First-Time Home Buyer Programs in Indiana 2026

Indiana’s first-time buyer loans come from the Indiana Housing and Community Development Authority (IHCDA). First Step pairs a bond-funded 30-year fixed mortgage with non-forgivable down payment assistance. Step Down offers the rate with no assistance. Next Home, with up to 3.5% in assistance, is also open to repeat buyers.

IHCDA’s Homeownership Department describes its programs as available “statewide in all 92 Indiana counties.” Everything on this page comes from IHCDA’s own website and its Homeownership Program Guide, the file posted September 1, 2026, read on September 24, 2026. For the down-payment side alone, including city help in Indianapolis, see our Indiana down payment assistance guide. This page covers the rest: which of the four IHCDA programs you can actually use, and what each one asks of you.

The four IHCDA programs, and which ones need first-time status

The name First Place still turns up in older guides. The program guide says First Place “ended 12/31/2023,” so treat any First Place figures you find as history.

How much First Step pays

The program guide posted September 1 describes First Step as “up to four percent” of non-forgivable assistance, based on the purchase price. IHCDA’s participating-lender matrix dated September 24, 2026 breaks that down: 4% with an FHA first mortgage and 3.5% with a conventional (Fannie Mae or Freddie Mac) one. IHCDA’s homebuyers page still says “5% of the price of the home”; the program documents don’t, so confirm the percentage with your lender at reservation. Next Home is simpler. The programs page lists “2.50% or 3.50% Based on the purchase price,” not exceeding the appraised value.

What “non-forgivable” means for an IHCDA second mortgage

All IHCDA assistance is a loan “secured by a Second Mortgage.” Nothing is forgiven over time, and the guide says “There is no proration.” The balance comes due in full if any of these happens during the 30-year first mortgage:

• you stop living in the home as your principal residence;
• you sell or refinance, unless you refinance through an IHCDA program such as Next Step;
• you take out a home equity line of credit;
• you default and foreclosure starts, you break another term of the second note or mortgage, or IHCDA finds that something you stated on the application was false.

Until then, the assistance can go toward “down payment, closing costs, pre-paid items and Realtor compensation.” IHCDA also lets you layer other assistance on top, as long as the extra help sits in third lien position behind U.S. Bank’s first mortgage and IHCDA’s second. The one thing you can’t do is walk away from closing with cash: “A Mortgagor using DPA funds is not eligible to receive any cash back at closing,” except for money you can document as your own investment.

IHCDA’s three-year test, and the veteran and census-tract exceptions

For the bond programs, IHCDA’s definition is someone who has not, during the three years before closing, “had a present ownership interest in his or her principal residence.” It applies only to the people signing the loan and moving in, not to everyone in the household. The guide spells out some edge cases:

• Divorce: if you had an ownership interest in a marital home within three years but lived somewhere else for the full three years before closing, you can still qualify.
• Mobile homes: owning a transportable mobile home (hitch and axles still on, no permanent additions) doesn’t count against you. Owning a double-wide within three years does.
• Inheritance: expecting to inherit a house doesn’t count. Moving into one after you take title does.

Two groups skip the test entirely. The first is buyers in a targeted area: a qualified census tract where “seventy percent (70%) or more of the families have an income which is eighty percent (80%) or less of the statewide median family income,” or a state-designated area of chronic economic distress. IHCDA’s targeted-area map shades counties blue when “entire county is targeted” and yellow when you need to check the tract. The second is an “Eligible Veteran”: anyone who served in the active military, naval or air service or the Indiana National Guard without a dishonorable discharge, as shown on a DD214. Under federal law (26 U.S.C. 143(d)(2)(D)), a veteran can use this exception for bond-financed loans only once.

Income, price and property limits

IHCDA posts two sets of limits, both effective May 25, 2026. For First Step, Step Down and Next Home FHA, it caps both income and price by county. In Marion County outside a targeted tract, that means $110,300 for a household of one or two, $126,845 for three or more, and a $566,355 acquisition limit. In Marion’s targeted tracts, the figures are $132,360, $154,420 and $692,211. Next Home conventional has no price cap, and its Marion income limit is $154,420. Other counties are on IHCDA’s income and acquisition limits page.

