First-Time Home Buyers In Indiana: Your Guide To Loans, Grants And Down Payment Assistance Programs

As a first-time home buyer, you probably have a lot of questions. Figuring out how to navigate the mortgage process is a challenge that most aspiring homeowners must face – luckily, you’re not on your own. There are plenty of resources out there to help you make sense of all the new terms that will be thrown your way. In addition, there are plenty of programs and grants out there, both at the national and local level, to help you actually afford your first home purchase.

Today, let’s talk about some of the programs you can find as a first-time home buyer in the lovely midwestern state of Indiana and how these programs could potentially help you.

Who Qualifies As A First-Time Home Buyer In Indiana?

In Indiana, what qualifies as a “first-time home buyer” is the same as everywhere else in the country. If you haven’t owned a house as your primary residence in the 3 years prior to applying for a mortgage, you qualify as a first-time home buyer in Indiana.

However, even if it isn’t your first time buying a house, you can still qualify for some loan and down payment assistance programs if you meet income limit requirements or are buying a home in a qualified census tract, which is an area or county where at least 70% of families earn less than 80% of the median family income in the state.

Indiana Home Buyer Statistics

Wondering what your finances should look like when beginning the search for your first home? Buyers in Indiana, first-time or not, tend to align with the following average statistics:

• Average sale price: $186,100
• Minimum down payment (3%): $5,583
• Average credit score: 693
• Median household income: $48,737

Housing data sourced from Bestplaces.net; credit score data sourced from Equifax®.

First-Time Home Buyer Loan Programs In Indiana

As you look for a home, it’s a good idea to start researching your financing options. Unless you can afford to buy a house in cash, you’ll need to get a mortgage. There are plenty of home loan options available, so you can hopefully find one that fits your needs best.

Let’s review a few:

• Federal Housing Administration (FHA) loans: An FHA loan is a loan backed by the FHA and is considered a government loan. FHA loans are typically easier to qualify for than conventional loans and have less strict requirements for income, debt and credit score. FHA loans typically require a minimum down payment of 3.5% of the loan amount.
• Department of Veterans Affairs (VA) loans: A VA loan is another government loan that is only available to veterans, qualifying active-duty service members and surviving spouses. These loans boast lower interest rates, more lenient qualification requirements and a 0% down payment requirement.
• U.S. Department of Agriculture (USDA) loans: These loans backed by the USDA are available to rural buyers only. They offer low rates, lenient qualification requirements and, like VA loans, no down payment requirement. The only stipulation is that the home you purchase must be in a qualifying USDA rural area. Rocket Mortgage® isn’t accepting applications for USDA loans at this time.
• Conventional loans: A conventional loan is a loan not backed by the government that is instead purchased by Fannie Mae and Freddie Mac to sell to investors. These loans may be slightly harder to qualify for than government loans, but if you do qualify, you can typically get a pretty low interest rate if you have a good credit score and financial history. With a conventional loan, you typically must make a down payment of at least 3%.

First-Time Home Buyer Down Payment Assistance Programs In Indiana

Once you have an idea of how much you may want to prepare to spend and what kind of loan could work best for you, it’s a good idea to look into local- and state-level assistance programs. If you qualify, many of these programs offer down payment assistance or other forms of financial help that could make purchasing your first home a little easier on your savings.

Here are a few options Indiana residents can potentially take advantage of. 

First Place FHA Program (FP FHA)

The First Place FHA (FP FHA) is a program offered via the Indiana Housing and Community Development Authority (IHCDA) for buyers getting FHA loans. First Place offers up to 6% of a home’s purchase price in down payment assistance to qualifying buyers. To qualify, prospective buyers must be first-time home buyers, live in a qualifying area, meet income requirements and must have a credit score of at least 640.

For more information on FP FHA, consult the IHCDA’s program guide.

First Place Conventional Program (FP MAE And FP MAC)

The First Place Conventional program also offers up to 6% down payment assistance and is roughly the same as the FP FHA program, except that it is instead offered to buyers looking to finance a home with a conventional loan rather than FHA. As such, it has a few different requirements. Prospective buyers will be expected to complete an online home buying course through either Fannie Mae or Freddie Mac (Homeview or CreditSmart). They may also need to have a minimum credit score of at least 680.

For more information on FP MAE and FP MAC, the conventional versions of FP FHA, check out the IHCDA’s in-depth guide.

Next Home FHA Program (NH FHA)

The IHCDA also offers a program called Next Home FHA. NH FHA offers up to 3.5% of a home’s purchase price in down payment assistance on a 30-year fixed rate FHA loan. Like FP, this program requires borrowers to meet various requirements. The property you purchase must be in a qualifying area and the potential buyer will need to have a credit score of at least 640. Unlike FP, you can use the Next Home program even if you are not a first-time home buyer.

For more information about NH FHA, check out the IHCDA’s guide to this financial assistance program.

Next Home Conventional Program (NH MAE And NH MAC)

IHCDA also offers a conventional version of the NH FHA program called the Next Home Conventional Program. Like the two differing FP programs, this conventional down payment assistance program is also a little different from its FHA counterpart. For conventional borrowers, Next Home does not allow co-signing. Borrowers may also need to have a 680-credit score or higher. NH MAE and MAC still offer 3.5% of the house’s purchase price in down payment assistance – the borrower must just use a conventional loan rather than an FHA loan.

For more information about NH MAE and NH MAC, consult the IHCDA’s guide.

Mortgage Credit Certificate Program (MCC)

Finally, IHCDA also offers a Mortgage Credit Certificate, or MCC. MCC is a federal income tax credit that can help borrowers reduce their income tax liability and increase their qualifying income. The credit rate is 25% of the borrower’s loan amount. The maximum annual amount that potential borrowers can receive as a credit annually is $2,000.

MCC can be used alongside the Next Home programs also offered by IHCDA. For more information on qualifying for this tax credit, review IHCDA’s guide.

Local First-Time Home Buyer Grants And Other Assistance Programs In Indiana

Beyond programs offered through the state, you may also be able to find financial help at the local level when buying your first home. The city of Evansville, Indiana, as an example, offers forgivable loans to qualifying first-time buyers to help them cover closing costs. Muncie also offers multiple grants and programs to help low- to moderate-income buyers achieve homeownership.

For a full list of local homeownership assistance programs in the state, visit the Department of Housing and Urban Development (HUD)’s collection of Indiana resources.

The Bottom Line

Buying a home for the first time may seem overwhelming, but there are really a lot of resources out there to help buyers out, whether they’re getting their first house or their seventh. Before you start looking for your dream home in Indiana – or any state – be sure to do your research and see if you qualify for any grants or assistance that could ease your financial burden.

Ready to start house hunting yourself and see what you can qualify for? Get approved online today with Rocket Mortgage®.