Indiana First-Time Homebuyer Assistance Programs

Indiana may be known as the Crossroads of America, but a lot of people are finding reasons to race to the Hoosier State and put their cars in park. One reason being it’s still an affordable place to plant your roots: The state’s housing costs are well below the national average. For example, in Indianapolis — the state’s most populous city — the median home price in the third quarter of 2024 was $323,700 (compared to $414,100 nationwide), according to the National Association of Realtors.

Plus, if you’re a first-time buyer, you may be able to get some help from the Indiana Housing and Community Development Authority (IHCDA). Read on to learn more about the IHCDA’s programs and other opportunities to make buying a home in Indiana more affordable.

Indiana first-time homebuyer programs

IHCDA Step Down program

The IHCDA offers numerous homebuyer programs, including the Step Down program. This is an interest-only mortgage offered through the IHCDA and partnering lenders that comes as an FHA or conventional 30-year fixed-rate mortgage. Step Down cannot be used in conjunction with any other IHCDA programs.

• Requirements
  

  • Be a first-time homebuyer who has not had ownership interest in a property within the past three years, or be buying in a targeted area.
  • Be buying a primary residence in Indiana.
  • Meet area-specific income and purchase limits
  • Purchase price cannot exceed appraised value
  • Meet credit score, income and debt-to-income (DTI) ratio limits, although the IHCDA doesn’t explicitly mention what these limits are

• Pros and cons
  

  Pros

  • Open to multiple property types
  • More than 50 participating lenders

  Cons

  • $250 non-refundable reservation fee
  • Subject to recapture tax if you sell the home within the first nine years, which will eat into your net proceeds

Indiana down payment assistance

IHCDA First Step program

The IHCDA First Step program is a down payment assistance (DPA) program that provides up to 6 percent of the purchase price in the form of a non-forgivable loan. It must be used in conjunction with a 30-year fixed rate loan — either an FHA loan or conventional loan. You’ll either need to qualify as a first-time homebuyer or be buying in a targeted area. Income and purchase price limits apply, too.

• Pros and cons
  

  Pros

  • Deferred payments
  • No interest

  Cons

  • Non-forgivable — you’ll have to repay the loan when you sell the home, refinance or pay off the mortgage
  • $250 reservation fee

IHCDA Next Home program

Next Home is another option from the IHCDA to help make your home purchase more affordable, although it’s open to anyone, not just first-time homebuyers. The down payment assistance is smaller compared to the First Step program: only up to 3.5 percent of the purchase price. The borrower requirements, income limits and property cost limits, however, are the same as the First Step program.

One important requirement to note is that you’ll need a minimum credit score of 640 if your debt-to-income ratio is 45 percent or lower; the program accepts a DTI as high as 50 percent, but you’ll need a credit score of at least 680.

City-specific homebuyer assistance programs

Bloomington HAND Down Payment and Closing Cost Assistance

In Bloomington — home to Indiana University — the HAND Down Payment and Closing Cost Assistance program can give first-time homebuyers who earn up to 80 percent of the area’s median income as much as $10,000 to help with initial homebuying expenses.

• Requirements
  

  • Earn no more than 80 percent of the area median income
  • Complete a homebuyer education class
  • Be a first-time homebuyer
  • Work with a lender who will allow a HAND second mortgage

• Pros and cons
  

  Pros

  • Forgiven after five years

  Cons

  • Must repay a portion of the loan if you need to move earlier than expected
  • May have a more narrow set of lender options

Evansville HOPE Down Payment Assistance

HOPE of Evansville offers first-time homebuyers a down payment assistance program that will match up to $15,000 in down payment funds.

• Requirements
  

  • Must use a minimum of $1,000 of your own money
  • Must be below income and purchase price limits, and you must be buying within the city limits
  • Must complete a homebuyer education course

• Pros and cons
  

  Pros

  • Forgivable if you continue living in the home for a predetermined period of time
  • Can choose any lender

  Cons

  • $80 fee for homebuyer education course
  • $875 contingency addendum fee

Other Indiana first-time homebuyer loans

On a national level, there are loans geared toward first-time homebuyers that Hoosiers can take advantage of. Some of the loans you can explore include:

• FHA loans: Loans insured by the Federal Housing Administration (FHA) have more lenient financial requirements than other loans. You can get an FHA loan with 3.5 percent down and a credit score as low as 580.
• VA loans: For active-duty military, veterans and surviving spouses, a loan guaranteed by the U.S. Department of Veterans Affairs (VA) is a great option. These loans typically come with lower interest rates and don’t require a down payment.
• USDA loans: Loans guaranteed by the U.S. Department of Agriculture (USDA) also require no down payment, but you’ll need to buy in a designated rural area and meet area-specific requirements.
• HomeReady and Home Possible loans: HomeReady and Home Possible are loan programs created by government-sponsored enterprises Fannie Mae and Freddie Mac. They’re specifically for first-time homebuyers, requiring only 3 percent down and having more flexible income requirements.

Get started

Ready to find your Hoosier homestead? Put these items on your to-do list.

• Start your search with IHCDA-approved lenders: The organization works with a wide range of lenders to implement its homebuyer assistance programs. You can browse the complete list here.
• See what other borrowers are saying: Read reviews of Indiana mortgage lenders to find out what other homebuyers like you have to say about the closing timeline, the customer service, fees and transparency.
• Compare Indiana mortgage rates: Rates change all the time, and they aren’t the same with each lender. As you get started on your house-hunting journey, have a sense of the average rates in Indiana that other borrowers with a similar credit profile are paying.
• Improve your credit: Speaking of credit, take steps to get yours in the best shape possible. Even boosting your credit score by 10 points can wind up helping you score a lower rate.
• Estimate your insurance costs: Your lender is going to require you to have proper protection in place for the new home. Research the best homeowners insurance in Indiana to get an idea of how much your premiums will add to your expenses. Make sure you account for flood insurance if you’re thinking about buying in an area with elevated flood risks, too.