Purchasing your first home can be an exciting and rewarding experience, but it can also be very trying if you are of limited financial resources. In the state of Indiana, first time home buyers have access to three programs designed exclusively to help making homeownership a reality. While some states provide many more opportunities than Indiana, the assistance Indiana does provide has helped countless low and moderate income buyers purchase their first home.
Indiana Housing and Community Development Agency (IHCDA)
IHCDA is an Indiana state agency whose mission is to ensure the availability of safe, good-quality, affordable housing to all Indiana residents. The agency provides funding for low-interest loans, down payment and closing costs assistance, and rehabilitation grants through a network of banks, mortgage brokers, and nonprofit organizations. The IHCDA currently has only three programs aimed at first time home buyers. They are: First loan, First Loan Plus, and Mortgage Credit Certificates (MCC).
Indiana First Loan Program
The First Loan program offered by IHCDA is aimed at first time home buyers who don't need assistance with down payment or closing costs. The program provides a low-cost, fixed-rate mortgage through FHA or a conventional loan product. As do most housing assistance programs of this sort, certain restrictions do apply. For example, borrowers must be first-time buyers who have not owned another home within three years of the time of application. Upon approval, applicants must complete a free, online home buyer’s education course prior to close.
Furthermore, there are income requirements and restrictions due to the fact the program is aimed at low to moderate income families. The bank or lending institution that provides the IHCDA loan will require from all applicants a verifiable work history, current income and financial outlook, and a decent credit score. Loans will be subject to purchase price restrictions based on geographic location.
Indiana First Loan Plus Program
The First Loan Plus program is nearly identical to the First Loan program except that it also provides first time home buyers with financial assistance to cover closing costs and a down payment. These loans enjoy the same low interest rate as First Loan, plus as much as 6% of the home's value to be applied to closing costs and down payment. This assistance does not exceed $7,500 in any case. Borrowers with disabilities may qualify for additional financial assistance of up to 10% of their chosen home's value. In order to qualify for First Loan Plus borrowers must meet the requirements of the First Loan program.
Indiana Mortgage Credit Certificates
Mortgage Credit Certificates are part of a federal program administered by the individual states. These certificates allow homeowners to reduce their federal tax liability based on a formula which takes into consideration interest paid on their mortgages. With these certificates, first time buyers increase the amount of spendable income they have available for mortgage payments, thus making it easier to qualify. Certificates are good for the entire life of the mortgage as long as the homeowner remains in the home as his primary residence.
Other Financing Options
Often times there are other state, county, and municipal options for first time home buyer’s assistance in Indiana. These opportunities vary in nature and scope and are not always available. The HUD website is a good place to find information on these first time home buyer programs, since more often than not they are funded with HUD grants. These grants are sometimes made in combination with IHCDA loans, private conventional loans, or programs from nonprofit organizations. Currently the HUD website lists opportunities in major Indiana cities like Indianapolis, Fort Wayne, and South Bend.
From time to time cities and counties will offer their own assistance programs as a means of finding new owners for city-owned homes. These homes may have been seized by the municipality to pay for delinquent tax liens, or they may be homes that were simply abandoned by their previous owners.
In order to prevent further city blight, these homes are often sold at prices well below market value to first time home buyers. Assistance programs including low-cost mortgages, down payment assistance programs, and rehab grants and loans are often available. Your real estate agent should be aware of any such opportunities in your local area.