Down Payment Assistance in Indiana

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Real Estate

Down Payment Assistance Programs

Many people want to own a home but struggle to save for the down payment. What if you could click your heals together and make down payment money appear? Well, it isn't quite THAT simple, but start "clicking" as you learn about down payment assistance programs that could make home ownership a reality. Does this sound too good to be true? It’s not. There are programs available to help people with decent credit and a stable employment history to buy a home without having to save up for years while pouring rent money down the drain. And even better—you don't have to pay them back. 

Seller-funded down payment programs were eliminated in the Housing and Economic Recovery Act of 2008, but States and Local government agencies are still permitted to help borrowers finance their homes with second mortgages and grants. These agencies set their own requirements that borrowers must meet in order to qualify for the programs including property location, income limits, and in some cases purchase price.

While the qualifications vary according to program and state, these programs typically require that buyers first qualify for a home loan through a mortgage lender. Typically buyers must complete a Home Ownership Counseling course. Each program is unique and has its own guidelines such as income and asset restrictions, recapture clauses, reserves required, or geographic boundaries.  Assistance programs often participate with FHA but some also work with conventional loan programs. All can be used for single family homes, and some also allow manufactured/modular home, condos, and rehab homes. Most programs allow both new construction and existing homes.  Most programs do not underwrite the loan, and they typically don't add cost in the form of points or fees. They just provide the gift of the down payment and/or closing costs to those who qualify.

Let’s look at two of the programs:

Indiana NextHome Program
Financial Assistance for Homebuyers in Indiana

The Indiana Housing & Community Development Authority introduced the NextHome program to help make home ownership more affordable for people who are working to finance a home purchase. The purpose of this program is to make funds available to eligible applicants who need financial assistance to pay the upfront costs of borrowing such as the down payment and closing costs. When closing on a home loan, fees and expenses can add up quickly and prove to be prohibitive for some borrowers.
 
Under the Next Home program, borrowers with an FHA mortgage from a participating lender can apply and be awarded down payment assistance of up to 4 percent of the purchase price.  Borrowers seeking a conventional loan can apply and be awarded up to 3 percent. The award comes in the form of a deferred loan. This loan is forgiven in full after two years, carries a zero percent interest rate, and no monthly payments are required.
 
Eligibility Requirements

NextHome is not just for first-time homebuyers, and there is no limit on purchase price; therefore a larger number of applicants can benefit from it. However, there are other requirements that applicants must meet to be considered eligible:

  • A credit score of at least 660
  • Must have a mortgage from an IHCDA Participating Lender.
  • Can be combined with Mortgage Credit Certificate (MCC)
  • Must complete "Framework", an online homebuyer education course.
    • Participants of Next Home are reimbursed the $75 cost of the course at closing.
  • Must meet income limits
    • Limits area based on the county where the home is located, the type of program, and type of mortgage.

First Place (FP)

The First Place FHA Program (“FP FHA”) is a first-time homebuyer program that provides down payment assistance in an amount not to exceed six percent (6%) of the purchase price or appraised value of the Subject Property, whichever is lower. This is done using FHA financing in the form of forgivable second mortgage with no monthly payments or interest associated. If the home is sold or refinanced within the nine (9) years from the date of closing, the full amount of down payment assistance must be repaid. This second mortgage is fully forgiven following the anniversary date nine (9) years after the date of closing. These loans associated with the First Home Program must meet the requirements set forth in the Program Guide along with the requirements of the Master Servicer and Ginnie Mae. This program may not be combined with other IHCDA program. 

Eligibility Requirements

  • Based on the purchase price
    • Purchase price cannot exceed the appraised value
  • Borrower must be a first-time homebuyer, unless
    • The subject property is located in a qualified census tract or targeted areas
  • Mortgage must be FHA, 30-year fixed rate loan
  • Minimum FICO credit score of 640 with a debt to income ratio of less than 45.00%, or
    • Minimum FICO credit score of 680 with debt to income ratio greater than 45.00%, but less than 50.00%