Financing Resources for First-Time Homebuyers in Indiana

Buying your first home is an experience full of excitement and anticipation, but the process can also feel overwhelming and sometimes downright scary. Luckily for potential homebuyers in Indiana, there are plenty of programs available to help first-time homebuyers understand the process and even help with the finances.

The U.S. Department of Housing and Urban Development (HUD) offers counseling services to help first-time homebuyers better understand the homebuying process. HUD-approved counseling agencies provide many of these services for free. Some agencies also offer online education programs which, if completed, can help you access certain first-time homebuyer loan programs.

There are a number of HUD-Approved Housing Counseling Agencies in the state.

• City of Bloomington Housing and Neighborhood Development (HAND)
• Community Action Program Inc. of Western Indiana
• Hope of Evansville, Inc.
• Pathfinder Services, Inc.
• City of Gary, IN Department of Community Development
• Transition Resources – Telamon
• Martindale Brightwood Community Development Corporation (MBCDC)
• Advantage Housing, Inc.

Home loan programs in Indiana offer a variety of incentives to potential homebuyers.

• Indiana FHA Loans: These loans are insured by the Federal Housing Administration and they offer first-time homebuyers an affordable down payment (3.5%). However, borrowers will need to pay for mortgage insurance (MIP) which serves as protection for the lender should you default on the loan. Loan limits vary based on county and are calculated based on the medium home price for that area. While there are no income limits to qualify for an FHA loan, you will need to meet the debt-to-income ratios allowed by the FHA.
• USDA Rural Housing Loan: While you do not need to be a first-time homebuyer to qualify for this lending program, it’s still a great option for homebuyers of any kind looking to purchase a home in rural Indiana. This loan offers 100% financing, no down payment, and 30 year low fixed rate loans, among other things. There are several types of USDA mortgages. Loans for single-family homes are for qualifying low- and moderate-income borrowers. Income limits vary by location and household size. You can find the specific income requirements on the USDA’s website.
• IHCDA’s Homebuyer Programs: Indiana’s Housing and Community Development Authority (IHCDA) has a variety of financing options available for first-time homebuyers in Indiana. To qualify applicants must meet specific eligibility standards that vary from program to program.
• Housing Choice Voucher (HCV): The HCV is funded by HUD and provides assistance to low-income families to help them transition from renting to owning. To be eligible, applicants must be a current HCV Participant in good standing. Applicants must also meet minimum income requirements and have continuous full-time employment for a year. Families applying for this voucher are required by HUD to make a minimum down payment of 3%, with at least 1% of that payment coming from personal resources. Additional eligibility requirements can be found on the Federal Housing Authority’s

In addition to the lending programs listed here, the state also has opportunities for down payment assistance.

• Helping to Own (H2O): This program offers down payment assistance of 3.50% based off the purchase price, but not to exceed the appraised value of the home. You must be a first-time homebuyer to qualify and have a FICO credit score of 640 with a debt-to-income ratio of less than 45%. If your FICO credit score is 680, your debt-to-income ratio must be greater than 45%, but less than 50%.
• Next Home (NH): Next Home offers down payment assistance of 3.50% and is not exclusive to first-time homebuyers. While the same FICO credit score and debt-to-income ratios apply to this program, it is different because, unlike the H20 program, it can be combined with the Mortgage Credit Certificate (explained below).
• Indiana Home Solution (IHS): The Indiana Home Solution program is available to first-time homebuyers. The program offers a 30-year fixed FHA loan as well as down payment assistance of 6%. You can use the down payment assistance to cover your down payment or your closing costs.

Indiana offers a tax credit for first-time homebuyers. The MCC can assist the borrower in reducing their federal income tax liability and increasing their qualifying income.

To be eligible for this tax credit you must be purchasing a home in a “targeted area.” These areas meet specific criteria related to median family income, or have been deemed as an “area of chronic economic stress.” Additionally, to be considered a first-time homebuyer, you cannot have owned property as a principal residence during the last three years. There are further restrictions for qualifying listed in the MCC Program Guide.

If you’re a potential first-time homebuyer in Indiana, you should know there are plenty of programs out there to make the process easy and affordable.