Understanding Your Mortgage Options in Iowa: Conventional, FHA, VA & More

Iowa's real estate market has its own rhythm. Home prices in Des Moines and surrounding communities remain more affordable than many coastal cities, but that doesn't mean choosing the wrong mortgage won't cost you.

The right mortgage program can:

• Lower your down payment requirements (sometimes to as little as 0%)
• Reduce your monthly payments
• Help you qualify for a home even with less-than-perfect credit
• Save you money on interest over the life of your loan

Working with a knowledgeable Des Moines realtor who understands these programs makes the process smoother and helps you avoid common pitfalls.

Conventional Loans: The Most Common Path to Homeownership

What Is a Conventional Loan?

A conventional loan is a mortgage that isn't backed by the federal government. These loans are offered by private lenders like banks and credit unions and follow guidelines set by Fannie Mae and Freddie Mac.

They're the most popular mortgage option in Iowa and across the country, representing about 60% of all home loans.

Who Should Consider a Conventional Loan?

Conventional loans work well for buyers who:

• Have a credit score of 620 or higher (though 740+ gets you the best rates)
• Can put down 3% to 20% of the purchase price
• Have stable income and employment history
• Want flexibility in loan amounts (conventional loans can exceed other loan limits)

Busting the 20% Down Payment Myth

Here's something many Iowa homebuyers don't realize: you don't need 20% down for a conventional loan.

Many lenders offer conventional loans with as little as 3% down. The catch? If you put down less than 20%, you'll pay private mortgage insurance (PMI) until you reach 20% equity in your home.

PMI typically costs between 0.5% and 1% of your loan amount annually, but it's removable once you hit that 20% equity mark—unlike FHA mortgage insurance, which can last the life of the loan.

Pros and Cons of Conventional Loans

Pros:

• Lower down payment options available (as low as 3%)
• PMI can be removed once you reach 20% equity
• More flexible property requirements
• Higher loan limits for expensive properties

Cons:

• Stricter credit score requirements
• May require higher down payments than government-backed loans
• Less forgiving if you have credit challenges

FHA Loans: A Smart Choice for First-Time Buyers

What Makes FHA Loans Different?

FHA loans are backed by the Federal Housing Administration, which means lenders take on less risk and can offer more flexible terms to borrowers.

These loans are incredibly popular with first-time homebuyers in Iowa because they require as little as 3.5% down and accept lower credit scores than conventional loans.

Who Benefits Most from FHA Loans?

FHA loans are ideal for Iowa buyers who:

• Have credit scores as low as 580 (or 500 with 10% down)

• Can only afford a 3.5% down payment

• Are first-time homebuyers

• Have a higher debt-to-income ratio (up to 56.99% in some cases)

Understanding FHA Mortgage Insurance

Here's the trade-off with FHA loans: you'll pay mortgage insurance premiums (MIP) both upfront and monthly.

The upfront premium is typically 1.75% of your loan amount, which can be rolled into your mortgage. Monthly MIP varies based on your loan amount and down payment, but it usually ranges from 0.45% to 1.05% annually.

Unlike conventional PMI, FHA mortgage insurance typically stays with you for the life of the loan if you put down less than 10%. If you put down 10% or more, MIP drops off after 11 years.

FHA Loan Limits in Iowa

In 2026, FHA loan limits in most Iowa counties are $541,287 for a single-family home. This covers the vast majority of homes in the Des Moines area and central Iowa.

Pros and Cons of FHA Loans

Pros:

• Low down payment requirement (3.5%)
• More forgiving credit requirements
• Higher debt-to-income ratios accepted
• Great for first-time buyers in Iowa

Cons:

• Upfront and monthly mortgage insurance required
• MIP typically lasts the life of the loan
• Stricter property condition requirements (home must meet FHA standards)
• Lower loan limits than conventional loans

VA Loans: Honoring Those Who Served

What Are VA Loans?

VA loans are guaranteed by the Department of Veterans Affairs and are one of the most powerful benefits available to military service members, veterans, and eligible surviving spouses.

Iowa has a strong military community, and VA loans offer incredible advantages for those who've served our country.

Who Qualifies for VA Loans?

VA loans are available to:

• Active-duty service members
• Veterans who meet minimum service requirements
• National Guard and Reserve members who've served for at least 6 years
• Eligible surviving spouses of service members who died in service or from service-related disabilities

The Unbeatable Benefits of VA Loans

VA loans offer benefits that no other mortgage program can match:

• Zero down payment required: You can finance 100% of your home purchase
• No private mortgage insurance: Save hundreds of dollars every month
• Competitive interest rates: Often lower than conventional loans
• More flexible credit requirements: No minimum credit score set by the VA (though lenders have their own standards)
• Limits on closing costs: The VA caps what lenders can charge
• Reusable benefit: You can use it multiple times throughout your life

VA Funding Fee

While VA loans don't require PMI, they do include a one-time funding fee that helps sustain the program. The fee varies based on your down payment and whether it's your first time using the benefit, but it typically ranges from 1.25% to 3.3% of the loan amount.

The good news? This fee can be rolled into your loan, and veterans with service-connected disabilities are exempt from paying it.

