The Rural Development loan through USDA is designed to help grow homeownership in communities with a population of 35,000 or less. There are towns in all of the 99 counties in Iowa that are eligible. Some of them include Solon, Tiffin, Williamsburg, Swisher, and Newton. There are many more eligible towns than ineligible ones! Don’t hesitate to email or text us the address of the property you are curious about and we will confirm eligibility for you.
The USDA loan program provides an excellent opportunity for low- and moderate-income homebuyers in rural Iowa to achieve the dream of homeownership With 100% financing and no down payment required, USDA loans open the door for buyers who may not qualify for conventional mortgages.
However there are specific eligibility requirements and guidelines that applicants must meet to qualify for a USDA home loan in Iowa. In this comprehensive guide, we will break down all the key USDA loan requirements in Iowa to help you determine if this government-backed mortgage program is the right fit for your home buying needs.
Overview of USDA Loan Program
The USDA Rural Housing Service offers home loans through its Section 502 Direct Loan Program to help low-income individuals and families living in rural areas purchase homes. These loans are commonly known as USDA home loans or USDA rural development loans.
Some key features of USDA loans include
- 100% financing – no down payment required
- Below-market interest rates
- Fixed interest rate for life of loan
- Low mortgage insurance rates
- Flexible credit score requirements
- No maximum income limits
In addition to purchase loans, USDA financing can also be used for building, repairing, renovating or relocating a home in an eligible rural area.
USDA Loan Availability in Iowa
USDA home loans are available to buyers purchasing homes in designated rural areas of Iowa. You can check your specific location using the USDA’s eligibility site.
Generally, USDA loans are available in rural cities, towns and communities with populations under 25,000. Some suburban and metro areas adjacent to rural communities may also qualify.
The USDA Iowa State Office, located in Des Moines, serves the entire state and processes loan applications through a network of local offices.
Iowa USDA Loan Income Limits
To qualify for a USDA home loan in Iowa, your household income must fall under the income limits set for your area. The income limits vary by county and are adjusted for household size.
Here are the maximum income thresholds for USDA loans in Iowa:
- 1-2 person household – $77,300
- 3-4 person household – $91,800
- 5+ person household – $105,600
You can check the income eligibility limits in your county using the USDA income and property eligibility site.
The income limits are set at 115% of the area median income. So they are higher than for other affordable loan programs like FHA or conventional 97.
USDA Home Loan Credit Score Requirements in Iowa
The USDA has flexible credit standards designed to help low-income buyers with limited credit histories qualify for financing.
Here are the general credit score requirements for USDA loans in Iowa:
- Minimum credit score of 640 for most applicants
- Score of 580-639 may qualify with 10% down payment
- No minimum score for applicants with non-traditional or insufficient credit history
While there is no minimum credit score requirement, applicants with very low scores will have to undergo manual underwriting review. Those with scores below 640 should expect to pay a higher interest rate.
Downpayment and Mortgage Rates on USDA Loans in Iowa
A major benefit of USDA loans in Iowa is that no down payment is required. Borrowers can finance 100% of the purchase price plus eligible closing costs. The loan even covers the upfront mortgage insurance premium.
Current interest rates on 30-year fixed rate USDA mortgages in Iowa range from 4.25% to 5%, depending on credit score. Rates are very competitive with conventional loans.
Closing costs average 3-5% of the loan amount and can be financed into the loan.
Other Iowa USDA Loan Requirements
In addition to income and credit requirements, USDA loan applicants in Iowa must meet other eligibility standards:
- Be a U.S. citizen or permanent legal resident
- Have stable income and employment history
- Have a minimum 2 year history of residence and employment
- Not have any recent bankruptcies or foreclosures
- Have an acceptable debt-to-income ratio (typically below 41%)
- Occupy the home as primary residence
- Complete USDA-approved homebuyer education course
- Purchase a home that passes USDA appraisal and inspection requirements
USDA loans have more flexible property standards compared to FHA and conventional loans. Condition, age and size of the home are not as strictly evaluated.
