With home prices at record highs, housing affordability has become a challenge in many parts of the country. But the Hoosier State combines low home prices and a healthy job market to create a bastion of affordability. This page explains how to take advantage of Indiana’s bargains. This page gives a step-by-step guide to the housing and mortgage market in Indiana, with a focus on first-time buyers.

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Check Mortgage Rates in Indiana

Powered by IN Mortgage Rates

Your credit score is the main variable determining whether you qualify for a mortgage, and the rate you’ll pay for the loan. But mortgage rates can vary a bit from state to state, depending on regional trends in state and local property markets. One factor affecting lending is the foreclosure rate, and Indiana’s mortgage defaults are on par with the national average, RealtyTrac says. Indiana also is a “non-judicial foreclosure state,” meaning lenders don’t have to spend months or years in court to repossess a home. To learn more about the forces behind the interest rates on home loans, read MoneyGeek’s mortgage rates guide.

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First-Timer? Get Homebuying Help in Indiana

Indiana is noted for its affordable home prices, although wages aren’t as high here as in some coastal states. There also are numerous state and local programs to help first-time buyers achieve ownership. If you’re seeking assistance, start with the Indiana Housing & Community Development Authority, which offers several programs to help residents afford homes. For example, the Affordable Home program offers FHA loans at below-market rates. Borrowers must be first-time homebuyers, meet income limits and have a credit score of at least 660.

The My Home Conventional program helps buyers get a good deal on a low, fixed-rate loan. This program is open to first-time buyers and repeat buyers. And if you’re buying in certain targeted areas, you might be eligible for the state’s Mortgage Credit Certificate program. It’s worth up to $2,000 a year.

In addition to the state programs, a number of cities – including Indianapolis, Gary, South Bend, Evansville and Bloomington — offer down payment assistance. Rules vary, but most programs require buyers to complete a class, and some are open only to low- and moderate-income buyers. For more information about down-payment assistance, see MoneyGeek’s first-time homebuyers guide.

Financial Assistance in Indiana for First-Time Buyers

See MoneyGeek’s resource for closing cost assistance, down payment assistance and other financial aid available in Indiana.

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3

Bargains Galore: Home Affordability in Indiana

Indiana home prices have been edging up slowly, but they remain well below the national average. In fact, Indiana’s price appreciation has been among the weakest in the nation over the past 25 years, topping only Ohio and Connecticut, according to the Federal Housing Finance Agency. As a result, Indiana remains one of the most affordable places in the country to buy a home.

Kokomo is the nation’s most affordable city, according to the National Association of Home Builders/Wells Fargo Housing Opportunity Index. Fully 98.2 percent of homes sold in Kokomo in the second quarter of 2016 were affordable to a median-income family, according to the index. In Indianapolis, where the median home price was $138,000 and median income was $66,700, some 87.5 percent of homes were in reach of a typical family. Indianapolis’ economy has been boosted by a diverse job market that includes a deep pool of positions in health care. And in Elkhart, 84.4 percent of homes were affordable.


How Indiana Mortgage Rates and Home Prices Affect Monthly Payments

Metro Area Estimated Monthly Mortgage Payment* Q1 2016 (Change from Previous Year) 2015 Median Home Price 2014 2013
Cincinnati-Middletown $648 $137,800 (+2.10%) $145,400 $140,600 $135,500
Ft. Wayne $542 $115,300 (+8.50%) $115,900 $108,200 $106,600
Gary-Hammond $658 $140,100 (+13.50%) $141,700 $135,100 $130,100
Indianapolis $690 $146,900 (+5.50%) $153,200 $144,600 $136,700
Louisville $696 $148,100 (+5.00%) $154,500 $142,800 $139,500
South Bend-Mishawaka $469 $99,800 (-2.30%) $113,400 $106,700 $95,200

Source: National Association of Realtors Q1 2016 Metropolitan Median Area Prices and Affordability report.
*Estimated Monthly Mortgage Payment is based on median home prices for the metro area in Q1 2016 and a 30-year fixed mortgage with today’s rates.

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Determine How Much You Can Borrow in Indiana

Indiana has low limits for jumbo loans. Throughout the state, the loan limit for mortgages backed by Fannie Mae and Freddie Mac is $417,000. Borrowing more than $417,000 means you’ll need a jumbo loan, which can come with a higher interest rate and stricter underwriting standards than a conforming loan.

FHA loan limits are more varied. They top out at $365,700 in some northwestern Indiana counties that are part of the Chicago area. In the rest of the state, FHA caps range from $271,050 to $299,000.

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5

Buying a Home in Indiana: Experts Weigh In

Nancy Smith

Nancy Smith is 2016 president of the Indiana Association of Realtors and associate broker at Carpenter Realtors in Shelbyville.

Cheryl Stuckwish

Cheryl Stuckwish is president of Berkshire Hathaway HomeServices Indiana Realty in Seymour and 2017 president of the Indiana Association of Realtors.

What advice do you give to first-time buyers?

Smith

The best advice I can give first-time buyers is to be pre-approved prior to closing. If buyers are not pre-approved, they can easily miss out on the home they are wanting to buy.

Stuckwish

Consult with a realtor as soon as possible in your search for a home. A realtor will put you in contact with a reputable lender that can help you find the right price range for you, as well as answer any questions you might have about financing. We call it being a pre-approved buyer. It really helps strengthen your offer when the time comes.

