First-Time Homebuyer Programs in Indiana

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The down payment on a new home is often the biggest hurdle for first-time homebuyers. In Indiana, where the average home value is $242,672, you would need a down payment of $48,534 to avoid purchasing private mortgage insurance.

Fortunately, first-time homebuyer programs in Indiana can help you achieve homeownership. Mortgages that allow you to put less down are available, though they often have income requirements and require mortgage insurance. MoneyGeek explores several state-specific and government-backed first-time homebuyer programs for people from different financial backgrounds.

Indiana First-Time Homebuyer Programs

Indiana offers grants and loans to assist first-time homebuyers with down payments and closing costs. We have compiled the first-time homebuyer programs offered by the Indiana Housing and Community Development Authority (IHCDA) to help you find the best option for your particular needs and situation.

IHCDA First Step

The IHCDA First Step program provides a 30-year fixed-rate mortgage with down payment assistance (DPA) of 6% of the purchase price. This assistance is non-forgivable and must be repaid, but it helps reduce the upfront costs of buying a home. The program is available for both FHA and conventional loans, with a $250 reservation fee required.

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ELIGIBILITY REQUIREMENTS

To qualify for the IHCDA First Step program, you must meet specific eligibility requirements.

  • Be a first-time homebuyer
  • Occupy the house as primary residence in Indiana
  • Meet area-specific income and purchase limits
  • Have a 30-year fixed-rate FHA or conventional loan
  • Pay a $250 non-refundable reservation fee

IHCDA Step Down

The IHCDA Step Down program is designed to assist first-time homebuyers or individuals purchasing in targeted census tracts in Indiana. It offers a 30-year fixed-rate mortgage option without down payment assistance but provides a highly competitive interest rate for eligible participants. The program supports FHA and conventional loans, giving borrowers flexibility in choosing the type of mortgage that fits their needs. Homebuyers must pay a $250 reservation fee when applying for the program.

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ELIGIBILITY REQUIREMENTS

To qualify for the IHCDA Step Down program in Indiana, you must meet specific eligibility requirements.

  • Must be a first-time homebuyer or purchasing in a targeted census tract
  • Must meet IHCDA income limits and credit score requirements
  • Pay a $250 reservation fee to secure the loan
  • Property must be a primary residence within Indiana

Next Home

The IHCDA Next Home program provides down payment assistance of 2.5% or 3.5% of the purchase price for FHA and conventional 30-year fixed-rate loans. This assistance helps homebuyers cover upfront costs, such as down payments and closing costs. It's ideal for repeat homebuyers or first-time buyers purchasing homes in Indiana. The DPA is not forgivable and must be repaid when the loan is refinanced or the home is sold.

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ELIGIBILITY REQUIREMENTS

To qualify for the Next Home program, you must meet specific eligibility requirements.

  • Use the house as a primary residence in Indiana
  • Meet area-specific income and purchase limits
  • Have a 30-year fixed-rate FHA or conventional loan
  • Pay a $250 non-refundable reservation fee

Zero-Down-Payment Loan Programs in Indiana

There are zero-down-payment loan programs in Indiana that don't require you to put money down when purchasing a home. USDA and VA loans are government-backed loans with no down payment.

USDA Loans

USDA loans are designed to assist eligible rural and suburban homebuyers by providing favorable financing options. They are issued by the U.S. Department of Agriculture as part of its Rural Development Guaranteed Housing Loan program, targeting those who might struggle to obtain conventional financing.

USDA loans offer benefits such as no down payment requirements and competitive interest rates, making homeownership more accessible. Borrowers must commit to using the property as their primary residence and meet specific credit and income criteria. USDA loans aim to support sustainable homeownership in designated rural areas.

To qualify for USDA loans, your property must be 2,000 square feet or less and located in a USDA-eligible rural area with a population under 35,000. Income limits also apply, varying by location. For instance, in Crawford County, Indiana, the income limit is $64,900, whereas in Dubois County, Indiana, it is $71,500 for a four-person, low-income household.

VA Loans

VA loans are issued by the U.S. Department of Veterans Affairs. They are designed to help veterans, active-duty service members and certain members of the National Guard and Reserves purchase homes. These loans offer unique benefits that make homeownership more accessible to those who have served.

VA loans provide several advantages, including no down payment requirement and no private mortgage insurance (PMI). They also feature lower interest rates compared to conventional loans. As of November 2024, the current APR for a 15-year fixed-rate VA loan in Indiana is 6.24%, while for a 30-year fixed-rate VA loan, it is 6.38%.

To qualify for a VA loan, you must meet certain eligibility criteria, which include your length of service or service commitment, duty status and character of service. You must adhere to specific income limits based on your location. A valid Certificate of Eligibility (COE) is also required to apply for this loan.

