The Iowa Finance Authority (IFA) is providing the following clarification to help ensure consistent handling of cash back and principal reduction for transactions using IFA homeownership program funds (including non-IFA MHOA).
Cash Back
Cash back should be limited to the borrower’s actual funds contributed to the transaction, including earnest money and eligible items paid outside of closing.
Principal Reduction
Principal reduction will generally be limited to $1,000. This allowance is intended to provide flexibility for standard closing adjustments. If a principal reduction higher than $1,000 may be needed, please submit a preliminary CD through Lender Online prior to closing along with supporting rationale for review.
Most lenders are already structuring transactions this way, and this clarification helps ensure consistent application across the program.
IFA is providing this information now so lenders have time to review and make any needed adjustments before the July 1, 2026, effective date. Beginning July 1, transactions must be structured in accordance with these requirements.
Please contact the IFA Homeownership Team with any questions.
