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Compare mortgage rates in Iowa.
Key Points
• Iowa’s mortgage rates are often very close to the national average.
• Mortgage rates are influenced by economic factors, including inflation, the federal funds rate, and the overall health of the housing market.
• Higher interest rates lead to increased monthly mortgage payments, making it more challenging for potential buyers to qualify for a loan or purchase their desired property.
• Iowa offers a variety of mortgage types to cater to different financial situations and preferences, including fixed-rate mortgages, adjustable-rate mortgages (ARMs), FHA loans, VA loans, USDA loans, and jumbo loans.
• Homebuyers can secure a competitive mortgage rate by comparing interest rates and fees from multiple lenders.
Introduction to Mortgage Rates
Mortgage interest rates are not simply determined by a single factor but rather by a complex interplay of economic conditions and each individual borrower’s financial profile. It all comes together in Iowa with a mortgage landscape that offers a range of options for homebuyers.
If you’re purchasing a home in Iowa, it helps to have a basic understanding of mortgage rates — where they come from and how to ensure you’re well positioned to get your best possible rate. Study this guide.
Where Do Mortgage Rates Come From?
The Federal Reserve, often referred to as the Fed, plays a pivotal role in determining mortgage rates. The Fed sets the short-term interest rates that banks use as a benchmark for their lending rates. Although home loan rates are not directly tied to Fed rates, they tend to follow the same economic trends.
But there’s more to it than that: Each would-be borrower has their own individual risk profile, and lenders will decide exactly what rate to offer a borrower based on their credit score, income and assets, and other metrics. We’ll give you more details on that below.
How Interest Rates Affect Home Affordability
Mortgage rates have a significant impact on home affordability. In Iowa, the average home value is about $220,000. If you purchased a home for that amount and made a 20% down payment, you would be borrowing $176,000. At a 6.5% interest rate, your monthly mortgage payment would be $1,112. But at 7.5% interest, your monthly payment would be $1,230. Over the life of the loan, assuming a 30-year term, you would pay more than $42,000 in additional interest at the higher rate.
Recommended: Average Monthly Expenses for One Person
Should Homebuyers Wait for Interest Rates to Drop?
Many people grapple with the dilemma of whether to purchase a home immediately or wait for interest rates to drop. This is especially true of those buying a first home, who don’t have the sale of an existing residence to rely on for a down payment.
While it’s true that rates can fluctuate, it’s impossible to say exactly when they will hit a given number. And it’s important to consider the opportunity cost of waiting: Home prices could rise while you wait for interest rates to fall. And a delay in purchasing means a delay in building equity in a home that you own. Remember, too, that you can always refinance your mortgage if interest rates decrease in the future.
Iowa Mortgage Rate Trends
Below you’ll see Iowa’s average mortgage rates over almost two decades. As you can see, Iowa’s rates fall, rise, then fall again, and so on, always sticking fairly close to the national average. Looking at rates over time may provide some reassurance that current rates are not exceptionally high compared to historical norms.
| Year | Utah Rate | U.S. Rate |
|---|---|---|
| 2000 | 8.06 | 8.14 |
| 2001 | 6.92 | 7.03 |
| 2002 | 6.53 | 6.62 |
| 2003 | 5.66 | 5.83 |
| 2004 | 5.70 | 5.95 |
| 2005 | 5.80 | 6.00 |
| 2006 | 6.47 | 6.60 |
| 2007 | 6.39 | 6.44 |
| 2008 | 6.04 | 6.09 |
| 2009 | 5.02 | 5.06 |
| 2010 | 4.80 | 4.84 |
| 2011 | 4.62 | 4.66 |
| 2012 | 3.54 | 3.74 |
| 2013 | 3.82 | 3.92 |
| 2014 | 4.17 | 4.24 |
| 2015 | 3.94 | 3.91 |
| 2016 | 3.83 | 3.72 |
| 2017 | 4.16 | 4.03 |
| 2018 | 4.74 | 4.57 |
Historical U.S. Mortgage Rates
Three decades of U.S. average rates shows that mortgage rates today are not at their lowest level ever, but nor are they at the double-digit highs seen in the early 1980s.
