First-time home buyer programs in Indiana: IHCDA and Indianapolis

Who counts as a first-time buyer?

IHCDA’s program guide (February 2026) defines a first-time homebuyer as someone with no ownership interest in a principal residence during the three years before closing. The test applies only to the people who sign the loan and will live in the home. Prior ownership of a single-section mobile home does not disqualify you if the lender documents certain facts. Inheriting a share of a property does not count until you take vested title and live there.

The guide waives the first-time rule in two cases: the home is in a targeted area (a federally designated qualified census tract or an area of chronic economic distress), or you are an eligible veteran. Next Home also accepts repeat buyers.

IHCDA programs

IHCDA programs are statewide, in all 92 counties. All pair a 30-year fixed-rate FHA or conventional first mortgage with, in most cases, a second mortgage for the assistance. According to IHCDA’s program page and guide:

• First Step: first-time buyers (or targeted area or veteran). 5% of the price as down payment assistance (DPA), plus a bond-funded interest rate.
• Step Down: same eligibility, rate only, no DPA.
• Next Home: first-time or repeat buyers. DPA of 2.5% or 3.5% of the price or appraised value, whichever is less. FHA or conventional.
• Next Step: a one-time refinance for First Step and Step Down borrowers, with DPA matching the current lien.

The assistance is a second mortgage at 0% with no monthly payments. It is not forgivable. IHCDA’s FAQ and guide say it comes due when you sell, refinance (other than through an IHCDA refinance program), stop using the home as your main residence, or reach the end of the 30-year first mortgage. You can use it for the down payment, closing costs, prepaid items and agent compensation.

Other conditions in the guide:

• Reserve through a participating lender and pay a $250 non-refundable reservation fee (paid by eCheck, with a $1.00 processing fee).
• Complete homebuyer education; the guide names Fannie Mae’s HomeView and Freddie Mac’s Credit Wise as the only accepted certificates.
• Live in the home as your main residence. Bond loans may not exceed the appraised value.
• Lenders may charge at most 1% origination and $1,600 in lender fees on bond loans.
• Minimum credit score and maximum debt-to-income ratio are set by IHCDA and its master servicer; the guide does not state them, so ask a participating lender.

Income and price limits for Marion County

IHCDA publishes limits by county, effective May 25, 2026. Marion County has targeted tracts, so it has two sets of numbers.

Source: IHCDA income and acquisition limit tables, May 2026. The Next Home Conventional table lists Marion County at $154,420 with no acquisition limit.

Check your address against IHCDA’s targeted area list, and have a lender confirm which table applies to your loan.

Example: what the assistance is worth

These figures are an illustration. Take a purchase price equal to the Indianapolis median home value of $241,500 (see our Indiana home prices page).

On an FHA loan, $12,075 would cover the minimum down payment on this price and part of the closing costs. It is a loan, not a gift: you repay it when you sell or refinance.

Federal recapture tax

Bond-funded loans (First Step, Step Down) can trigger the federal recapture tax. IHCDA’s guide says nothing is due if you sell more than nine years after closing, at a loss, on death, or in a transfer to a spouse. Otherwise the maximum is the lesser of 6.25% of the highest loan principal or 50% of your gain, reduced by your holding period and by how much your income exceeds the limit in the year of sale. On a $230,000 loan, the cap is $14,375. IHCDA tells borrowers to consult a tax advisor and see IRS Form 8828.

Programs in Indianapolis

The City of Indianapolis does not list a down payment program of its own. Its housing page tells prospective buyers who want an affordable home, down payment assistance or a specialty mortgage to contact a local nonprofit homeownership partner, whose name and phone number are on that page.

The city’s Homeowner Repair Program helps income-qualified owner-occupants with repairs, but applications are closed and, per the city page, expected to reopen in 2027; emergency repairs are still considered. Homeowners behind on payments can use Indiana’s foreclosure prevention network at 877gethope.org, listed on IHCDA’s site. IHCDA’s Individual Development Account program offers up to $4,500 in state matching funds for a qualified purchase.

Comparison of the main programs

You apply through an IHCDA participating lender; see the home-buying steps guide and our page on buying in Indianapolis.