First-Time Homebuyer Programs in Indiana

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 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.

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.

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.

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.

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 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 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.

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.

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.

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

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