Factors Affecting Mortgage Rates in Iowa
As mentioned above, numerous factors influence mortgage rates in Iowa and across the nation. Some of these factors are economic, while others are entirely within the homebuyer’s control. Let’s examine these a bit more closely.
Economic Factors
• The Fed: The Federal Reserve plays a crucial role in setting the tone for mortgage rates. Its rates serve as a benchmark for other interest rates, including mortgage rates. When the Fed raises rates, higher mortgage rates often follow.
• Inflation: Inflation, which refers to the rate at which the price of goods and services increases, can also impact mortgage rates. When inflation rises, the purchasing power of money decreases, making it more expensive for lenders to lend money. To compensate for this, lenders may increase interest rates to maintain their profit margins.
• Unemployment rate: The unemployment rate is another economic factor that influences mortgage rates. When the Federal Reserve sees unemployment ticking upward, a rate drop may follow.
Consumer Factors
• Credit score: A borrower’s credit score is a crucial factor in determining what mortgage rate they’ll be offered. A higher credit score, which reflects a history of responsible borrowing and debt management, indicates lower risk to lenders. As a result, borrowers with higher credit scores typically qualify for lower mortgage interest rates.
• Down payment: The amount of down payment a borrower can make also impacts mortgage rates. A larger down payment reduces the loan amount, which in turn reduces the risk for the lender. To incentivize larger down payments, lenders may offer lower interest rates to borrowers who can make a substantial down payment.The amount of down payment a borrower can make also impacts mortgage rates. A larger down payment reduces the loan amount, which in turn reduces the risk for the lender. To incentivize larger down payments, lenders may offer lower interest rates to borrowers who can make a substantial down payment.
• Income and assets: A steady income and sufficient assets provide assurance to lenders that the borrower can consistently make mortgage payments. Lenders will assess the borrower’s employment history, salary, investments, and emergency savings to evaluate their financial stability.
• Type of mortgage loan: The type of mortgage loan chosen can also affect the interest rate. Adjustable-rate mortgages (ARMs) often have lower initial rates compared to fixed-rate mortgages, but the rates can adjust over time. Government-backed loans, such as VA loans, may offer lower rates due to reduced risk for lenders.
Types of Mortgages Available in Iowa
Iowa offers a diverse range of mortgage options to homebuyers. Having a basic understanding of what might be on the mortgage menu can help you maximize your borrowing power.
Fixed-Rate Mortgage
Fixed-rate mortgages provide stability and predictability by maintaining the same interest rate and monthly payment amount throughout the life of the loan, making it easier for borrowers to budget and plan their finances.
Fixed-rate mortgages are typically available in terms of 10, 15, 20, or 30 years. The choice of loan term depends on the borrower’s financial situation and preferences. Shorter loan terms generally have lower interest rates but higher monthly payments, while longer loan terms have higher interest rates but lower monthly payments.
Adjustable-Rate Mortgage (ARM)
Adjustable-rate mortgages (ARMs) are characterized by an initial lower interest rate compared to fixed-rate loans. This can be attractive to borrowers who are planning to sell their home or refinance before the fixed-rate period (usually 5, 7, or 10 years) ends. After the initial rate period, the interest rate can adjust periodically based on a predetermined index. This adjustment can lead to fluctuations in monthly mortgage payments.
FHA Loans
FHA loans, backed by the Federal Housing Administration, are designed to make homeownership more accessible to borrowers with less-than-perfect credit or limited down payment funds. They may be especially attractive to those who qualify as a first-time homebuyer, in part because they typically have more lenient eligibility requirements compared to conventional loans.
VA Loans
VA loans are specifically designed for eligible veterans, active-duty military members, certain Reserve and National Guard members, and surviving spouses. These loans are backed by the Department of Veterans Affairs (VA) and offer competitive interest rates, no down payment requirement, and flexible credit guidelines.
One of the significant advantages of VA loans is the absence of a down payment requirement. This can be particularly beneficial for service members and veterans who may not have substantial savings for a down payment.
USDA Loans
USDA loans, provided by the United States Department of Agriculture (USDA), are tailored for borrowers whose income falls within government guidelines and who are seeking to purchase a home in a rural area. These loans offer competitive interest rates, no down payment requirement, and flexible credit guidelines.