IHCDA counts qualifying income for everyone who will live in the home and be liable on the note. A non-occupying co-signer is allowed, but their income isn’t counted and they can’t take title. Neither can a spouse who isn’t on the application.

For bond loans, the home has to be a single-family house, townhome, PUD, approved condo, or HUD-plated double-wide manufactured home that is permanently affixed. You must buy it fee simple and move in within 60 days of closing. Land over one acre needs a zoning or appraiser finding that the extra land is needed for “basic livability.” No more than 10% of the home can be used for business.

Credit, education and the fees IHCDA sets

• Credit score and DTI: the guide sets both through “the requirement set forth by IHCDA and/or the Master Servicer” (U.S. Bank HFA Division), which your lender checks with U.S. Bank.
• Homebuyer education: a certificate goes in with the reservation documents, and IHCDA accepts only two: Fannie Mae’s HomeView or Freddie Mac’s CreditSmart (the program guide calls it “Credit Wise”; IHCDA’s lender matrix lists “Credit Smart or HomeView”).
• Reservation fee: $250, non-refundable, paid by eCheck only, with a $1.00 processing fee.
• Lender fee caps on bond loans: the origination fee is limited to 1%, and total lender fees to $1,600, no matter who pays them.
• One loan at a time: “The mortgagor may only have one IHCDA mortgage loan at the time of closing.”

Bond loans (First Step and Step Down) can also trigger the federal recapture tax. It applies only if all three happen within the first nine years: the home stops being your principal residence, you sell at a profit, and your income is above that year’s adjusted limit. The guide says it “will never exceed the lesser of 6.25% of the original loan amount or one-half (1/2) of the gain.” IHCDA gives you the Federal Recapture Notice when your loan gets final approval.

Mortgage credit certificates are refinance-only now

IHCDA’s MCC page today offers only a re-issuance affidavit, addressed to “All Borrowers who have refinanced their MCC Loan.” The guide’s list of programs that are “Currently… available” names only First Step, Step Down, Next Home and Next Step. The Next Home guides that “include MCC” are filed under IHCDA’s archive.

How a First Step loan gets made

You start with a lender on IHCDA’s participating lenders list. You need a signed purchase agreement before the lender can reserve the loan in IHCDA Online, and the rate is fixed at that point. Once a loan is locked, you can’t relock a new application for at least 60 calendar days. IHCDA underwrites the file for tax-code compliance, and final approval must come within 60 days of the lock, or an extension fee applies. The lender funds both mortgages at closing. U.S. Bank HFA Division then buys the first mortgage and reimburses the lender for the second.

To size a payment first, use our mortgage calculator, affordability calculator or down payment calculator, and get pre-approved. IHCDA’s first mortgages are FHA or conventional; our FHA vs. conventional comparison explains the difference. VA loans aren’t among IHCDA’s reservation types, but veterans can still use First Step through the veteran exception, which federal law allows only once. Closing costs: Indiana closing costs. More: Indiana hub, Great Lakes lenders, and first-time programs in Ohio and Kentucky.

Questions from Indiana first-time buyers

Is IHCDA’s down payment assistance forgiven after a few years?

No. Every IHCDA assistance program is a non-forgivable second mortgage with “no proration.” You repay it in full when you sell, refinance outside IHCDA, open a HELOC or move out.

I owned a home five years ago. Am I a first-time buyer in Indiana?

Yes, for IHCDA’s bond programs. The lookback is three years before closing, so ownership that ended five years ago doesn’t count.

I’m a veteran who owns a home now. Can I use First Step?

Yes, on the first-time question. IHCDA exempts an “Eligible Veteran” with a non-dishonorable discharge shown on a DD214. Federal law allows that veteran exception only once: a veteran who has already received a bond-financed loan through it can’t use it again (26 U.S.C. 143(d)(2)(D)). The county income and price limits still apply, and you can hold only one IHCDA loan at closing.

Can my parents co-sign an IHCDA loan?

Yes, as non-occupying co-signers, if the agency’s guidelines allow it. IHCDA leaves their income out of the household total, and they can’t sign IHCDA documents or take title.

Which homebuyer class does IHCDA accept?

Only a Fannie Mae HomeView or Freddie Mac CreditSmart certificate, according to IHCDA’s program guide and lender matrix.