We study the impact of lattice vibrations on magnetic and electronic properties of paramagnetic bcc and fcc iron at finite temperature, employing the disordered local moments molecular dynamics (DLM-MD) method. Vibrations strongly affect the distribution of local magnetic moments at finite temperature, which in turn correlates with the local atomic volumes. Without the explicit consideration of atomic vibrations, the mean local magnetic moment and mean field derived magnetic entropy of paramagnetic bcc Fe are larger compared to paramagnetic fcc Fe, which would indicate that the magnetic contribution stabilizes the bcc phase at high temperatures. In the present study we show that this assumption is not valid when the coupling between vibrations and magnetism is taken into account. At the γ-δ transition temperature (1662 K), the lattice distortions cause very similar magnetic moments of both bcc and fcc structures and hence magnetic entropy contributions. This finding can be traced back to the electronic densities of states, which also become increasingly similar between bcc and fcc Fe with increasing temperature. Given the sensitive interplay of the different physical excitation mechanisms, our results illustrate the need for an explicit consideration of vibrational disorder and its impact on electronic and magnetic properties to understand paramagnetic Fe. Furthermore, they suggest that at the γ-δ transition temperature electronic and magnetic contributions to the Gibbs free energy are extremely similar in bcc and fcc Fe.