Pros and Cons of VA Loans

Pros:

• No down payment required
• No monthly mortgage insurance
• Lower interest rates
• Flexible credit standards
• Can be used multiple times

Cons:

• One-time funding fee (unless exempt)
• Property must meet VA appraisal standards
• Must be used for primary residence only
• Not all sellers want to work with VA buyers (though this is becoming less common)

USDA Loans: Perfect for Rural and Suburban Iowa

What Are USDA Loans?

USDA loans are backed by the U.S. Department of Agriculture and designed to promote homeownership in rural and suburban areas.

Here's the surprising part: many areas you wouldn't consider rural actually qualify for USDA financing.

Who Can Get a USDA Loan?

To qualify for a USDA loan in Iowa, you need to:

• Buy a home in a USDA-eligible area (check the USDA eligibility map)
• Meet income limits (typically 115% of the area median income)
• Use the home as your primary residence
• Have a credit score of at least 640 (though some lenders accept lower)

USDA Loan Benefits

USDA loans offer several compelling advantages:

• Zero down payment: Finance 100% of your purchase
• Low mortgage insurance: Typically lower than FHA premiums
• Competitive rates: Often comparable to conventional loans
• Flexible credit: More lenient than conventional requirements

Pros and Cons of USDA Loans

Pros:

• No down payment required
• Lower mortgage insurance than FHA
• Competitive interest rates
• Available in many Iowa communities

Cons:

• Geographic restrictions (property must be in eligible area)
• Income limits apply
• Upfront and annual guarantee fees required
• Longer processing times than other loan types

How to Choose the Right Mortgage for Your Iowa Home Purchase

Every buyer's situation is unique. Here's a quick guide to help you determine which loan type might work best for you:

• Choose a Conventional loan if: You have good credit (680+), can put down at least 3-5%, and want the flexibility to remove PMI once you reach 20% equity
• Choose an FHA loan if: Your credit score is below 680, you can only afford 3.5% down, or you have a higher debt-to-income ratio
• Choose a VA loan if: You're a veteran or active-duty service member—this is almost always your best option with zero down and no PMI
• Choose a USDA loan if: You're buying in an eligible rural or suburban area, meet income limits, and want zero down without military service

Working with Local Iowa Lenders: Why It Matters

While you can get a mortgage from national lenders, working with local Des Moines area lenders offers distinct advantages:

• Market knowledge: Local lenders understand Iowa's housing market and can offer insights specific to Des Moines, Ankeny, West Des Moines, and surrounding communities
• Faster communication: Being in the same time zone and familiar with local customs speeds up the process
• Relationship building: Local lenders are part of your community and invested in your long-term success
• Real estate agent trust: Iowa real estate agents have established relationships with local lenders and know who closes on time

A trusted Des Moines real estate agent can connect you with reputable local lenders who have proven track records of getting deals closed smoothly.

Why Pre-Approval Is Critical in Iowa's Market

Before you start touring homes in Central Iowa , get pre-approved for a mortgage. Here's why it matters:

• Know your budget: Understand exactly how much home you can afford
• Strengthen your offer: Sellers take pre-approved buyers more seriously
• Move quickly: In competitive situations, having pre-approval can make the difference between getting your offer accepted or losing out
• Avoid surprises: Discover any credit issues early so you can address them before making an offer

Your dsmSOLD Team realtor can guide you through the pre-approval process and help you understand what documentation you'll need.

Common Mortgage Mistakes Iowa Homebuyers Should Avoid

Protect yourself from these common pitfalls:

• Not shopping around: Get quotes from at least three lenders to compare rates and terms
• Focusing only on interest rates: Look at the total cost including fees, closing costs, and loan terms
• Making major financial changes: Avoid changing jobs, opening new credit accounts, or making large purchases during the mortgage process
• Skipping the fine print: Read and understand all loan documents before signing
• Maxing out your budget: Just because you're approved for a certain amount doesn't mean you should borrow it all
  
  Your Next Steps: Finding the Right Mortgage and Home in Iowa

Understanding your mortgage options is the first step toward successful homeownership in Iowa. Whether you choose a conventional loan, FHA, VA, or USDA loan, the key is finding the right fit for your financial situation and homeownership goals.

The Iowa housing market offers tremendous opportunities, and with the right mortgage and a knowledgeable real estate partner, you can navigate the process with confidence.

Ready to Start Your Homebuying Journey?

The dsmSOLD Team specializes in helping Iowa homebuyers navigate every step of the process—from choosing the right mortgage to finding your perfect home in Des Moines, Ankeny, West Des Moines, Johnston, Urbandale, and beyond.

We work with trusted local lenders who understand Iowa's unique market and can match you with the mortgage program that best fits your needs. Our team brings local expertise, data-driven insights, and a commitment to putting your needs first.

Have questions about mortgage options or want to explore what's possible in today's Iowa market? We're here to help.

Contact The dsmSOLD Team:

• Call or text: (515) 442-0625
• Email: ryan@dsmsold.com

At the dsmSOLD Team, Your Needs Come First, Always!

Special thanks to Dane Eischeid of New American Funding, for providing edits and insights that helped shape this article.