What’s the biggest challenge for buyers in Indiana?

Smith

We have an extremely low inventory of homes for sale, and this is causing homes that are priced right and in the right location to move very quickly, most times with multiple offers.

Stuckwish

Low inventory of homes to purchase has become a real issue for all buyers right now. That’s one reason working with a realtor is more important than ever. Your realtor can let you know about homes for sale immediately so that you can be one of the first buyers to view them.

How has Indiana weathered the recent ups and downs of the real estate market?

Smith

The volatility of the market in the past decade has changed dramatically. During those recession years, we had many consumers who had lost their jobs and were unable to do anything. Foreclosures were very high, and these two things caused a very volatile market that basically shot down the ability for many potential buyers to enter the market. Today, the job market is stronger, interest rates have remained low, the foreclosure market is down dramatically and we have a healthy market that has produced many new home buyers. Low inventory has driven the prices up in many areas, which also has been good for the economy. Lending institutions seem stronger, and lenders are again eager to make loans.

Stuckwish

Our market has little new construction in it over the past decade, compared to previous years. Many builders left the business because of the volatility and didn’t return. Without new construction, the cycle of real estate sales suffers. It has remained a very strong market, but would have been even stronger with new construction as a part of the picture.

What’s unique about Indiana’s housing market?

Smith

Indiana is unique in many ways. First, Indianapolis is ranked in the top five for affordability of homes. Second, with our property tax restructure a few years ago, we have low property taxes. We are very focused on job growth, and as a state, have worked hard to recruit new business and industry to our state. We are located in what I feel is the “Hub of the Midwest,” and this too, draws many people from around the world to Indiana to start a new business or relocate an existing business. Our schools for the most part are ranked very high and we have a large number of colleges, universities and technical education available for our youth.

Stuckwish

We have never been a bubble market. Our market tends to move up slowly and move down slowly. In other words, we are a more stable market in times of the bubble bursts that have been so detrimental to other states.

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Don’t Forget Indiana’s Closing Costs

Home prices aren’t the only thing that’s comparatively cheap in Indiana. The state’s closing costs also are below the national average, a survey by Bankrate.com shows. A borrower who takes out a $200,000 loan can expect to pay $2,057, compared to the 2016 national average of $2,128. The average broker or originator fee of $1,010 was the single largest item, and the typical survey fee of $465 also was a significant cost. Closing costs can be negotiable, and they can vary from one lender to the next, so shopping around can pay off. For more about the expenses that accompany taking out a mortgage, visit MoneyGeek’s closing costs page.

Average Closing Costs in the Hoosier State

Average Origination
Fees
$1,067
Average Third-Party
Fees
$770
Average Total Closing
Costs
$1,837

Source: Bankrate’s 2015 survey of closing costs.

Refinancing a Mortgage in Indiana

Indiana might boast an affordable housing market, but there still is one area for concern: Tepid appreciation. Home prices are up just 17 percent from early 2011 through early 2016, according to the Federal Housing Finance Agency, lagging the national average of 27 percent. This trend could work against you if you hope to refinance your mortgage to take advantage of rock-bottom mortgage rates.

Typically, lenders want you to borrow less than 80 percent of the home’s value. If you have equity in your home, congratulations. The combination of historically low interest rates and Indiana’s below-average closing costs mean refinancing might make sense. Say you have a $100,000 loan with a 30-year term at 5 percent interest. Your principal and interest payment is $537. Refinance to a new loan with the same term but a 3.5 percent rate, and your monthly payment falls to $449. For help in analyzing the costs and benefits of a refi, see MoneyGeek’s guide to refinancing your mortgage.

Other Indiana Mortgage Resources

Indiana Housing & Community Development Authority loans

The state agency offers various loan programs for first-time buyers.

Indiana Housing Now

This nonprofit lists affordable homes for sale and rent throughout the state.

Weatherization Assistance Program

Helps some homeowners pay for improvements to make their homes more energy-efficient.

Indianapolis Housing Agency

The city offers its own program to help first-time buyers achieve ownership with down payment and mortgage assistance for those who meet requirements income and employment requirements, among others.

South Bend down payment assistance

This city offers help to buyers who make less than 80 percent of median income — adjusted for household size — and want to purchase in South Bend.

Gary down payment assistance

This city in northwestern Indiana provides low-income residents with forgivable loans for down payment, principal reduction, and closing costs associated with the purchase of a home in Gary.

Bloomington Home Buyer’s Club

This city program provides first-time buyers up to $5,000 for down payment and closing costs after completing a course on what to expect when purchasing a home.

Evansville down payment assistance

This city in southern Indiana offers no-interest loans for up to $5,000 to help buyers cover down payments, closing costs or repairs.

Evansville Teachers Federal Credit Union down payment assistance

The financial institution offers up to $10,000 in down payment assistance to first-time buyers who make 80 percent or less of the area’s median income. You’ll have to ante up at least $1,000 of your own money to go toward buying the home.

HOPE of Evansville homeownership center

This organization touts itself as a one-stop shop for homebuyer courses, credit repairs and down payment assistance.

Fort Wayne rehab program

The city offers down payment and closing costs assistance and tax breaks for buyers of blighted homes.