With housing prices and interest rates still hanging high, it can feel almost impossible to ever save up enough money to qualify for a home loan. If this is how you’re feeling right now, you’re not alone.
Many First Time Home Buyers today cannot qualify. Not because Indiana residents don’t have good enough credit scores (they do) or don’t have stable income (they do – about $62k per household). The hurdle is the down payment requirements.
Saving while paying rising rents at the same time is not easy. That’s why there are some great government programs in place to help people in these exact situations, called down payment assistance.
Keep reading to learn about down payment assistance available through the Indiana Housing & Community Development Authority (IHCDA).
How Does Down Payment Assistance Work in Indiana?
Applying for down payment assistance through IHCDA comes in the form of a “forgivable” second mortgage. You never have to make a payment on this second mortgage, nor do you accumulate interest on it. Here’s the catch.
Depending on the program you use, you will agree to remain in your home for a certain amount of time. If you sell or refinance before the end of that agreed time period, you’d have to pay back your down payment assistance.
However, if you follow through on your end of the agreement, the second mortgage is forgiven and that money turns into home equity!
The Programs
First Place Program
This FHA program allows buyers to get up to 6% in down payment assistance for the purchase price or the appraised value of the home (whichever is lower).
First Place Down Payment Assistance comes in the form of a second mortgage that after 9 years is forgiven by IHCDA and then becomes equity in your home. If you sell or refinance before that time, you will have to repay the down payment assistance.
Conditions
- Must be a First Time Buyer to be eligible OR buy within a Target Area in Indiana.
- Must be within income limits
- No more than 10% of the residence can be used for business use.
- Investment properties are not eligible.
- Appraisal must be done by a licensed appraiser under HUD.
- 640 FICO score or higher
- DTI (Debt to Income ratio) of less than 45%
For more information on this program, reach out to one of our First Option Mortgage Lending Officers today.
Next Place Program
This FHA program provides 3.5% of the purchase or appraised price (whichever is lower).
Next Place Down Payment assistance can also be applied to closing costs.
Buyers do not have to be a first time home buyer to qualify.
In order for your Next Place DPA to be forgiven, you must live in the home for 3 years and not sell or refinance within that time. Otherwise, you’ll have to pay back the DPA.
Conditions
- Must be a 30-year fixed rate mortgage
- Must be a single-family residence.
- You must use the interest rate specifically for the Next Place Program.
- Must meet county specific income limits based on your family size.
- 640 FICO score or higher
- DTI (Debt to Income ratio) of less than 45%
For more information on this program, reach out to one of our First Option Mortgage Lending Officers today.
Other Assistance Programs Available
Down payment assistance isn’t the only way to cover your down payment. You can also apply for homebuyer grants, matched savings programs, receive gift funds from family, and other “free money” opportunities. These may be a much more palatable option.
If you don’t qualify for DPA or don’t feel it’s right for you, our First Option Mortgage Lenders would be happy to discuss homebuyer grant programs with you.
Why it’s Okay to Ask for Down Payment Assistance
You may feel a little shame to even consider applying for assistance, especially if you’re a millennial or Gen Z. If so, think of it this way…
Instead of seeing it as asking for help, think of it as the state investing in you to become an established part of the community, so you can help invest in your local area via property taxes.
Property taxes make up a huge part of the local government budget. These funds are used to finance K-12, parks, police and fire departments, and more.
Without those funds, development slows and communities may go without crucial resources, much needed improvements, and support programs. Homeownership is not just about having a permanent residence with a fixed payment. Homeownership helps build strong communities.
But the economy isn’t what it used to be, especially the housing market. That’s why Indiana offers down payment assistance with the goal to invest in potential homeowners with the goal to see that money returned long-term through contribution to the community for years to come.
For more information on DPA programs or homebuyer grants, contact us today.
