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2022 First-Time Homebuyer Programs in Indiana

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Like many states, Indiana offers first-time homebuyer programs that provide down payment and closing cost assistance, tax incentives and low-interest mortgage loans. However, many of these programs have rules such as income or property value limits that could impact your eligibility.

First-time homebuyer programs are reserved for owner-occupants and may need to be repaid if you refinance or sell your home before a minimum occupancy period expires.

Indiana statewide and local first-time homebuyer programs

Indiana residents may qualify for an array of state and local first-time homebuyer programs in the form of grants, forgivable loans and tax incentives, some of which can be combined for maximum benefits.

Program nameAssistance amountAssistance typeWhere it’s available
First Place6% of home price for down payment assistanceForgivable second mortgageStatewide
Next Home3.5% of home price for down payment assistanceForgivable second mortgageStatewide
Mortgage Credit Certificate25% of mortgage up to $2,000Tax creditStatewide
Fort Wayne Downpayment Assistance ProgramUp to $8,000 for down payment and closing costsForgivable second mortgageFort Wayne
HAND Down Payment and Closing Cost AssistanceUp to $10,000 for down payment and closing costsForgivable second mortgageBloomington

What to know about different types of down payment assistance

While all homebuyer assistance programs are designed to increase homeownership rates and make buying a first home easier, the programs come in a variety of forms with various rules for eligibility and possible repayment.

  • Grants: Grants are the simplest form of financial aid for first-time homebuyers because they don’t require a lien to be placed against your home. However, a grant often comes with requirements to live in the property for a certain number of years before you refinance or sell it, otherwise you will be required to repay some or all of the grant.
  • Forgivable loans: Financial aid for homeowners is sometimes provided as a forgivable second mortgage. With this type of down payment assistance, a second mortgage lien is secured against your home. While homeowners are not typically required to make payments on the loan, they will need to repay some or all of it if they move out before a certain number of years.
  • Tax credits: A mortgage credit certificate (MCC) is a federal income tax program designed to reduce housing costs and incentivize homeownership for low and moderate income households. An MCC can be used to lower your federal income taxes with a credit of up to 25% of the annual mortgage interest paid for the life of the mortgage, up to $2,000 annually in Indiana.

How Indiana first-time homebuyer programs work

The process of applying and qualifying for a first-time homebuyer program in Indiana includes several steps, from identifying possible assistance programs to understanding your eligibility and potential repayment requirements. Homebuyer programs are funded by state and local jurisdictions, which means some programs may be temporarily unavailable or other programs may be introduced. State and local housing agencies will have the most up-to-date information.

To participate in a first-time homebuyer program in Indiana, you’ll need to follow these steps:

Take a homebuyer education class. Most state and local homebuyer programs require applicants to take a homebuyer class. You’ll also likely find it a valuable resource to learn about how to finance, find and maintain your first home.

Contact a lender. Each program requires you to use an approved lender who is familiar with the homebuyer program. Find a lender on the Indiana or local housing agency website’s list. Your lender will check your credit score and make recommendations if it needs improvement.

Find out program requirements. Some Indiana homebuyer programs have income, property price and geographical limits. Your lender or the housing agency can help you understand whether you are eligible for various programs.

Understand the payback requirements for each program. While you’re probably not planning to move as soon as you buy a home, you should be aware of your commitment, any repayment requirements and the time frame required to have your loan or grant forgiven.

Indiana first-time homebuyer program requirements

Each first-time homebuyer program has requirements that buyers must meet. These requirements can change periodically, so it’s best to confirm the rules with your lender or housing finance agency.

Program name Credit score minimumDTI ratio maximumMaximum income limitHow long you have to live in the home
First Place640 or 68045% to 50%, depending on credit scoreVaries by county and household size from $73,300 to $406,0669 years
Next Home640 or 68045% to 50%, depending on credit scoreVaries by county and household size from $73,300 to $406,0669 years
Mortgage Credit Certificate640 or 680
*used in conjunction with Next Home
45% to 50%, depending on credit score
*used in conjunction with Next Home
Varies by county and household size from $73,300 to $406,0669 years
Fort Wayne Downpayment Assistance ProgramSet by lendersSet by lendersVaries by household size from $40,250 to $75,9005 years
HAND Down Payment and Closing Cost AssistanceNone41% to 55%Varies by household size from $42,750 to $80,6005 years

THINGS YOU SHOULD KNOW

Income limits vary widely by location, so it’s important to check on your eligibility for first-time homebuyer programs in Indiana before you begin the application process. Most programs rely on median income by household size to set income limits. You can check the Department of Housing and Urban Development’s (HUD) median income lookup tool to find out the limits in your area.

National first-time homebuyer programs

A variety of homebuyer programs are available to first-time homebuyers, regardless of where they live. Many state and local first-time homebuyer programs require you to qualify for one of the mortgage loan programs listed below before you can become eligible for down payment or closing cost assistance or a mortgage credit certificate. The loans listed below are available to all homebuyers and are not limited to first-time homebuyers.

Conventional loans. Conventional loan programs are available from a variety of lenders and typically follow the guidelines set by Fannie Mae and Freddie Mac, the largest purchasers of conventional loans. Generally, conventional loan programs require higher credit scores and lower debt-to-income ratios than federally guaranteed loan programs. Conventional loans usually require private mortgage insurance for any borrower who makes a down payment of less than 20%.

FHA loans. Loans that are insured by the Federal Housing Administration are designed for borrowers with lower credit scores and higher debt-to-income ratios. FHA loans require mortgage insurance for the life of the loan but offer the benefit of a down payment of just 3.5% and easier qualification standards.

VA loans. VA loans are available to veterans and current military personnel. Two main benefits of VA loans is that they do not require down payments or mortgage insurance. VA loans also don’t have any loan size limitations, but borrowers must qualify to prove they can afford the payments.

USDA loans. USDA loans are available for properties in designated rural areas that meet property price limitations. Borrowers must meet income limitations and qualify to repay the loan, but they do not have to make a down payment.

FAQs about Indiana first-time homebuyer programs

Who qualifies as a first-time homebuyer in Indiana?

A first-time homebuyer in Indiana is legally someone who has not owned a home within the previous three years. Indiana follows HUD’s definition of a first-time homebuyer, which also considers someone a first-time homebuyer if they previously owned a home with a former spouse.

Can I qualify for down payment assistance in Indiana?

Down payment assistance in Indiana is available for first-time homebuyers who qualify for a mortgage based on their credit and financial history, along with meeting income requirements. Whether you can get down payment assistance also depends on whether funds are available for the program.

How much of a down payment do I need to buy a house in Indiana?

While down payment assistance may reduce your out-of-pocket needs, loan programs in Indiana are available through the VA and USDA with a zero-down-payment requirement. FHA loans require a down payment of 3.5% and some conventional loan options allow a down payment of just 3%.

Home price trends in Indiana major areas

Indiana is considered one of the more affordable states in the U.S. for housing, but prices there have risen, as they have across the country. From January through December of 2020 to January  through December 2021, the median sales price in Indiana rose 13.5%, according to the Indiana Association of Realtors.

In Marion County, which includes Indianapolis, the median sales price for a home was $180,307, with prices up 10.3% over the year, per the National Association of Realtors. This translates into a monthly mortgage payment of $684, compared to $639 a year earlier, a difference of $45. In Allen County, which includes Fort Wayne, the median sales price is $168,355, up 11.4% over a year. This translates to a monthly mortgage payment of $639, up from $591 a year earlier — a difference of $48.

 

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