Indiana First Time Home Buyer Programs and Grants

We published this article details Indiana’s best first-time home buyer grants and DPA loans in 2025 while connecting applicants with top lenders and banks. Indiana’s housing market, with a median home price of $253,026 in December 2024, remains relatively affordable compared to the national average, but the median down payment of approximately $25,000 poses a significant hurdle for first-time home buyers. A first-time home buyer, per HUD guidelines, is someone who hasn’t owned a principal residence in the past three years, with exceptions for buyers in targeted areas or those who are displaced homemakers or single parents. The Indiana Housing and Community Development Authority (IHCDA), alongside local and federal programs, offers grants and down payment assistance (DPA) loans to reduce upfront costs.

2025 Indiana First-Time Home Buyer Grants and DPA Loans

The IHCDA administers Indiana’s primary home buyer programs, offering 30-year fixed-rate mortgages (FHA, VA, USDA, or conventional) paired with grants and DPA.

Most Indiana mortgage lenders require a minimum credit score of 640 (660 for conventional loans), a debt-to-income (DTI) ratio of 45–50%, completion of a HUD-approved homebuyer education course, and a minimum borrower contribution of 1% of the purchase price or $1,000 (whichever is greater).

The income limits range from $88,200–$141,000, and purchase price limits vary from $349,525–$453,100 by county.

The maximum loan amount is $806,500. Programs may carry a recapture tax if the home is sold within nine years.

1. IHCDA First Step Program

The First Step Program provides up to 6% of the purchase price or appraised value (whichever is lower) as a non-forgivable second mortgage for down payment and closing costs. It pairs with a 30-year fixed-rate FHA or conventional mortgage, requires a 640 credit score (660 for conventional), and a $250 reservation fee. No monthly payments are required, but the loan is due upon sale, refinance, or after 30 years. Details at IHCDA First Step.

2. IHCDA Next Home Program

The Next Home Program offers up to 3.5% of the purchase price as a second mortgage for down payment, forgiven after three years if the buyer remains in the home. It pairs with an FHA loan (30-year fixed-rate), requires a 640 credit score, and is available to both first-time and repeat buyers. A homebuyer education course is required. Learn more at IHCDA Next Home.

3. IHCDA Indiana Home Solution (IHS) Program

The IHS Program provides up to 6% of the purchase price as a second mortgage with a 15-year affordability period, prorated forgiveness starting at 20% in year 11 until fully forgiven in year 15. It requires a 30-year fixed-rate FHA loan, a 660 credit score, and a $100 reservation fee. Exclusively for first-time buyers unless in targeted areas. Details at IHCDA IHS.

4. IHCDA Helping to Own (H2O) Program

The H2O Program offers a grant of up to 3.5% of the loan amount to cover the down payment for an FHA loan, non-repayable unless the home is sold within nine years (subject to recapture tax). It requires a 640 credit score and homebuyer education, and is exclusive to first-time buyers. See IHCDA H2O.

5. IHCDA Mortgage Credit Certificate (MCC) Program

The MCC Program provides a federal tax credit of up to 25% of annual mortgage interest (capped at $2,000) for first-time buyers or those in targeted areas. It requires an $800 application fee and cannot pair with IHCDA loans but works with other mortgages. Income and purchase price limits apply. Details at IHCDA MCC.

6. IHCDA Step Down Program

The Step Down Program offers an interest-only, 30-year fixed-rate FHA or conventional mortgage for first-time buyers or those in targeted areas. It cannot pair with other IHCDA programs, requires a 640 credit score (660 for conventional), and is designed to lower initial payments. Details at IHCDA Step Down.

Local First-Time Home Buyer Incentives

1. Indianapolis Neighborhood Housing Partnership (INHP) Down Payment Assistance

INHP offers $7,500–$24,999 in DPA as a forgivable second mortgage for first-time buyers in Marion County, based on household size and income (80% AMI or less). It requires an INHP mortgage, a $1,000 borrower contribution, and a HUD-approved education course. Funds are limited. Contact INHP DPA.

2. Bloomington HAND Down Payment and Closing Cost Assistance

Bloomington’s HAND Program provides up to $10,000 as a forgivable second mortgage for first-time buyers earning 80% AMI or less, purchasing within city limits. A homebuyer education course is required. Contact Bloomington HAND.

3. HOPE of Evansville Down Payment Assistance

HOPE of Evansville matches up to $10,000 in DPA (dollar-for-dollar) for first-time buyers with incomes at or below 80% AMI, requiring a $1,000 borrower contribution. The home must be in Evansville city limits. Details at HOPE of Evansville.

4. Fort Wayne Housing Authority Hoosier Homes DPA

The Hoosier Homes DPA, administered by the Fort Wayne Housing Authority, offers up to 5% of the purchase price as a forgivable second mortgage (seven-year term) for buyers in select counties (e.g., Allen, DeKalb). No first-time buyer requirement, but income limits (80% AMI) and a homebuyer education course apply. Details at Hoosier Homes.

5. Gary First-Time Homebuyer Program

Gary’s Homeownership Opportunity Network (HON) provides up to $5,000 in DPA for closing costs, down payment, or fees for first-time buyers. Income limits and a homebuyer education course apply. Contact Gary HON.