Low-Down-Payment Loan Programs in Indiana

First-time homebuyers in Indiana can take advantage of low-down-payment loan programs that allow them to finance their home with a down payment of 3.5% or less. These programs include conventional, FHA and FHA 203(k) loans.

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    Conventional Loans

    Conventional loans are a popular choice for homebuyers in Indiana, offering flexibility with a down payment as low as 3%, depending on the lender. These loans come in two main types: conforming, which follows Freddie Mac or Fannie Mae guidelines, and non-conforming, which exceeds conforming limits. However, if your down payment is 20% or less, you'll need to pay private mortgage insurance. Eligibility for conventional loans requires a minimum credit score of 620 and a debt-to-income ratio of 43% or lower.

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    FHA Loans

    FHA loans are government-backed loans that adhere to Federal Housing Administration policies. In Indiana, the mortgage limit for single-family properties is $766,550, while two-family properties have a limit of $981,500 for 2024. To qualify, you'll need a minimum credit score of 500 and a 3.5% down payment. If your down payment is less than 20%, private mortgage insurance is required.

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    FHA 203(k)

    FHA 203(k) loans are designed for homebuyers planning renovations. They combine renovation costs into the mortgage, requiring a 3.5% down payment. There are two main types of FHA 203(k) loans: Standard and Limited. Eligibility requires a credit score between 500 and 580 and a front-end debt-to-income ratio of 31% or less. These loans aren't limited to first-time buyers, but you can't have two FHA loans at the same time.

FHA vs. Conventional Loan: Which Is Right for You?

FHA loans and conventional loans are often compared as they are the two most common types of mortgages. FHA loans require a minimum down payment of 3.5%, whereas conventional loans can require as low as 3% for first-time homebuyers. Conventional loans typically have stricter credit score and debt-to-income ratio requirements than FHA loans, making them less accessible to those with lower credit scores.

The current APR for a 15-year fixed-rate conforming loan in Indiana is 6.00% as of November 2024. In comparison, the APR for a 15-year fixed-rate FHA loan is 8.06%. APRs on FHA loans can be higher due to more fees and extra costs associated with borrowing money on government-backed loans.

You can use our FHA vs. conventional loan calculator below to help you compare both FHA and conventional mortgage programs and determine the best option for you.

FHA vs. Conventional Loan Calculator

Compare FHA and conventional mortgage programs to better understand your loan opportunities in Indiana.

Basic Details

Some basic details about the property and loan
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Calculation Results
Financial AnalysisFHAConventionalDifference
Monthly Payment (First Year)FHA$0Conventional$0Difference$0
Upfront Costs FHA$0Conventional$0Difference$0
Total 30-Year CostFHA$0Conventional$0Difference$0
Total 5-Year CostFHA$0Conventional$0Difference$0
Monthly Mortgage Insurance (First Year)FHA$0Conventional$0Difference$0
Down PaymentFHA$0Conventional$0Difference$0
Calculator results are rounded to the nearest whole dollar.
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RECOMMENDED CREDIT SCORES FOR FIRST-TIME HOMEBUYERS

Qualifying for first-time homebuyer programs often involves meeting minimum credit score requirements, which can vary depending on the loan program. Conventional loans typically require a credit score of 620, while government-backed loans like FHA loans may only need a minimum credit score of 500.

According to Experian, the average credit score in Indiana in the third quarter of 2023 was 713. This suggests that many residents are likely to qualify for both conventional and FHA loans, as their scores exceed the minimum requirements. This positions Indiana homebuyers favorably when considering first-time homebuyer programs, potentially making homeownership more accessible.

FAQ: First-Time Homebuyer Programs in Indiana

We addressed frequently asked questions about first-time homebuyer programs in Indiana to help you choose the best option and move closer to homeownership.

Does Indiana have first-time homebuyer programs?

What qualifies me as a first-time homebuyer in Indiana?

Can you buy a house in Indiana with no down payment?

Who can help me with my down payment on a house in Indiana?

Additional Resources for First-Time Homebuyers in Indiana

Explore additional MoneyGeek resources for first-time homebuyers in Indiana to help you with the homebuying process.

About Zachary Romeo, CBCA


Zachary Romeo, CBCA headshot

Zachary Romeo is a certified Commercial Banking and Credit Analyst (CBCA), and the Head of Loans and Banking at MoneyGeek. Previously, he led production teams for some of the largest online informational resources in higher education, with over 13 years of experience in editorial production.

Romeo has a bachelor's degree in biological engineering from Cornell University. He geeks out on minimizing personal debt and helping others do the same through people-first content.


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