Indiana first-time homebuyer assistance programs
Whether you’re planting roots in Indianapolis or a smaller city somewhere in “The Crossroads of America” (as the state styles itself), there are options that can help make buying a home more affordable. Start with the Indiana Housing and Community Development Authority (IHCDA), the state’s housing finance agency, which helps first-time homebuyers purchase homes.
Indiana first-time homebuyer programs
IHCDA Step Down program
The Step Down program is an interest-only mortgage offered through the IHCDA and partnering lenders. It comes as either an FHA or conventional 30-year fixed-rate mortgage. To take advantage of it, you must:
- 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.
- Pay a $250 non-refundable reservation fee.
Also, Step Down cannot be used in conjunction with any other IHCDA programs.
Further qualifications and loan details depend on the type of loan and the lender. Contact the IHCDA to get further information and start the process.
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. While non-forgivable, it doesn’t require monthly payments; it only has to be paid back in full at the end of the mortgage term or if you sell the home.
Here are some of the requirements to qualify:
- 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.
- Must be a primary residence in Indiana.
- Meet area-specific income and purchase limits.
- Purchase price cannot exceed appraised value.
- Must be used with a 30-year fixed rate FHA or conventional loan.
- Pay a $250 non-refundable 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.
Other Indiana homebuyer assistance programs
Mortgage credit certificate (MCC)
In addition to finding help with buying a home, you can also explore Indiana’s mortgage credit certificate (MCC) program, which can play a useful role in reducing your tax bill. An MCC is a federal income tax credit, in Indiana equal to 25 percent of the amount you borrowed, up to $2,000 per year. The credit can make a difference in your tax bill throughout the life of your 30-year mortgage. It can be used in tandem with the IHCDA’s Next Home program, and the same income and purchase price limits apply. There is a program fee of $800, however.
Local homebuyer assistance programs
Depending on where you want to call home in Indiana, you might be able to take advantage of other local down payment assistance programs.
For example, in the city of 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 home-buying expenses. It’s a second mortgage, but it’s completely forgiven after five years.
In Evansville, first-time homebuyers can take advantage of the HOPE down payment assistance program. This program will match up to $15,000 in down payment funds. The homebuyer must use a minimum of $1,000 of their own money, must be below income and purchase price limits and must be buying within the city limits.
The Indianapolis Neighborhood Housing Partnership (INHP) offers down payment assistance funds, ranging in size from $7,500 to $24,999 depending on your household size and income; you must be getting a mortgage through the INHP to qualify.
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
Begin by completing this questionnaire on the IHCDA’s website to get a better idea of which assistance options you might qualify for. Once you have an idea of how much help you can receive, compare mortgage rates and options from the many mortgage lenders that participate in the agency’s programs. Some institutions might offer additional assistance for certain types of workers, too — first responders and teachers, for instance — so investigate all the programs that could fit you and your family. And, to learn more about available programs nationwide, visit our page on national first-time homebuyer loans and programs.
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