Iowa has it all — cityscapes, rolling hills and gorgeous plains. Plus, interest rates are low and the housing market is thriving. Whether you’re looking for lenders for first-time buyers or refinance opportunities, opportunities will come your way — as long as you’re prepared to shop around.
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Quick Look: Best Mortgage Lenders in Iowa
- Academy Mortgage Corporation: Best Overall
- Quicken Loans: Best for Online Lending
- Wells Fargo: Best for First-time Home Buyers
- Bank Iowa: Best for Customer Service
- US Bank: Best for Competetive Rates
What is a Mortgage Rate?
Mortgages are a necessity for almost anyone who’s tackling a loan — you can pay a mortgage back in installments over a fixed period of time. However, you’ll be charged interest in the process, and that interest is calculated as a percentage of the amount you borrow. That percentage is known as the interest rate, a.k.a. the “mortgage rate.”
What Factors Impact Your Mortgage Rate?
The rate you pay for your mortgage won’t be identical to what the next person pays, even if you live in the same part of Iowa. Here are a few factors that will affect the purchase quote you receive from a lender:
- Your credit score: Your credit history is logged by creditors and recorded by the 3 credit bureaus — Equifax, TransUnion and Experian — and the results are packaged up as a number. You’ll need a credit score around 580 to qualify for the most flexible loan type.
- Your income and debt: You probably know how well you can meet your expenses each month, but your lender will eyeball your monthly income amount that goes toward your debt. That way, your lender can evaluate how risky you are. Not only will this determine whether you’re approved, it will also influence your mortgage rate.
- Your investment in the purchase: The lender will expect you “buy-in” a little. This investment is called a down payment, and it’s expected at closing. You’ll need to put at least 3% of the purchase price down, but the more you put down, the lower your rate will be.
- Type of lender: You have a wide range of lender options wherever you live in Iowa. You may get a more competitive rate from a local lender. Don’t rule out credit unions, which are often open to the community at large and can sometimes beat rates from traditional lenders.
- Supply and demand: Lenders tend to drop their rates to try to compete when demand slows. As demand picks back up, lenders might raise those rates to maximize the profit they can make before the market slows again.
- The Federal Reserve: Inflation in general is heavily influenced by the Federal Reserve. The adjustments it makes to the money supply have a direct impact on the economy. The Federal Reserve also bases its actions on how the economy performs.
- Your decision-making process: You’ll likely find most of the rates you’re quoted fall within the same range, but you may save a percentage point or 2 by getting multiple quotes and choosing the best.
What is a Mortgage Type?
The type of mortgage you choose can also affect your interest rate. Here are some of the loan types to consider:
- Conventional: A conventional is not backed by the federal government. This makes it riskier for the lender — you’ll often see a higher interest rate.
- FHA: First-time and credit-challenged buyers often opt for this loan, which is backed by the Federal Housing Administration. Due to its government insurance against default, lenders can typically take on lower-credit borrowers and a reduced down payment amount. Interest rates will also often be lower with an FHA loan.
- USDA: It’s worth checking your eligibility for a USDA loan unless you live in a major metropolitan area. These government-backed loans go to home purchases in rural areas — a large percentage of Iowa land qualifies for a USDA loan.
- VA: You may qualify for a Veterans Administration-backed loan if you’re a former military member. You’ll get a zero down payment loan and low-interest rates.
What is a Mortgage Term?
The rate you pay will be influenced by the length of your loan, no matter where you live in Iowa. Here are the most common mortgage terms.
- 30-year fixed: A fixed loan sets a single rate you pay for the entirety of your loan. A 30-year loan stretches your payments over 30 full years, so your payments are lower compared to a 15-year loan. Lenders will charge a higher rate for this type.
- 15-year fixed: A fixed loan with a shorter duration bumps up the amount you’ll pay each month. But the reduced interest rate can save you a lot of money over the course of your loan.
- 5/1 ARM: Adjustable-rate mortgages are ideal if your income is likely to increase in the coming years. A 5/1 ARM means you’ll get 5 years of payments at a fixed interest rate, but that rate will change at the end of the 5 years. At that point, you’ll pay the going rate.