How to Apply for a USDA Home Loan in Iowa
If you meet the eligibility criteria outlined above, here is a summary of the steps to take when applying for a USDA mortgage in Iowa:
-
Get pre-qualified – Work with a USDA approved lender to assess your income, assets and debts and get pre-approved. This will determine the loan amount you qualify for.
-
Find a home – Once pre-qualified, you can start home shopping in eligible rural areas of Iowa. Work with a local real estate agent experienced in USDA loans.
-
Complete purchase contract – Make an offer and complete a contingent purchase agreement while your USDA loan is processed.
-
Apply for loan – Your lender will guide you through completing the full mortgage application and gathering required documents. Apply online for efficiency.
-
Home inspection & appraisal – USDA will arrange for a home inspection and appraisal to ensure the property is decent, safe, sound and eligible.
-
Loan approval – Underwriting will review your application and issue a Conditional Commitment if approved.
-
Close on home – Once all conditions are cleared, you can close on the home, move in and begin making mortgage payments.
The entire process takes 30-60 days in most cases. Having an experienced USDA lender to guide you helps ensure a smooth process.
Work with a USDA Specialist Lender
The key to successfully obtaining a USDA home loan in Iowa is working with a lender who specializes in this niche financing program. Here are some benefits of using a USDA mortgage expert:
- They understand the full eligibility guidelines and loan process
- Can accurately pre-qualify you and determine the maximum loan amount
- Will efficiently assemble your application and documentation
- Have relationships with local real estate agents familiar with USDA properties
- Can advise you on USDA inspection and appraisal requirements
- Will expedite closing and protect you throughout the transaction
To find a top USDA lender in Iowa, ask local real estate professionals or search online consumer sites for ratings and reviews. FHA and VA lenders usually also offer USDA financing. Compare interest rates and closing costs when shopping lenders.
USDA Loans Provide Affordable Iowa Home Financing
US citizen or permanent resident
In order to qualify for a USDA loan, you must be a permanent resident or US Citizen.
How is the process different for a USDA loan at Residential Mortgage Network vs. a local bank?
When it comes to RD loans, where you get your loan from DOES matter. Other lenders may discourage the program by claiming that financing will take longer when that is simply not true. At RMN, we underwrite all of our loans in-house.
We are a mortgage bank, not a broker, meaning we are in complete control of the process from start to finish. We can simply walk down the hall to talk to our processors and our underwriters, so things get done immediately. There isn’t a better way to explain it – it is just that easy! Many other mortgage companies in Iowa can’t say the same.
Because of this, we are able to meet quick financing deadlines so your closing does NOT take longer with an RD loan. Most importantly, we aren’t scared of the program. We know how to get them done just like a conventional loan – we have literally done thousands of them.
Buying a House Using USDA Rural Development Loan ($1,000 DOWN)
FAQ
Who qualifies for a USDA loan in Iowa?
How high does your credit score need to be for a USDA loan?
Does USDA have a maximum loan amount?
How accurate is the USDA eligibility map?
What are the eligibility requirements for a USDA home loan?
One of the biggest eligibility requirements is that the property be located in a designated rural area. You can use this map to determine if the property you have your eye on is eligible for a USDA home loan. Generally, these areas are outside of major metropolitan areas throughout the United States.
How do I Manage my USDA loan?
PUBLIC NOTICE: Notice Of Changes To Eligible Area Maps For USDA Rural Devel… Manage your USDA Loan You can create an account and manage your current loan through the Customer Service Center (CSC) portal. You can also contact the CSC at 800-414-1226
What are the requirements for a direct loan?
Properties financed with direct loan funds must: Borrowers are required to repay all or a portion of the payment subsidy received over the life of the loan when the title to the property transfers or the borrower is no longer living in the dwelling. Applicants must meet income eligibility for a direct loan.
How does Rd determine eligibility for a home loan?
Upon receipt of a complete application, RD will determine the applicant’s eligibility using verified information and the applicant’s maximum loan amount based on their repayment ability and the area loan limit for the county in which the property is located. What is the interest rate and payback period?