Indiana Down Payment Assistance 2026: Grants & Loans

· ✓ Last verified Sep 8, 2026 · November 23, 2025 · by AskDoss Editorial Team ·Real Estate · 8 min read

For most Indiana buyers the up-front cash is the hardest part. With the state’s median sale price around $280,055 (Redfin, May 2026), an FHA loan’s 3.5% minimum down payment runs about $9,800 — before closing costs. Down payment assistance (DPA) bridges that gap, and in Indiana the main source is the state housing agency, with the city of Indianapolis adding its own help on top.

One thing to know up front: Indiana’s housing agency renamed its programs. The current 2026 lineup is First Step, Step Down, Next Home, and Next Step. If you see older names like “First Place,” “Helping To Own (H2O),” or “Honor Our Vets” in a blog, those are legacy labels — work from the current names below.

Two definitions to settle first:

  • First-time buyer generally means you have not owned a primary residence in the past three years. Some programs waive this in targeted areas or for veterans.
  • Grant vs. forgivable loan vs. deferred second mortgage — see the box under the comparison table. Indiana’s main DPA is a non-forgivable second mortgage, so the structure matters.

State Housing Finance Agency Programs

The Indiana Housing and Community Development Authority (IHCDA) is the state’s housing finance agency. You apply through an IHCDA-participating lender, not IHCDA directly, and the assistance is paired with a 30-year fixed first mortgage. Program terms below come from IHCDA’s Homeownership Program Guide, rev. 02/2026.

First Step

First Step is IHCDA’s primary down payment assistance program, pairing a first mortgage with help toward the down payment.

  • Assistance amount: 5% of the purchase price (or appraised value, whichever is less). IHCDA’s Homeownership Program Guide states it plainly: the program “provides five percent of non-forgivable down payment assistance (DPA) using FHA, FHLMC, FNMA 30-year fixed rate financing.” Older write-ups citing 6% are outdated — confirm the current rate with your lender.
  • Structure: A non-forgivable second mortgage with no monthly principal-and-interest payment — repayable, not a grant. IHCDA’s guide is explicit that upon “termination of the first mortgage or the property no longer being used as a primary residence, the full amount of DPA must be repaid in full,” and IHCDA’s own FAQ adds that repayment is also triggered if the home is refinanced. Many blogs incorrectly call it “forgivable”; it is not — plan to repay the balance.
  • First-time buyer required? Yes, unless you’re buying in a targeted census tract or you’re a qualified veteran.
  • Minimum credit score: IHCDA’s program guide sets no published floor — it defers to “the requirement set forth by IHCDA and/or the Master Servicer.” Lenders commonly quote around 640, with some FHA scenarios asking for 660. Confirm with your lender.
  • Loan types: FHA or conventional, 30-year fixed.
  • Education: Homebuyer education is required.

Next Home

Next Home is the program for buyers who don’t qualify as first-timers — its defining feature is that it’s open to repeat buyers.

  • Assistance amount: IHCDA’s program guide caps Next Home at up to 3.50% of the purchase price (not exceeding the appraised value); the IHCDA programs page also references a 2.50% or 3.50% two-tier structure. Ask your lender which tier applies to your loan.
  • Open to repeat buyers as well as first-timers.
  • Minimum credit score: IHCDA sets no published floor for Next Home either; lenders commonly quote around 640.
  • Loan types: FHA or conventional; homebuyer education required.

Step Down and Next Step

  • Step Down is a reduced-rate first mortgage with no down payment assistance — useful if you have your down payment but want a lower rate. First-time buyers or targeted-tract buyers qualify.
  • Next Step is a one-time refinance program specifically for buyers currently participating in First Step or Step Down (or the legacy First Place program) who want to refinance their first mortgage — not a purchase program.

Income and purchase-price limits

IHCDA income and acquisition (purchase-price) limits vary by county and household size — there’s no single statewide number. Income limits run roughly in the high five figures to low six figures depending on the county, and purchase-price caps run into the mid-to-high $400,000s in some counties. Have your lender pull the current limit for your county from IHCDA’s income-and-acquisition-limits table before you assume you qualify.

A Note on the Mortgage Credit Certificate (MCC)

IHCDA has historically offered a Mortgage Credit Certificate (a federal tax credit on a share of your mortgage interest), but IHCDA’s current Homeownership Program Guide (rev. 02/2026) does not mention an MCC anywhere across its 32 pages — a strong signal that new MCC issuance is not currently bundled with First Step, Next Home, Step Down, or Next Step. Confirm directly with IHCDA whether a new MCC is available before relying on it. Existing certificate holders can still handle reissuance.

Local and County DPA Programs

Indianapolis (INHP)

The Indianapolis Neighborhood Housing Partnership (INHP) runs one of the state’s strongest local programs for buyers in Marion County.

  • Amount: Amounts vary by household size and income. INHP does not publish a fixed figure, so confirm the current caps with INHP directly.
  • Lender requirement: INHP down payment assistance is available only in combination with an INHP mortgage — it cannot be paired with an outside lender.
  • Structure: A 30-year first mortgage paired with a deferred, no-interest second mortgage — payments on the second are deferred to the back end of the term.
  • Eligibility: Income at or below 120% of area median income; you must use INHP as your lender and complete homebuyer education.