Current Mortgage Rates in Iowa
Benzinga monitors interest rates and updates the figures below as frequently as possible to ensure that you have the most recent data available.
|Loan Type||Current Mortgage Rate|
|15-year fixed||3.26 %|
|5/1 ARM (adjustable rate)||3.58 %|
Calculating Interest in Iowa
Mortgage is calculated using a process called amortization. Amortization means that interest is recalculated as you gradually pay off your home. Whether you’re getting a purchase or refinance quote, here’s what you can expect to pay over a 30-year loan in interest.
|City||Average Home Value||Loan Term||Current Rate||Monthly Payment||Total Interest Paid|
|Des Moines||$144,600||30-year fixed||3.67%||$663.12||$94,122.48|
|Cedar Rapids||$134,200||30-year fixed||3.67%||$615.42||$87,352.95|
|Iowa City||$225,600||30-year fixed||3.67%||$1,034.57||$146,846.69|
Lender Credit Score Minimums in Iowa
As you pay bills, you build a credit score, and that score can help you get loans for large purchases — a car, a home or even a business. Your score will start to nudge downward if you’ve missed payments or have defaulted on a loan in the past.
Conventional loan lenders will typically want to see a score in the 600s, although FHA-backed loans will let you drop below 600.
|Lender||Minimum Credit Score Required|
5 Best Mortgage Lenders in Iowa
Benzinga put together a comprehensive list of the 5 best mortgage lenders in the Hawkeye State.
1. Best Overall: Academy Mortgage Corporation
Academy’s high satisfaction ratings and excellent reviews are a great option if you’re looking for top-tier customer service. Academy has loan officers across the country and a branch in Cedar Rapids.
You can get in-person service and online loan assistance for conventional, FHA, VA and refinance loans, as well as first-time homebuyer education.
2. Best for Online Lending: Quicken Loans
There are many reasons to go with an online lender — and a great reason is because you can get pre-approved from the comfort of your sofa. Quicken lets you check mortgage rates among lenders on its site and choose the best option for you.
You can also use its tool to determine exactly what your monthly payment will be, whether you’re applying to purchase or refinance a home.
3. Best for First-Time Homebuyers: Wells Fargo
Wells Fargo is a great lender to consider if you’re buying your first home.
Not only does Wells Fargo have guides that can walk you through the process, but you may also qualify for its yourFirst Mortgage program — you’ll access down payment requirements as low as 3% and get help with your closing costs if you attend one of its online classes.
4. Best for Customer Service: Bank Iowa
Bank Iowa might be one of the best mortgage companies for a personal touch. You’ll work directly with a loan specialist from the very start, either via phone or in person.
That representative will walk you through the entire process and make sure you know what the next step of your buying journey will be, from start to closing.
5. Best for Competitive Rates: U.S. Bank
VA loans are available at a wide variety of Iowa lenders. But U.S. Bank brings all the benefits, including competitive rates.
U.S. Bank also has a handy tool that will help you calculate what your monthly payment will be before you apply.
Making Homes More Affordable in Iowa
Iowa is an affordable state with plenty of job opportunities. Whether you already live in the Hawkeye State or are thinking of relocating, low-interest rates can make it a great time to buy a home. Shop around so you get the best deal on interest and save money when you’re ready to buy a home.
Frequently Asked Questions
1) Q: How do I get pre-approved?
First, you need to fill out an application and submit it to the lender of your choice. For the application you need 2 previous years of tax returns including your W-2’s, your pay stub for past month, 2 months worth of bank statements and the lender will run your credit report. Once the application is submitted and processed it takes anywhere from 2-7 days to be approved or denied. Check out our top lenders and lock in your rate today!
2) Q: How much interest will I pay?
Interest that you will pay is based on the interest rate that you received at the time of loan origination, how much you borrowed and the term of the loan. If you borrow $208,800 at 3.62% then over the course of a 30-year loan you will pay $133,793.14 in interest, assuming you make the monthly payment of $951.65. For a purchase mortgage rate get a quote here. If you are looking to refinance you can get started quickly here.
3) Q: How much should I save for a down payment?
Most lenders will recommend that you save at least 20% of the cost of the home for a down payment. It is wise to save at least 20% because the more you put down, the lower your monthly payment will be and ultimately you will save on interest costs as well. In the event that you are unable to save 20% there are several home buyer programs and assistance, especially for first-time buyers. Check out the lenders that specialize in making the home buying experience a breeze.