If you’re buying your first home in Indiana, you’re on a well-traveled path: The Hoosier State landed in the No. 14 spot on U-Haul’s list of most moved-to states in 2022. 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 & Community Development Authority (IHCDA), the state’s housing finance agency, which works with banks, credit unions and other mortgage lenders to help low- and moderate-income residents purchase homes.

Indiana first-time homebuyer loan programs

There are many types of mortgages available to first-time homebuyers in Indiana, including FHA, VA and USDA loans, which have a lower down payment requirement and typically lower credit minimums. Many mortgage lenders also offer conventional loans with as little as 3 percent down with private mortgage insurance, which can be a viable option for some. These are available directly through lenders; the IHCDA is not currently offering a first-mortgage program. However, the agency does offer down payment assistance.

Indiana down payment assistance

IHCDA First Place program

The down payment and closing costs can be a roadblock for first-time homebuyers. The IHCDA’s First Place program is designed to make coming up with that big chunk of cash much more manageable, offering a second mortgage of up to 6 percent of the purchase price in assistance.

There are no additional monthly payments or interest charges on this second mortgage, and if you live in the home you bought for at least nine years and stay current on all of your other duties as a homeowner, it’ll be forgiven after that time. However, if you sell the property or refinance the first mortgage in those years, you’ll need to pay the second mortgage back. Be sure to ask your loan officer for a full explanation of the “forgiveness period” to understand how long you need to stay in the home.

You could qualify for the First Place program if you’re taking out a 30-year FHA loan. To be eligible, you must also be a first-time buyer — defined as someone who has not owned a home in the past three years — or buying in a “Targeted Area,” or a veteran.

Borrower requirements:

  • 640 minimum credit score with a debt-to-income (DTI) ratio under 45 percent
  • 680 minimum credit score with a DTI ratio above 45 percent (but no more than 50 percent)
  • Must meet IHCDA income limits, which range from $82,100 to $138,740, depending on where you’re buying and how many will live in the household

Property requirements:

  • Must be a single-family home, condominium, townhome, planned unit development (PUD) or a manufactured home affixed to a permanent foundation
  • Must be in Indiana
  • Must be a primary residence (investment properties and rental properties do not qualify)
  • Must meet IHCDA purchase price limits (also known as “acquisition cost” limits), which range from $331,650 to $405,350 across the state’s 92 counties

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 Place 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 Place program.

Other first-time homebuyer loan 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. A similar program in Fort Wayne can help first-time buyers get up to $8,000 of assistance, provided they can contribute at least $1,000 to the purchase and complete a homebuyer education course.

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 your situation. As you begin the home-buying process, keep in mind that mortgage rates could keep on rising this year, so now might be ideal to lock in a low rate.