Updated · Mike Certo, NMLS #260555
Indiana Down Payment Assistance Programs Guide
Indiana's down payment help runs almost entirely through IHCDA, and the money arrives as a second mortgage layered behind your main loan. Here is the part that trips people up: none of it is forgiven. First Step and Next Home are both repayable seconds. This page digs into the mechanics: what non-forgivable actually costs you, what triggers repayment, the programs Indiana quietly retired, and how each option stacks on an FHA, FHA or conventional first mortgage.
How does IHCDA down payment assistance actually work?
The assistance is never a standalone loan. IHCDA places it as a second mortgage behind your first, so it fills the down payment and closing-cost gap while your primary loan carries the purchase. Two seconds do the work: First Step at 5% of the price, and Next Home at 2.5% or 3.5%. You pick one, not both. Neither charges a monthly payment, and neither is forgiven, which is the single most important thing to understand before you sign in Indiana.
What does "non-forgivable" mean for your money?
In many states, down payment help forgives a little each year until it disappears. Indiana does not work that way. The IHCDA second sits quietly on your title with no monthly payment, but the full amount stays owed the entire time you hold the loan. There is no clock counting it down to zero. Take a 5% First Step second on a $280,000 Fishers home and that is $14,000 you will repay in full at the moment you sell, refinance, or move out. Treated as a bridge to ownership it is useful; treated as free money it will sting.
First Step: 5% as a repayable second
First Step lends 5% of the purchase price for first-time buyers, apart from the target-tract and verifiable-military exceptions. It carries no monthly payment, so it does not raise your housing cost month to month. What it does is create a lien for the full 5% that settles when the home changes hands or stops being your primary residence. For a first-time buyer in Indianapolis or Lafayette who is short on savings but plans to stay a while, that trade often makes sense.
Next Home: 2.5% or 3.5% for first-time and repeat buyers
Next Home lends 2.5% or 3.5% of the price or appraised value, whichever is less, and its headline feature is that it drops the first-time requirement. A repeat buyer moving up in Carmel or relocating to Bloomington can use it. Like First Step, it is a non-forgivable second with no monthly payment, repaid on sale, refinance, or loss of primary residence. It caps lower than First Step, but it reaches a much wider group of buyers.
First Step vs Next Home, side by side
The two seconds solve the same problem from different angles. One is larger and first-time only; the other is smaller and open to everyone. This is the comparison Mike walks through on almost every IHCDA call.
| Feature | First Step | Next Home |
|---|---|---|
| Amount | 5% of purchase price | 2.5% or 3.5% of price/value |
| Structure | Non-forgivable second | Non-forgivable second |
| Monthly payment | None | None |
| Forgiveness | None; repaid in full | None; repaid in full |
| Buyer type | First-time only (or target/military) | First-time or repeat |
| Repaid when | Sale, refi, or non-primary | Sale, refi, or non-primary |
Programs Indiana quietly retired
A lot of Indiana down payment content online is out of date, and the stale entries can send you chasing help that no longer exists. Three corrections matter. First Place, IHCDA's old first-mortgage program, ended on December 31, 2023. The Helping To Own program, often described as an H2O "3.5% grant that never repays," is not a current IHCDA offering; the current 3.5% product is Next Home, and that one is a repayable second. And IHCDA no longer issues new Mortgage Credit Certificates, keeping only a re-issuance affidavit for existing holders. If a blog points you to any of these, confirm the current lineup at in.gov/ihcda.
Where Step Down and Next Step fit
IHCDA runs two more programs that are easy to confuse with the down payment help. Step Down is rate-only. It gives no down payment assistance, so it suits a first-time buyer who has the cash but wants IHCDA's rate structure. Next Step is a refinance product for people who already hold an IHCDA First Place or First Step mortgage. Neither one puts money toward a down payment on a new purchase, so if that is your goal, First Step or Next Home is the path.
How does IHCDA assistance layer with FHA, FHA or conventional?
The assistance second sits on top; the first mortgage decides most of the terms. FHA is the usual base for thinner credit or a slim down payment, with a 2026 Indiana floor of $541,287 on a single-family home, uniform across all 92 counties. Conventional financing fits once your score clears the mid-600s, because the mortgage insurance cancels at 20% equity. VA is zero down for eligible veterans. And a large share of rural Indiana qualifies for zero-down USDA, so the IHCDA second can pair with the loan type that fits your file.
What triggers repayment, and what does it cost to reserve?
Three events settle an IHCDA second: selling the home, refinancing the first mortgage, or the home no longer being your primary residence. Any one of them makes the full assistance balance due, because there is no forgiveness to reduce it. On the cost side, IHCDA charges a $250 reservation fee, and it caps lender fees at $1,600, so the up-front expense of using the program is modest. The larger number to plan for is the second itself, which you repay in full when one of those three events happens.
Which IHCDA option fits which buyer?
If you are a first-time buyer who needs the most help and plans to stay put, First Step wins on size at 5% of the price. If you have owned before, or you want a smaller second, Next Home is the fit because it opens to repeat buyers at 2.5% or 3.5%. Both are repayable, so neither is a way to get free equity, and the choice really comes down to eligibility and how much you need. A buyer with cash on hand who only wants a better rate should look at Step Down instead of either second.
Related Indiana guides
- Indiana first-time home buyer guide
- Indiana transfer tax and closing costs
- All Indiana loan programs
- Talk to Mike about your scenario
Indiana down payment assistance FAQ
Is IHCDA down payment assistance a grant you never repay?
No. Both First Step and Next Home are second mortgages, not grants, and neither is forgiven over time. You make no monthly payment on the second, which is where the grant confusion starts. But the full balance is due when you sell the home, refinance the first mortgage, or the property stops being your primary residence. Budget for that repayment before you treat the money as free.
What triggers repayment of an IHCDA second mortgage?
Three events: selling the home, refinancing the first mortgage, or the home no longer being your primary residence. Any of them makes the full assistance balance due, because IHCDA's First Step and Next Home seconds are non-forgivable. There is no forgiveness clock that erases the balance if you stay long enough, which is how these differ from many other states' programs.
How is Next Home different from First Step?
First Step lends 5% of the purchase price and is limited to first-time buyers, apart from target-tract or military exceptions. Next Home lends 2.5% or 3.5% of price or appraised value and is open to first-time and repeat buyers alike. Both are non-forgivable seconds with no monthly payment. Next Home is the one a move-up buyer reaches for; First Step is larger but first-time only.
Does Indiana still offer the First Place or H2O programs?
No. IHCDA's First Place program ended on December 31, 2023, and the older Helping To Own (H2O) grant is no longer a current program. Some aggregator pages still list an H2O 3.5% grant that never repays, but that is stale. Indiana's current 3.5% product is Next Home, which is a repayable second mortgage, not a grant.
Can I still get a new Indiana MCC?
Probably not a new one. IHCDA no longer issues new Mortgage Credit Certificates; it keeps only an MCC re-issuance process for people who already hold one and are refinancing. If a page tells you to pick up a fresh Indiana MCC for a purchase, confirm current availability with IHCDA before you count on the tax credit.
What credit score does IHCDA down payment assistance require?
IHCDA's program guide states no fixed minimum credit score and defers to the master servicer. In practice lenders typically look for around 640 on IHCDA loans, so treat that as a working target, not a hard IHCDA floor. If your score is close, ask Mike what moves it over the line before you apply.