Confirm the current dollar caps with INHP directly, as they’re tied to Marion County’s HUD median-income limits, which update annually.

Eligibility Comparison Table

Program Type Max Amount Min Credit First-Time Only Education
IHCDA First Step Non-forgivable 2nd mortgage 5% of price No published floor; lenders quote ~640 (660 some FHA) Yes (waived in targeted tracts / for vets) Required
IHCDA Next Home 2nd mortgage assistance Up to 3.50% (2.50%/3.50% tiers) of price No published floor; ~640 No Required
IHCDA Step Down Reduced-rate 1st (no DPA) N/A ~640 Yes (or targeted tract) Required
Indianapolis INHP Deferred 0% 2nd mortgage Varies (not published) Per INHP Varies Required

Grant vs. forgivable loan vs. deferred second mortgage:

  • Grant — money you keep; no repayment.
  • Forgivable loan — reduced toward $0 the longer you stay. (Indiana’s First Step is *not* forgivable.)
  • Deferred second mortgage — a real loan you’ll repay, with payments postponed until you sell, refinance, or pay off the first mortgage. IHCDA’s First Step and INHP’s second mortgage are deferred second liens.

How to Apply for Down Payment Assistance in Indiana

  1. Check your numbers first. Estimate your price range and the cash you’ll need, and review your credit — lenders commonly want around 640, though IHCDA sets no published floor. Our Indiana closing costs guide covers the rest of the cash you’ll owe at the table.
  2. Get pre-approved with an IHCDA-participating lender. IHCDA programs run through approved lenders. Start with an Indiana mortgage lender and ask specifically about First Step and Next Home.
  3. Complete homebuyer education. It’s required for IHCDA loans. Finish early so it doesn’t delay closing.
  4. Confirm your county’s income and price limits. These vary by county and household size — verify yours before writing an offer.
  5. Submit with your purchase contract. Once under contract, your lender packages the DPA with the first mortgage and submits for approval.

For the full purchase path, see our first home in Indiana guide and our Indiana first-time buyer programs guide.

Common Mistakes to Avoid

Calling First Step “forgivable”

IHCDA’s program guide describes First Step’s assistance as a non-forgivable second mortgage. It has no monthly payment, but you’ll repay the balance at sale, refinance, or when the home stops being your primary residence. Don’t budget as if it disappears.

Working from retired program names

“First Place,” “H2O,” and “Honor Our Vets” are legacy labels. Use the current 2026 names — First Step, Step Down, Next Home, Next Step — so you and your lender are talking about the same thing.

Assuming a single statewide income limit

Indiana’s income and purchase-price limits are set county by county. Verify yours rather than assuming a figure you saw for another county.

Forgetting the homestead deduction

Once you own, Indiana’s homestead standard deduction can lower your property tax bill — see our Indiana homestead deduction guide. It’s a separate step from DPA, but easy to miss.

Neighboring state programs:

Frequently Asked Questions

How much down payment do I need to buy a house in Indiana?

With an FHA loan, the minimum is 3.5% of the purchase price. On Indiana’s median sale price of about $280,055 (Redfin, May 2026), that’s roughly $9,800. IHCDA’s First Step can provide assistance of about 5% of the price, and conventional loans can go as low as 3% down.

Is Indiana’s First Step assistance a grant I don’t repay?

No. IHCDA’s program guide describes First Step assistance as a non-forgivable second mortgage. There’s no monthly payment on it, but the balance is repayable when you sell, refinance, or stop using the home as your primary residence. It is not a grant.

What credit score do I need for Indiana down payment assistance?

IHCDA does not publish an official credit-score floor for First Step or Next Home — its program guide defers to “the requirement set forth by IHCDA and/or the Master Servicer.” Lenders commonly quote around 640, with some FHA scenarios asking for 660. Your lender confirms the exact requirement for your loan type.

Do I have to be a first-time buyer to get help in Indiana?

Not always. First Step requires first-time-buyer status unless you’re in a targeted census tract or a qualified veteran. Next Home is open to repeat buyers. Choose the program that fits your situation with your lender.

What is FHA mortgage insurance and will I pay it?

FHA loans require mortgage insurance: an upfront premium of 1.75% of the loan amount (which can be financed) plus an annual premium, typically around 0.55% of the balance, paid monthly. On a roughly $270,000 FHA loan the upfront premium is about $4,700 and the annual premium runs around $1,500 per year at the start. With less than 10% down, FHA mortgage insurance generally stays for the life of the loan.

Can I still get a Mortgage Credit Certificate (MCC) in Indiana?

IHCDA has offered an MCC in the past, but its current Homeownership Program Guide (rev. 02/2026) does not mention an MCC across any of its 32 pages — a strong sign new issuance is not currently bundled with the active programs. Confirm directly with IHCDA whether a new MCC is available before counting on it. Existing holders can still process reissuance.

Sources

  • IHCDA Homeownership Program Guide, rev. 02/2026 — First Step, Step Down, Next Home, Next Step program terms
  • IHCDA Homebuyer Programs — plain-language program summaries
  • IHCDA FAQ — down payment assistance repayment triggers
  • Indianapolis Neighborhood Housing Partnership (INHP) — down payment assistance program
  • U.S. Department of Housing and Urban Development (HUD) — FHA loan requirements and mortgage insurance
  • Redfin — Indiana median sale price, May 2026
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