Overview
Indiana is one of the more forgiving places in the country to buy a first home. The statewide median sits around $255,000 in 2026 (Indianapolis runs closer to $240,000), well under the national figure, and a low cost of living stretches a paycheck further. The Indiana Housing and Community Development Authority (IHCDA) runs the state's homebuyer programs, pairing affordable first mortgages with down payment help. The real challenge here isn't price, it's the cash to close, and that's exactly the gap these programs are built to bridge.
IHCDA's flagship is the First Step program, which layers a 30-year FHA or conventional first mortgage with down payment and closing-cost assistance of up to 6% of the purchase price. That help comes as a forgivable second mortgage with no interest and no monthly payment, fully forgiven after nine years as long as you don't sell or refinance. It's open to first-time buyers, qualified veterans, and anyone purchasing in a targeted census tract. You'll need a 640 credit score (680 if your debt-to-income runs higher), must stay within IHCDA's county income limits, and complete homebuyer education.
State Programs
First Step Program
Forgivable second mortgage (down payment assistance)Next Home Program
Forgivable second mortgage (down payment assistance)Helping To Own (H2O)
Down payment grantMortgage Credit Certificate (MCC)
Federal tax creditINHP Down Payment Assistance (Indianapolis)
Forgivable/deferred second loan (local)Federal Programs Available in Indiana
These nationwide programs can be combined with Indiana state assistance for maximum benefit.
FHA Loan Program
Low down payment mortgageVA Home Loan
Zero down payment mortgageUSDA Rural Development Loan
Zero down payment mortgageTips for First-Time Buyers in Indiana
If nine years feels long, the Next Home program offers up to 3.5% in assistance forgiven after just two years, and it's open to repeat buyers, not only first-timers. Lower-income first-time buyers using an FHA loan can instead take the Helping To Own (H2O) program, a grant of up to 3.5% of the loan amount that never has to be repaid (subject to a federal recapture tax only if you sell within nine years at a gain). Stack any of these with IHCDA's Mortgage Credit Certificate, which converts part of your mortgage interest into a federal tax credit worth up to $2,000 a year for the life of the loan.
Indiana keeps taxes light. The state income tax is a flat 2.90% for 2026 (accelerated under a 2025 law, with conditional cuts toward 2.85% after 2030), among the lowest flat rates anywhere. Effective property taxes run roughly 0.8% of value, and Indiana's constitution caps an owner-occupied home's bill at 1% of assessed value. On a $255,000 home, that's well under $2,500 a year before deductions. The standard homestead deduction knocks $48,000 off your assessed value, a supplemental deduction trims more, and Indiana added a new homestead credit for 2026 — real savings that lower your bill further.
Beyond the state, look local. In Marion County, the Indianapolis Neighborhood Housing Partnership (INHP) offers forgivable down payment assistance for qualifying buyers, paired with its own mortgage. Military buyers near Camp Atterbury, Grissom Air Reserve Base, or Naval Surface Warfare Center Crane should compare a zero-down VA loan against stacking IHCDA help on an FHA loan. Start with a HUD-approved housing counselor (free, and required education for most programs runs through IHCDA-approved providers), then choose an IHCDA-participating lender to actually originate the loan.
Frequently Asked Questions
For educational purposes only -- not financial or tax advice. Program details, eligibility requirements, and benefit amounts are subject to change. Verify all information directly with the administering agency before applying. Last verified: June 15, 2026.