Indiana First-Time Home Buyer Programs of 2021

NerdWallet
By NerdWallet 
Edited by Beth Buczynski
Indiana First-Time Home Buyer Programs

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If you’re a first-time home buyer in Indiana, the state’s housing authority wants to help with what’s likely going to be the biggest purchase you’ve ever made.

The Indiana Housing and Community Development Authority, or IHCDA, offers mortgage programs for qualified first-time home buyers. You're considered a first-time buyer if you have not owned your primary residence in the last three years.

The requirement to be a first-time home buyer is waived for military veterans and for people who buy in economically disadvantaged "target areas." Some of the programs are open to repeat buyers who meet income guidelines.

National first-time home buyer programs

Conventional mortgage

Best for:

Low down payments, limited mortgage insurance premiums

What you need to know:

A conventional mortgage is a home loan that isn’t guaranteed or insured by the federal government. Conventional mortgages that conform to the requirements set forth by Fannie Mae and Freddie Mac allow down payments as low as 3% for first-time buyers or lower-income home buyers. Unlike FHA loans, conventional loans allow borrowers to eventually cancel their mortgage insurance or avoid mortgage insurance altogether if they put at least 20% down.

VA loans

Best for:

Military, low down payments

What you need to know:

The U.S. Department of Veterans Affairs helps service members, veterans and surviving spouses buy homes. VA loans are especially generous, providing competitive interest rates, often requiring no down payment or mortgage insurance. Although there is no official minimum credit score, most VA-approved lenders require scores of at least 640.

FHA loans

Best for:

Low credit score, low down payments

What you need to know:

This is the go-to program for many first-time home buyers with lower credit scores. The Federal Housing Administration allows down payments as low as 3.5% for those with credit scores of 580 or higher. The FHA will insure loans for borrowers with scores as low as 500 but requires a 10% down payment for a score that low. Mortgage insurance is required for the life of an FHA loan and cannot be canceled.

USDA loans

Best for:

Low down payments, rural

What you need to know:

A USDA home loan is a zero-down-payment mortgage for eligible rural and suburban home buyers. USDA loans are issued by the U.S. Department of Agriculture through the USDA Rural Development Guaranteed Housing Loan Program. There are income limitations, which vary by region. Applicants with credit scores of 640 or higher receive streamlined processing. Those with scores below that must meet more stringent underwriting standards.

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IHCDA highlights and eligibility requirements

HIGHLIGHTS

  • Some programs offer down payment assistance.

  • Loans can be used to buy single-family houses, manufactured homes, townhouses and condominiums.

  • All qualified loans are 30-year fixed-rate mortgages.

ELIGIBILITY

  • Income limits vary by county and depend on family size.

  • Manufactured homes are not eligible.

  • Borrower pays a $100 "reservation fee."

Indiana first-time home buyer loan programs

First Place

Best for:

Low mortgage rates

What you need to know:

The First Place program provides FHA loans with down payment assistance for low- to moderate-income home buyers. FHA loans are mortgages insured by the Federal Housing Administration. Down payment assistance is provided in the form of a forgivable second mortgage and can be up to 6% of the home’s purchase price. Maximum home prices vary by county. The minimum credit score is 640.

The borrower must be a first-time home buyer, and this program can’t be combined with any other IHCDA program. Borrowers may receive down payment assistance from an entity other than IHCDA.

Helping To Own (H2O)

Best for:

Down payment assistance

What you need to know:

The Helping To Own program offers down payment assistance for low- to moderate-income first-time home buyers who get FHA loans. The assistance is a grant of up to 3.5% that does not have to be repaid. The minimum credit score is 640. H2O cannot be combined with any other IHCDA program.

Next Home

Best for:

Down payment assistance

What you need to know:

Next Home provides down payment assistance in the form of a second mortgage to low- to moderate-income borrowers who get FHA mortgages. The maximum down payment assistance for FHA loans is 3.5%. The assistance must be repaid if the buyer refinances or sells the home, or goes into foreclosure, within three years of getting the loan.

The minimum credit score for an FHA loan is 640. The Next Home program can be combined with a mortgage credit certificate.

Mortgage Credit Certificate

Best for:

Tax credits

What you need to know:

Low- to moderate-income first-time home buyers can obtain mortgage credit certificates from IHCDA. Borrowers can receive a credit to offset their federal income taxes, up to $2,000 for each year they own the home.

Summary: 2021 IHCDA first-time home buyer programs

  • First Place for low- to moderate-income home buyers who need down payment and closing cost assistance.

  • Helping to Own (H2O) for down payment assistance on FHA loans.

  • Next Home for a loan that combines down payment assistance with a mortgage credit certificate.

  • Mortgage Credit Certificates for federal income tax breaks.

Visit the IHCDA website for brief summaries of each loan program and related links to dig deeper, including a list of participating lenders, organized by county.

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