6. Federal Home Loan Bank of Indianapolis (FHLBI) HomeOwnership Program (HOP)

The HOP Program offers up to $20,000 in DPA for down payment and closing costs, available through FHLBI member banks (e.g., Old National). Income must not exceed 80% AMI, and funds are first-come, first-served. Details at FHLBI HOP.

Top 10 Banks and Lenders Offering Down Payment Assistance in Indiana

Based on participation in IHCDA programs, FHLBI’s HOP, and other DPA initiatives, here are the top 10 banks and lenders offering DPA in Indiana in 2025 (verified via IHCDA’s lender list and market presence):

1. Old National Bank: Offers IHCDA’s First Step (6%) and Next Home (3.5%) alongside FHLBI’s HOP ($20,000).

2. New American Funding: Provides Pathway to Homeownership ($6,000) and pairs with IHCDA and Chenoa Fund DPA.

3. Rocket Mortgage: Supports IHCDA’s H2O (3.5%) and First Step (6%), combinable with HomeReady/Home Possible.

4. First Merchants Bank: Participates in IHCDA’s IHS (6%) and FHLBI’s HOP ($20,000).

5. Huntington National Bank: Offers IHCDA’s First Step (6%) and Next Home (3.5%), plus HomeReady loans.

6. Ruoff Mortgage: Supports IHCDA’s H2O (3.5%) and IHS (6%), known for local expertise.

7. Centier Bank: Provides IHCDA’s Next Home (3.5%) and FHLBI’s HOP ($20,000).

8. Caliber Home Loans: Offers IHCDA’s First Step (6%) and Chenoa Fund (3.5%).

9. Union Savings Bank: Participates in IHCDA’s IHS (6%) and HomeReady/Home Possible.

10. Fifth Third Bank: Supports IHCDA’s H2O (3.5%) and FHLBI’s HOP ($20,000).

Find additional IHCDA-approved lenders at IHCDA Lenders. (Learn more about the latest on first-time home buyer loans today.)

Case Study 1: The Patel Family in Indianapolis

The Patels, a family of four earning $70,000 annually, aimed to buy a $250,000 home in Marion County’s 46208 zip code. As first-time buyers, they qualified for the IHCDA First Step Program, receiving a $15,000 second mortgage (6% of the purchase price) for their FHA loan’s 3.5% down payment ($8,750) and $6,250 in closing costs. They also secured $7,500 from INHP’s DPA, forgivable after five years, requiring a $1,000 contribution. The New American Funding Pathway added $6,000 for additional closing costs. After completing a HUD-approved course via INHP and contributing $1,000, they closed in March 2025. The $28,500 in assistance covered all upfront costs, with the First Step loan deferred for 30 years, allowing them to afford a home in a competitive urban area.

Case Study 2: Marcus Johnson in Fort Wayne

Marcus, a veteran earning $55,000, wanted a $200,000 home in Allen County. Through a VA loan (0% down), he avoided a down payment but needed closing cost support. The Hoosier Homes DPA provided a $10,000 forgivable second mortgage (5% of the purchase price, seven-year term). The IHCDA MCC offered a $2,000 annual tax credit, reducing his tax liability. Old National Bank, an FHLBI member, added $5,000 via the HOP Program. After contributing $1,000 and completing a HUD-certified course via eHome America, Marcus closed in April 2025. The $15,000 in assistance and tax credit covered closing costs and enhanced affordability, leveraging his veteran status for favorable terms.

Tips for Indiana First-Time Home Buyers

1. Get Pre-Approved: Obtain a pre-approval letter from an IHCDA-approved lender to clarify your budget and strengthen offers. See IHCDA Lenders.

2. Combine Programs: Pair IHCDA’s First Step or Next Home with local DPA (e.g., INHP, HOPE) or Chenoa Fund, ensuring compatibility via your lender.

3. Complete Education Courses: HUD-approved courses like eHome America ($75) or INHP (free) are required. See eHome America.

4. Check Targeted Areas: First-time buyer requirements may be waived in zip codes like 46208 or 46805. Check IHCDA Targeted Areas.

5. Monitor Credit and DTI: Aim for a 640+ credit score and DTI below 45–50%. Use LendingTree Spring for credit monitoring.

Indiana’s home prices rose 4.8% in 2024, with urban areas like Indianapolis and Fort Wayne facing increased competition. Local DPA programs like INHP and Hoosier Homes are limited and first-come, first-served, with funds potentially depleting by mid-2025. IHCDA’s First Step and IHS require repayment upon sale or refinance, and H2O grants carry a recapture tax if sold within nine years. USDA loans are restricted to rural counties (e.g., Jasper, Pulaski), and VA loans require military eligibility. Buyers should verify funding availability and review repayment terms with lenders.

Indiana’s 2025 first-time home buyer programs, led by IHCDA’s First Step, Next Home, IHS, H2O, and MCC, alongside local initiatives in Indianapolis, Bloomington, and Fort Wayne, provide robust support for overcoming upfront costs. By combining these with federal options like FHA, VA, or HomeReady loans, buyers can minimize out-of-pocket expenses. The top 10 lenders, including Old National and New American Funding, enhance access to these programs. Work with approved lenders, complete required education, and act promptly to secure limited funds, making homeownership achievable in Indiana’s affordable yet competitive market.

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