Jumbo Loans
Conventional mortgage loans (those not backed by the government) have a maximum lending limit set by the Federal Housing Finance Agency (FHFA). For 2024, the conforming loan limit for a single-family home in most U.S. counties (and throughout Iowa) is $766,550. A jumbo loan is a conventional loan that exceeds this limit. Jumbo loans may have more stringent requirements of borrowers because lenders take on more risk with these loans.
Popular Places to Get a Mortgage in Iowa
When it comes to securing a mortgage, location plays a crucial role. Homebuyers should consider choosing areas with affordable home prices and favorable mortgage terms. Some popular places in Iowa for obtaining a mortgage include Des Moines, Cedar Rapids, Iowa City, and Davenport.
The cost of living in an area can significantly impact mortgage affordability. The Cost of Living Index (COLI) provides a comparison of the cost of living in different states relative to the national average. Iowa has a relatively low COLI, making it an attractive option for homebuyers seeking affordability.
Least Expensive Locations
Within Iowa, some of the places that made SoFi’s list of the best affordable places in the U.S. include Urbandale and Waterloo. Waukee and Grimes were among the best affordable places for families. Young adults might especially like Coralville, outside of Iowa City. And if you are retiring in Iowa, take a look at Clear Lake and Marion.
Most Expensive Locations
The highest cost-of-living location in Iowa is also its largest city, Des Moines. Other higher-cost areas include West Des Moines, Ankeny, and Johnston. These areas are known for their higher home prices and overall cost of living. The good news is that Iowa has one of the lowest cost of living levels in the U.S., with a state average that is 15 points below the national average. So even an area that is considered expensive in Iowa might still be relatively affordable when compared to many other cities in the U.S.
Recommended: The Cost of Living in the U.S.
Tips for Securing a Competitive Mortgage Rate in Iowa
As we have seen, obtaining a competitive mortgage rate can significantly impact the overall cost of homeownership in Iowa. Take these steps:
Compare Interest Rates and Fees
To secure the best possible mortgage rate, it’s essential to factor both interest rates and fees into your calculations, and to compare offers from multiple lenders. Fees can vary among lenders and can add to the overall cost of the mortgage.
Get Preapproved
Getting preapproved for a mortgage is a crucial step in the homebuying process. The mortgage preapproval process involves providing the lender with your financial information and obtaining a conditional approval for a specific loan amount. This strengthens your position as a buyer, gives you a clear picture of how much house you can afford, and allows you to move quickly when you find the right property.
If you’re concerned interest rates might rise, you can lock in your rate for a certain period, typically ranging from 30 to 90 days, by paying a fee to the lender. This can provide peace of mind and protect you from potential rate increases.
Iowa Mortgage Resources
Iowa provides a range of resources and programs to support homebuyers, especially first-time buyers and those with limited financial means. These resources include down payment assistance programs.
First-Time Homebuyer Programs
The Iowa’s Finance Authority’s FirstHome Program is designed to assist novice homebuyers, those who have served in the military, and people purchasing a home in specific parts of the state. It offers competitive rates which aren’t determined based on credit score. Loans may require only a 3% down payment. There is a household income and home price eligibility requirement which varies based on the county. Iowa defines a first-time homebuyer as someone who has not owned a principal residence in the last three years.
Down Payment Assistance
Iowa buyers with a household income below $163,800 can apply for the Homes for Iowans Down Payment and Closing Cost Assistance program. This is a second loan that will offer up to 5% of a home’s sale price (with no maximum price). There are no monthly payments on the loan; borrowers repay it if they sell or refinance the home, or when they pay their first mortgage in full. Iowans can also combine down payment assistance with the FirstHome loan program.
Tools & Calculators
Online tools and calculators can help would-be homeowners estimate their mortgage payments, compare interest rates, and determine what they can afford.
Run the numbers on your home loan.
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Mortgage calculator
Punch in your home loan amount and a new interest rate, and we’ll estimate your payoff date.
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Down payment calculator
Enter a few details about your home loan and we’ll provide your monthly mortgage payment.
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Home affordability calculator
Provide us with a few details and see how much you can afford to spend on a home purchase.
