4 programs that can help you afford to buy a home in Indiana

With Indiana's housing market facing historically high home prices and continued high demand despite the COVID-19 pandemic, first-time homebuyers may be at a loss as to how to afford buying a new home. 

These programs are designed to make homebuying more affordable by providing down payment assistance or tax credit to eligible buyers.

Indianapolis Housing Agency

Unlike most down payment assistance programs that are aimed at low-income or first-time homebuyers, the Hoosier Homes program allows applicants who earn $114,240 combined or less annually to qualify.

The Hoosier Homes initiative will offer up to 6% down payment assistance on homes in Marion County with purchase prices up to $450,000.

"It’s one more tool in the community’s toolbelt" to encourage home ownership, said Christopher Walsh, deputy executive director of the Indianapolis Housing Agency. "The Indianapolis Housing Agency doesn’t want to think of itself as strictly providing government assistance to very low-income people exclusively for rental purposes. We want to think about how we can serve the community more broadly, and home ownership is a big part of that."

Through this program, homebuyers can receive 3% to 5% assistance on down payment or closing costs. You can also receive an additional 1% assistance if you are a K-12 teacher, a first-responder, in the U.S. military or a veteran, or if you live in Marion County and earn less than $40,800 per year.

The assistance comes in the form of a three-year forgivable second lien with zero interest on the loan.

"Some people just cannot afford, especially in today’s market, the tremendous run-up in home price appreciation," said Jed Guenther, senior vice-president at Bayview Loans, whose sister company, Lakeview Loans, is a partner in the program. He added that the program helps cover some of the most significant costs in home ownership: the down payment and closing costs.

Other eligibility requirements:

• Must have a minimum FICO credit score of 620 and debt to Income ratio up to 50%
• Must occupy the home as principal residence within 60 days of closing
• Must purchase one of the following types of homes: single-family, townhome, condominium or duplex
• Must be a new purchase (no refinancing)
• Home can be in either Marion County or Fort Wayne

Find out if you are eligible and start the application process at the Housing Resource Hub, a non-profit partner of the Indianapolis Housing Agency.

First Place Federal Housing Authority program

Looking to buy your first home? Through the First Place program, homebuyers who meet certain eligibility requirements may receive down payment assistance of up to 6% of either the purchase price or the appraised value of the home, whichever is lower.

Homebuyers will not have to make any monthly mortgage payments or interest on this assistance.

As long as homebuyers do not sell or refinance the home within nine years from the date of closing, the full down payment assistance amount will be forgiven.

Otherwise, if they sell the home within nine years, make a profit on the sale of the home, and if the household income for the year is more than the year’s adjusted qualifying income for a family of that size, they will have to repay the original loan amount or half of the gain on the sale of the home, whichever is lower.

Key eligibility requirements:

• Must be a first-time homebuyer unless you are purchasing a home in a designated targeted area, a list of counties which includes Shelby County, or a qualified census tract within certain counties 
• Must have a minimum FICO credit score of 640 with a debt-to-income ratio of less than 45% or a minimum score of 680 with debt-to-income ratio greater than 45% but less than 50%
• Meet income limits, available on the Indiana Housing Authority website. They vary by county. In Marion County, you cannot earn more than $81,600 if you have a one- to two-person household unless you live in a designated census tract, in which case, you can earn up to $97,920 as a one- to two-person household. The income limit for three-person households is $93,840. If you live in a designated census tract, it is $114,240.
• The home must be your principal residence

Next Home Federal Housing Authority program

Even if you’re not a first-time homebuyer, you can get help with down payments on your new home with the Next Home program. This 30-year fixed-rate program will assist homebuyers with down payment assistance on the purchase of a single-family home. Homebuyers can receive assistance of up to 3.5% of either the purchase price or the appraised value of the home, whichever is lower.

It can be used in conjunction with the mortgage credit certificate, which is described below.

Key eligibility requirements

• Meet income limits, available at the Indiana Housing Authority website. The income limits and credit score requirements are the same as for the First Place program.
• The home must be your principal residence

Mortgage credit certificate

First-time homebuyers and individuals buying single-family dwellings in the state of Indiana can receive a federal income tax credit that assists the borrower in reducing how much they need to pay in federal income tax. If you’re not a first-time homebuyer, you may still be eligible if you are a veteran or if you are buying a home in a designated targeted area.

Homebuyers can apply for the mortgage credit certificate through a participating lender when they apply for a loan. The mortgage credit certificate can only be used by individuals who do not already have a mortgage on the home in question.

The tax credit can be used in conjunction with the Next Home program.

Key eligibility requirements:

• Meet income limits, available at the Indiana Housing Authority website. They vary by county. The income limits and credit score requirements are the same as for the First Place program.

Contact IndyStar reporter Ko Lyn Cheang at kcheang@indystar.com or 317-903-7071. Follow her on Twitter: @kolyn_cheang.