Updated · Mike Certo, NMLS #260555
Indiana First-Time Home Buyer Guide (2026)
Indiana runs its first-time-buyer help through IHCDA, the state housing finance agency. Two products do the work: First Step gives 5% of the price toward your down payment, and Next Home gives 2.5% or 3.5%. Here is the thing most Indiana buyers get wrong. This money is a second mortgage you pay back, not a grant. This guide covers who counts as a first-time buyer here, how First Step and Next Home differ, and how the loan types pair.
Who qualifies as a first-time buyer in Indiana?
In Indiana, a first-time buyer is anyone who has not owned a principal residence in the past three years. That is the test IHCDA uses for First Step and Step Down, and it means a past owner who has rented for a few years can qualify again. Two groups skip the rule: buyers purchasing in a HUD-designated target census tract, and buyers with verifiable military service. Next Home drops the first-time requirement entirely, so a repeat buyer in Bloomington or Fort Wayne can still get help.
The IHCDA program menu, plain
IHCDA does not hand out one loan. It layers a first mortgage with an optional assistance second, and it also runs a rate-only track and a refinance track. Here is how the four current programs fit for a buyer in 2026.
| Program | What it gives | Structure | Key rule |
|---|---|---|---|
| First Step | 5% of purchase price | Non-forgivable second, no monthly payment | First-time buyer (or target tract / military) |
| Next Home | 2.5% or 3.5% of price/value | Non-forgivable second, no monthly payment | First-time or repeat buyers |
| Step Down | Rate-only, no down payment help | First mortgage, reduced-rate structure | First-time (or target tract) |
| Next Step | Refinance only | For existing IHCDA mortgages | Not for new purchases |
First Step and Next Home are the two most first-time buyers ask about, because they put cash toward the down payment. Step Down helps on the rate side without assistance, and Next Step exists only to refinance an existing IHCDA loan. The down payment assistance page digs into the repayment mechanics on First Step and Next Home.
First Step or Next Home, which one fits you?
The choice usually comes down to two things: whether you are a first-time buyer, and how much help you need. First Step lends the larger amount, 5% of the price, but it is limited to first-time buyers apart from the target-tract and military exceptions. Next Home lends 2.5% or 3.5% of price or appraised value, whichever is less, and it opens the door to repeat buyers. So a first-time buyer in Evansville who wants the most help leans First Step, while a move-up buyer in South Bend uses Next Home.
| 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 |
| Buyer type | First-time only (or target/military) | First-time or repeat |
| Repaid when | Sale, refi, or non-primary | Sale, refi, or non-primary |
Why Indiana's assistance is not a grant
This is the correction that saves Indiana buyers from a bad surprise at closing or resale. Neither First Step nor Next Home is a grant, and neither is forgiven over time. They are second mortgages. You make no monthly payment while you live in the home, which is why people assume the money is free, but the full amount is due when you sell, refinance the first mortgage, or move out and it stops being your primary residence. On a $280,000 Indianapolis home, a 5% First Step second is $14,000 you repay at that point, so plan for it.
Do IHCDA loans have income and price limits?
Yes, and they are set by county and family size rather than one statewide number. IHCDA publishes a purchase-price ceiling and a household-income ceiling for each county, and the current set took effect in May 2026. Because those figures move and differ from Marion County to a rural county, the honest answer is to confirm your county's limit at in.gov/ihcda before you rely on a number. For context, the Indiana median sale price sits near $280,000 as of May 2026, and Indianapolis runs closer to $259,000, so a large share of Indiana homes fall well under the ceilings.
Which loan type should a first-time buyer pair with?
The IHCDA assistance rides on top of a first mortgage, and the first mortgage is where most of the decision sits. FHA is the common landing spot for lower credit or a slim down payment, and the 2026 FHA floor in Indiana is $541,287 on a single-family home, the same in all 92 counties. Conventional financing fits once your score climbs into the mid-600s, because the private mortgage insurance cancels at 20% equity. VA is zero down for eligible veterans. And a wide stretch of rural Indiana qualifies for USDA.
Is much of Indiana eligible for a zero-down USDA loan?
Yes. Once you step outside the urbanized cores, most of rural Indiana is USDA-eligible with no down payment. The areas that do not qualify are the Indianapolis metro and its suburbs, Fort Wayne, Evansville, South Bend, and the Lake County cities of Gary and Hammond. USDA caps household income near $122,800 for a one-to-four-person household in most counties as of 2026, and eligibility is address-specific. Because that figure updates and varies, confirm your address and income at USDA's eligibility tool before you count on it.
Good news on closing costs: Indiana has no state transfer tax
Many states hit buyers or sellers with a transfer tax that can run into the thousands. Indiana does not. There is no state real estate transfer or deed tax here. What you do pay is small: a $10 Sales Disclosure Form filing fee to the county auditor under IC 6-1.1-5.5, plus flat recording fees of roughly $25 per document. In Marion County the parcel charges add a $20 Sales Disclosure Form fee alongside the $10. The transfer-tax and closing-cost page lays out the full breakdown.
Indiana first-time buyer FAQ
Who qualifies as a first-time buyer in Indiana?
In Indiana a first-time buyer is someone who has not owned a principal residence in the past three years, the test IHCDA applies to First Step and Step Down. Two groups skip it: anyone buying in a HUD-designated target census tract, and buyers with verifiable military service. Next Home has no first-time rule at all, so a repeat buyer can use it.
What is IHCDA's First Step program?
First Step is IHCDA's down payment help for first-time buyers. It provides 5% of the purchase price as a second mortgage with no monthly payment. The part buyers miss is that it is non-forgivable: you repay the full amount when you sell, refinance, or the home stops being your primary residence. You also need to be a first-time buyer unless you buy in a target census tract or have verifiable military service.
How is Next Home different from First Step?
Next Home gives 2.5% or 3.5% of the price or appraised value, whichever is less, again as a non-forgivable second you repay on sale, refinance, or loss of primary residence. The big difference is eligibility: Next Home is open to first-time and repeat buyers, so it is the product a move-up buyer uses. First Step is larger at 5% but limited to first-time buyers.
Is IHCDA down payment assistance a grant?
No. This is the most common Indiana mix-up. Both First Step and Next Home are second mortgages, not grants, and neither is forgiven over time. You carry no monthly payment on them, but the full balance comes due when you sell the home, refinance the first mortgage, or stop using it as your primary residence. Plan for that repayment before you count the money as free.
What credit score do I need for an IHCDA loan?
IHCDA's own program guide sets no fixed minimum credit score; it defers to the master servicer. In practice lenders typically look for around 640 on IHCDA loans, so treat 640 as a working target rather than a hard IHCDA rule. If your score sits just under, Mike can map out what moves it over the line before you apply.
What is the 2026 conforming loan limit in Indiana?
$832,750 on a one-unit home, and it is the same in all 92 Indiana counties for 2026 because Indiana has no high-cost county. That makes Indiana an all-baseline state, unlike what many blogs suggest. The 2026 FHA floor is $541,287 statewide on a single-family home. Loans above your county's conforming limit become jumbo loans with tighter underwriting.
Is much of Indiana USDA-eligible?
Yes. Most rural Indiana qualifies for a zero-down USDA loan. The excluded areas are the urbanized cores: the Indianapolis metro, Fort Wayne, Evansville, South Bend, and the Lake County cities of Gary and Hammond. USDA caps household income around $122,800 for a one-to-four-person household in most counties as of 2026. Confirm your exact address and income limit at USDA's eligibility tool.