What to know about buying a house in Indiana
If you’re an Indiana first-time home buyer, you should consider yourself lucky. That’s because home prices are lower in the Hoosier State than the national average.
Indiana also provides substantial assistance to first-time home buyers. If you qualify, you may be able to get down payment assistance, putting you in a new home sooner than you thought. Here’s where to begin.
In this article (Skip to ...)
- IN home buyer overview
- Home loan options
- IN home buyer programs
- First-time buyer grants
- Buying in Indiana’s cities
- IN mortgage rates
Indiana home buyer overview
According to the Indiana Association of Realtors, the median home sale price in Indiana in January of 2023 was $215,000. That price decreased by 4.4% over the previous 12 months.
Even so, high home prices can make it difficult to save enough for a down payment. So keep reading for information on down payment assistance (DPA) programs that, if you qualify, may provide financial assistance.
Indiana home buyer stats
|Average Home Sale Price in IN1||$215,000|
|Minimum Down Payment in IN (3%)||$6,450|
|20% Down Payment in IN||$43,000|
|Average Credit Score in IN2||712|
|Maximum IN Home Buyer Grant3||IHCDA forgivable loan of up to 6% of the sale price|
Down payment amounts are based on the state's most recently available average home sale price. “Minimum” down payment assumes 3% down on a conventional mortgage with a minimum credit score of 620.
If you're eligible for a VA loan (backed by the Department of Veterans Affairs) or a USDA loan (backed by the U.S Department of Agriculture), you may not need any down payment at all.
First-time home buyer loans in Indiana
If you’re a first-time home buyer in Indiana with a 20% down payment, you can get a conventional loan with a low interest rate and no private mortgage insurance (PMI).
Of course, few first-time buyers have saved enough for 20% down. But the good news is, you don’t need that much. Not by a long shot. Borrowers can often get into a new home with as little as 3% or even 0% down using one of these low-down-payment mortgage programs:
- Conventional 97: From Freddie Mac or Fannie Mae. 3% down payment and 620 minimum FICO score. You can usually stop paying mortgage insurance after a few years once you reach 20% home equity
- FHA loan: Backed by the Federal Housing Administration. 3.5% down and a 580 minimum credit score. But you’re on the hook for mortgage insurance premiums (MIP) until you refinance to a different type of mortgage, move, or pay off your loan
- VA loan: Only for veterans and service members. Zero down payment is required. Minimum credit score varies by lender but often 620. No ongoing mortgage insurance after closing. These are arguably the best mortgages available, so apply if you’re eligible
- USDA loan: For those on low-to-moderate incomes buying in qualifying rural areas. Zero down payment required. Credit score requirements vary by lender but often 640. Low mortgage insurance rates
- IHCDA loans: May include competitive interest rates and down payment assistance. More information below
Note that government loan programs (including FHA, VA, and USDA home loans) require you to buy a primary residence. That means you can’t use these loans for a vacation home or investment property.
In addition, most programs let you use gifted money or down payment assistance (DPA) to cover your down payment and closing costs. Depending on your mortgage loan, you could potentially get into a new house with minimal cash out of pocket.
If you’re unsure which program to choose for your first mortgage, your lender can help you find the right match based on your finances and home buying goals.
Indiana first-time home buyer programs
The Indiana Housing and Community Development Authority (IHCDA) offers special deals on FHA loans and conventional mortgages. These are available mostly to first-time home buyers, though there are exceptions in certain target areas.
You must select a lender from the IHCDA’s approved list, as is customary with state-run mortgage programs. There are also caps on the price of the home you can buy and household income limits.
You’ll also need a credit score of at least 640 or 680 if you have a lot of other debts.
IHCDA Mortgage Credit Certificate (MCC)
Indiana Housing offers a Mortgage Credit Certificate program that allows you to claim a federal income tax credit for up to $2,000 in mortgage interest paid each year. A first-time home buyer can ask for the mortgage credit certificate when they apply for a loan through a participating lender.
Even though it costs $800 to apply for the MCC, most people save more than that over the life of the tax credit.
Indiana first-time home buyer grants
The IHCDA’s down payment assistance programs are more generous than those offered by many states, assuming you intend to stay in your new home for at least nine years.
These home buyer assistance programs let you borrow between 3.5% and 6% of the sale price, and you can use that money for:
- Down payment
- Closing costs
- Prepaid items (things like homeowners insurance premiums, real estate property taxes, and mortgage interest that you pay upfront on closing)
Better yet, you make no monthly payments on that DPA loan and pay no interest. After you’ve lived in your home for nine years (without refinancing), your loan is forgiven in full.
But if you sell, move out, or refinance during those nine years, you’ll have to pay back every cent you borrowed. So think carefully about your long-term homeownership plans before signing on.
IHCDA First Place Program
The First Place Program allows first-time homebuyers, buyers in target areas, and qualified veterans to borrow up to 6% of the purchase price as a down payment or closing costs. You’ll need to use a 30-year FHA mortgage to qualify for this assistance, which comes as a forgivable second mortgage.
