you will use. If you have bad credit, of course, you won’t be able to qualify for traditional loans, but as we told you above, there are other options that you could apply for.
Down Payment Requirements Buying a House in Iowa
Other than the VA loans, the other options will require you to have a down payment. So, at this stage, you need to get the down payment amount first before you approach the lender. Of course, you also need to check out all the other requirements needed from you by the lender and ensure that you fulfill them.
Getting Qualified and Pre-Approved Buying a House in Iowa
Get a mortgage pre-approval – after you get your down payment, you have to prequalify for a mortgage. This is crucial as it proves your seriousness towards the purchase and will also place you in a good position when it gets to financial negotiations. Also, don’t start this process if you are unsure about buying. Of course, before all this, you have decided the type of mortgage you want, the mortgage’s term, and how you will make payments. All these will come up when getting pre-approved.
Searching For Your Dream Home in Iowa
Get help and search for your home – you should hire a local real estate agent to help you navigate the local property market. Make sure that it’s someone who will have your best interest at heart throughout the entire process. After that, it is time now to go house hunting. Start by deciding what’s important to you, and remember to remain within your price range. So, what are you looking for in terms of cost of living, lifestyle, and culture? You also have to consider the proximity to schools, shopping centers, and restaurants.
Shopping and Buying a House in Iowa
The other thing you need to decide on is where to settle. Now, here are the best places that you need to look at. Ames – this town is 30 miles north of Des Moines, the state capital, and it is right in the path of Route 35, which connects Minneapolis and Kansas City.
This town is affordable to buy or rent. Also, it is home to the best public schools in the state, with 16 schools from elementary level to high school.
Buying a House In Des Moines, Iowa
West Des Moines – this is a western suburb of the capital of Iowa, Des Moines, and it would be perfect for those working in the city. The suburb is fairly densely populated as its home to over 60,000 people.
There are low crime rates, affordable housing, and a plethora of nightlife activities, all of which attract a lot of investors every year. Median home prices average $188,600.
Buying a House in Mount Vernon, Iowa
Mount Vernon – with a population of about 4500 people, this place will give you that village-like atmosphere that many investors, especially from cities, crave. Given the small population, the town is quite safe.
There are six schools in this town, all above average. Also, there are a number of restaurants, and the food is pretty good too.
Buying a House in Johnston, Iowa
Johnston – this town is in Polk County and has a population of about 19,000. The town has seen massive development over the last two decades, which is why it made it to our list of great places to live.
The average home price here is about $237,000. If you are one to explore and reconnect with nature, then this is where you need to be. You should consider checking out Clive, Coralville, Bettendorf, University Heights, Iowa City, Ankeny, Waukee, North Liberty, Urbandale, Robins, and Grimes.
Closing Your Home In Iowa
Prepare to close – after you find your ideal home, it’s time now to make an offer. Your agent will help you make a compelling one that would convince the seller to choose you. After your offer has been accepted, you must conduct inspections to ascertain that everything is in good condition.
If there are problems, you need to account for them when negotiating the final price. Also, you may want to have the property appraised to ensure that the home is worth the listing price. When everything is fine, the process of ownership transfer will commence. A lot is involved here, but your agent will help you navigate the entire process smoothly.
Making and Buying a House in Iowa and Calling It Home
Buying a home in Iowa is a dream for many, and when you get that opportunity, having bad credit should never stop you. Nothing should be in your way with Non-QMs, FHA, and VA loans readily available for you in the state. Get a mortgage broker today to learn more about your options.
November 20, 2022 - 9 min read