First-time homebuyer programs and grants in Indiana
Senior Content Writer
Quick insights
- Indiana first-time homebuyer programs include First Step Program, Step Down and Next Home, options that may offer down payment assistance, reduced mortgage rates or federal tax savings.
- The Indiana Housing and Community Development Authority’s First Step Program may provide eligible first-time homebuyers with 5% of the home’s purchase price in down payment assistance, while Next Home may provide 2.5% or 3.5%.
- Eligibility may depend on income, credit score, debt levels, purchase price, location and whether the buyer meets applicable first-time buyer requirements.
As a first-time homebuyer in Indiana, you may be able to use state and local programs to lower your costs. If you meet the eligibility requirements, these programs provide financial support for your mortgage, down payment and other homebuying expenses. Grants are gifts requiring no repayment, while forgivable assistance is pardoned if you meet specific terms, and deferred mortgages are debts you must eventually repay.
Indiana has a lot to offer for first-time homebuyers, from the energy and job opportunities of Indianapolis to Fort Wayne’s family-friendly neighborhoods and South Bend’s college-town feel.
Indiana first-time homebuyer programs
The Indiana Housing and Community Development Authority (IHCDA)Opens overlay works with participating lenders to provide mortgage and down payment assistance programs across the state. Programs may offer fixed-rate mortgages and up to 5% in down payment and closing cost assistance.
First Step
The First Step Program combines a 30-year, fixed-rate mortgage with down payment assistance equal to 5% of the purchase price of the home. FHA and conventional loan options may be available. General requirements:
- Be a first-time homebuyer or purchase in an eligible targeted census tract.
- Meet applicable income and purchase price limits.
- Satisfy IHCDA and mortgage underwriting requirements.
- Use the home as their primary residence.
- Apply through a participating IHCDA lender.
The down payment assistance is provided as a non-forgivable second mortgage. Repayment terms can be a significant factor in the choice of program that fits your needs.
Step Down
The Step Down program is a may reduce the mortgage rate but does not provide funds toward the down payment. Rather than providing down payment assistance, the program offers a 30-year, fixed-rate FHA or conventional mortgage with a reduced interest rate. Applicants must meet IHCDA’s income, purchase price, credit and other mortgage requirements. The first-time homebuyer requirement may not apply when purchasing a home in an eligible targeted area.
Next Home
The Next Home program combines a 30-year, fixed-rate mortgage with down payment assistance equal to 2.5% or 3.5% of the purchase price of the home, depending on the financing selected. Unlike First Step, Next Home may also be available to qualifying repeat buyers. Applicants must meet the income, credit, debt-to-income ratio (DTI) and mortgage requirements.
How IHCDA down payment assistance works
IHCDA down payment assistance may generally be used toward the down payment, closing costs and eligible prepaid expenses. Assistance may be structured as a second mortgage with 0% interest and no monthly payments, but it is not a grant and is not forgivable. Repayment is generally required when the first mortgage reaches maturity or if the home is sold, refinanced, or no longer used as the borrower’s primary residence.
HomeBoost Down Payment Assistance
The Federal Home Loan Bank of Indianapolis also offers HomeBoostOpens overlay, which may provide up to $25,000 toward down payment, closing and housing counseling costs for eligible first-generation, first-time homebuyers purchasing in Indiana or Michigan. Applicants need a household income at or below 120% of the local area median income. Financing through a participating FHLBank Indianapolis member institution is also required.
Funding is limited, and program availability may change.
Regional and city programs in Indiana
Local organizations may offer additional assistance based on where a homebuyer plans to purchase. While this is not a complete list, and availability may change, here are some examples.
Indianapolis Neighborhood Housing Partnership
The Indianapolis Neighborhood Housing Partnership (INHP) provides down payment assistance to qualifying homebuyers who use an eligible INHP mortgage. Assistance amounts depend on program eligibility, household income and available funding. Homebuyers can also access homebuyer education, mortgage prequalification and lending support through the organization.
South Bend homebuyer assistance
South Bend works with Community Homebuyers Corporation to help eligible residents become first-time homeowners. The city also provides free HUD-certified pre-purchase housing counseling, including budgeting and financial guidance. Program availability and assistance amounts may vary.
Evansville Down Payment Assistance
Evansville’s homebuyer assistanceOpens overlay may help eligible first-time buyers with down payment and closing costs. GuidelinesOpens overlay list a maximum down payment assistance amount of $15,000. Additional requirements:
- Have a household income below 80% of area median income.
- Purchase within Evansville city limits.
- Complete approved homebuyer education.
- Obtain qualifying fixed-rate financing.
- Use the property as their primary residence.
A $15,000 award generally carries a 10-year affordability period. Repayment or recapture provisions may apply if the home is sold or stops being the buyer’s primary residence before the required period ends.
Applying to Indiana first-time homebuyer programs
Knowing which programs you qualify for before you start daydreaming about furnishing your new home can make the financing process easier to navigate:
- Set your monthly budget. Look at your income, liabilities, credit score, overall assets and savings. A mortgage calculator can give you a sense of the house payment you may be comfortable managing.
- Estimate what you need to pay upfront. This can include a potential down payment, closing costs, prepaid expenses and insurance.
- Compare assistance options. Mortgage rates and program terms can differ, but having a financial framework and understanding of the programs available can help you make a confident decision.
- Check for local assistance. Cities like Indianapolis, South Bend, and Evansville offer local programs in addition to state assistance.
- Check county limits. IHCDA income and acquisition limits vary by location and program. They may be updated annually.
- Find a participating lender. IHCDA programs can be accessed through approved Indiana Home Lending Advisors, who can review your qualifications and discuss options.
- Consider mortgage preapproval. A mortgage preapproval can help clarify the financing range you may qualify for before you make an offer. If you proceed with a mortgage application, review the loan terms and disclosures provided during the application process.
- Confirm the property qualifies. Your home must meet specific purchase price limits and location rules. It must also be a certain property type and your primary residence.
- Understand the repayment terms. IHCDA down payment assistance usually must be repaid. Review exactly when this second mortgage is due before you close on the house.
In summary
Indiana first-time homebuyer programs may help eligible buyers cover some of the upfront costs involved in buying a home. Statewide options include First Step with 5% down payment assistance, Step Down with a rate-focused mortgage option and Next Home with up to 3.5% assistance. Comparing mortgage rates, assistance amounts, eligibility requirements and repayment terms may help you choose.
Consider reaching out to one of our Indiana Home Lending Advisors to help identify mortgage options that fit your goals.