The second mortgage has no interest or monthly payments. It’s completely forgiven after nine years as long as the buyer does not sell or refinance the house during that time. The mortgage credit certificate cannot be used in conjunction with the First Place Program.
To be eligible, borrowers must meet the following minimum debt-to-income ratio (DTI) and FICO credit score requirements:
- DTI under 45% with 640 credit score
- DTI of less than 50% with 680 credit score
The agency has rules about who can buy a single-family home, condo, townhome, planned unit complex, or mobile home. What’s more, the buyer’s income must also be within the limits set by the agency. It should be noted that the majority of eligible applicants have a moderate to low income.
IHCDA Next Home Program
Indiana Housing may offer Next Home assistance to both first-time and repeat homebuyers. A 30-year FHA loan is required. However, you can use 3.5% of the purchase price as a down payment.
If you don’t sell or refinance your house, the down payment aid is forgiven after just two years. Additionally, the aid and the mortgage credit certificate may be combined.
Visit the website to find out more about borrower requirements and income limits.
Helping To Own (H20)
The Helping To Own program is a grant of up to 3.5% of the loan amount used cover the down payment requirement for an FHA loan. You must be an Indiana first-time home buyer to qualify.
If the IHCDA’s home buyer assistance doesn’t seem like a good fit, you may have other options. Talk to your loan officer or real estate agent about local down payment grants and loans to learn more.
Buying a home in Indiana’s major cities
Indianapolis is the most challenging city for an Indiana first-time home buyer. It is more expensive than Fort Wayne or Evansville. Furthermore, home sale prices have been rising much faster.
However, in addition to the IHCDA’s offering, each of these cities has its own home buyer assistance program. So you may be in line for help if you want to buy a home in one of them.
Indianapolis first-time home buyers
In February 2023, the median list price of homes in Indianapolis was $230,000. According to Realtor.com, this represents a 4.5% annual increase.
If you want to purchase a home at this median price, your options for a down payment may include:
- $6,900 for 3% down payment
- $46,000 for 20% down payment
The Indianapolis Neighborhood Housing Partnership helps people who qualify to pay for their down payments by giving them up to $14,999. Eligibility requirements are listed on that page, and you can get more information by taking an online assessment.
Fort Wayne first-time home buyers
In February 2023, the median list price for homes in Fort Wayne was $200,000. According to Realtor.com, this represented a 5.3% increase from the previous year.
If you want to buy a home at that median price, your down payment options might fall between:
- $6,000 for 3% down payment
- $40,000 for 20% down payment
The City of Fort Wayne’s website doesn’t appear to currently offer any citywide down payment assistance programs.
But as late as the first quarter of 2022, first-time home buyers could get help through Community Connections, which is part of Pathfinder Services’ housing department. Call (800) 310-9510 for details about forthcoming assistance.
Evansville first-time home buyers
In February 2023, the median list price for homes in Evansville was $159,900. According to Realtor.com, home prices in this city were stable from one year to the next.
If you want to buy a home at that median price, your down payment options might fall between:
- $4,800 for 3% down payment
- $31,980 for 20% down payment
There appear to be a couple of down payment assistance programs in Evansville:
- City of Evansville Homebuyer Program: A forgivable loan (similar to the IHCDA’s) based on “the purchase price plus closing costs minus the maximum allowed by the prime lender.” Your loan may be forgiven after 5, 10, or 15 years, depending on how much you borrow. Loans are capped at $40,000.
- Hope of Evansville: You’ll have to contribute a minimum of $1,000 from your own savings. And Hope will match your contribution, dollar for dollar, up to $10,000.
Where to find home buying help in Indiana
All the organizations we’ve listed above should provide free advice to any first-time home buyer in the state of Indiana or within their areas.
In addition to our selection, the U.S. Department of Housing and Urban Development (HUD) provides a few lists for statewide, regional, and local resources:
Statewide and regional first-time home buyer resources in Indiana
- Indiana Housing and Community Development Agency: Homebuyer assistance programs, including FHA loans and conventional mortgages. Review the IHCDA Approved Lender List
- Indianapolis Neighborhood Housing Partnership: Offering homebuyer education classes and both downpayment and closing cost assistance
- City of Evansville Homebuyer Program
- Hope of Evansville
- U.S. Department of Agriculture, Rural Development programs
What are today’s mortgage rates in Indiana?
You can see today’s live mortgage rates in Indiana here. Use a mortgage calculator to see how your down payment, interest rate, homeowners insurance, and property taxes will affect your monthly mortgage payment.
When you’re ready to start the home buying process, get personalized rate quotes from at least three mortgage lenders. Instead of simply looking at advertised rates online, apply for preapproval and compare the interest rates and fees. Because that is the only way to ensure you receive the best possible deal on your new home loan.
1Source: Indiana Association of REALTORS Housing Data
2Source: Experian.com study of 2022 and 2021 data
3Based on a review of the state's available DPA grants at the time this was written