Using the free calculators is for informational purposes only, does not constitute an offer to receive a loan, and will not solicit a loan offer. Any payments shown depend on the accuracy of the information provided.
Refinancing Options in Iowa: Exploring Your Possibilities
Homeowners in Iowa have the option to refinance their existing mortgage to secure a lower interest rate or change the terms of their loan. Most lenders will help those with conventional mortgages refinance. Refinance options are also available for government-backed loans, including the FHA Streamline Refinance, which allows FHA-insured homeowners to refinance with minimal hassle.
VA loan holders can benefit from the Interest-Rate Reduction Refinance Loan (IRRRL), which allows them to refinance their VA loan to obtain a lower interest rate and reduce their monthly payments.
Closing Costs and Fees in Iowa: What to Expect
Closing costs associated with purchasing a home typically range from 3% to 6% of the home’s purchase price. These costs include appraisal fees, title insurance, loan origination fees, and recording fees. The specific closing costs in Iowa can vary depending on the value of the property and its location. Higher-priced homes and properties in certain areas may incur higher closing costs.
The Takeaway
Iowa’s mortgage landscape offers plenty of options for homebuyers, catering to different financial situations and preferences. By staying informed about current mortgage rates, exploring assistance programs, and carefully considering refinancing options, individuals can make strategic decisions that will allow them to be happy homeowners in the Hawkeye State.
Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.
FAQ
Will mortgage rates drop in Iowa?
Mortgage rates will likely drop in Iowa, but trying to predict when that will happen — or whether they will rise further before dropping — is nearly impossible. Your best bet is to keep up on larger market conditions, such as the movement of the Federal Reserve rate, and keep even closer tabs on your personal financial markers, including your credit score.
Will mortgage rates ever go back to normal?
It’s hard to say, since the definition of “normal” mortgage rates can vary over time. Mortgage rates have experienced fluctuations throughout history, and what is considered normal in one decade or generation can change.
Will Iowa home prices ever drop?
Real estate market trends, including home prices, are influenced by a combination of economic, demographic, and local factors. Predicting future home price movements is tricky, but a local real estate agent who follows the specifics in the market would be a good person to consult on this matter.
Is it a good time to buy a house in Iowa?
Determining the right time to buy a house involves considering personal financial readiness, market conditions, and long-term goals. There is no one-size-fits-all answer, and what is a good time for one person may not be for another. Take a good look at home prices in your chosen neighborhood, then use an online mortgage calculator and home affordability calculator to see if your finances are ready for the market.
How do I lock in a mortgage rate?
To lock in a mortgage rate, you can work with a lender to secure a specific interest rate for a certain period, typically ranging from 30 to 90 days. This usually involves paying a fee to the lender, known as a rate lock fee. By locking in a rate, you protect yourself from potential interest rate increases during the specified period.
How do mortgage interest rates work?
Mortgage interest rates are determined by a mix of economic factors, such as the Federal Reserve’s interest rate decisions, and personal financial metrics such as credit score, down payment, loan type, and loan term.
SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility for more information.
SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.
*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.
†Veterans, Service members, and members of the National Guard or Reserve may be eligible for a loan guaranteed by the U.S. Department of Veterans Affairs. VA loans are subject to unique terms and conditions established by VA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. VA loans typically require a one-time funding fee except as may be exempted by VA guidelines. The fee may be financed or paid at closing. The amount of the fee depends on the type of loan, the total amount of the loan, and, depending on loan type, prior use of VA eligibility and down payment amount. The VA funding fee is typically non-refundable. SoFi is not affiliated with any government agency.
¹FHA loans are subject to unique terms and conditions established by FHA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. FHA loans require an Upfront Mortgage Insurance Premium (UFMIP), which may be financed or paid at closing, in addition to monthly Mortgage Insurance Premiums (MIP). Maximum loan amounts vary by county. The minimum FHA mortgage down payment is 3.5% for those who qualify financially for a primary purchase. SoFi is not affiliated with any government agency.
Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article. Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
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More home loan resources.
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First-Time Homebuyer Guide
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First-Time Homebuyer Programs and Loans
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Mortgage Preapproval Process