Indiana's First Step program, administered by the Indiana Housing and Community Development Authority (IHCDA), offers one of the more straightforward down payment assistance options in the country. Qualified homebuyers can receive up to 6 percent of a home's purchase price as down payment and closing cost assistance, paired with a 30-year fixed-rate mortgage through an IHCDA-approved lender. For buyers who have the income to cover a mortgage but not the cash to meet closing requirements, the program closes a common affordability gap.

How the 6% Works

The First Step assistance is structured as a second mortgage. Think of it as a loan that sits quietly behind the primary mortgage. Key features include:

Up to 6 percent of purchase price. That can translate to several thousand dollars on an average-priced Indiana home.
30-year term with no monthly payments. The borrower does not pay on the assistance loan each month.
Repayment triggered by sale, refinance, or end of term. The full balance becomes due if the home is sold, the first mortgage is refinanced, or the 30-year term ends.
Not forgivable. Unlike some state programs that forgive the loan after a period of owner-occupancy, First Step assistance is eventually repaid.

The trade-off is simple. Forgivable programs feel more generous but often come with tighter income and property rules. First Step's non-forgivable structure means the program can serve a wider range of buyers with fewer restrictions.

Who Qualifies

First Step eligibility centers on first-time homebuyer status and meeting IHCDA's program rules. Key requirements include:

First-time buyer. Applicants must not have owned a home as a primary residence in the past three years. Exceptions exist for qualified veterans and buyers in certain targeted census tracts.
Income limits. Household income must fall below program caps tied to location and household size.
Purchase price caps. The home's price must fall below IHCDA's county-specific caps.
Owner-occupancy. The buyer must intend to live in the home as a primary residence.
Credit and underwriting. Buyers must meet lender credit requirements for the 30-year fixed first mortgage.
Homebuyer education. Completion of an approved homebuyer education course is typically required.

The First Mortgage

First Step pairs with a 30-year fixed-rate first mortgage through an IHCDA-approved lender. That first mortgage can be FHA-insured, VA-guaranteed, USDA-guaranteed, or a conventional loan, depending on the buyer's situation. The specific interest rate varies with market conditions and program settings, but IHCDA publishes rates regularly so buyers and lenders can evaluate the complete payment picture.

Buyers pay typical closing costs on the first mortgage (origination, appraisal, title, and insurance escrows) reduced by the help available from the First Step assistance.

Applying Through an Approved Lender

Buyers do not apply directly to IHCDA. Instead, they work with an IHCDA-approved lender, who handles underwriting, the First Step application, and closing coordination. Approved lenders include many large national banks, regional lenders, and credit unions that operate in Indiana. A buyer can find approved lenders through the IHCDA website.

The typical process looks like this:

Buyer completes homebuyer education
Buyer gets prequalified with an IHCDA-approved lender
Buyer makes an offer on an eligible home in Indiana
Lender submits the First Step application
Home is appraised, title is cleared, and final underwriting completes
Buyer closes, with First Step funds applied to down payment and closing costs
Buyer moves into the home as the primary residence

What the 6% Actually Buys

On a $200,000 purchase, 6 percent is $12,000. That is often enough to cover:

A minimum down payment for an FHA loan (3.5 percent of $200,000, or $7,000)
Lender-related closing costs (origination, appraisal, underwriting)
Title insurance and recording fees
Initial escrow deposits for property taxes and insurance

For buyers who have been saving diligently but have not reached the full amount needed to close, First Step's assistance often makes the difference between waiting another year and moving into a home now.

Combining With Other Programs

Indiana buyers can sometimes combine First Step with other assistance, such as employer-sponsored down payment help, community land trust support, or habitat-style programs in designated neighborhoods. The specific rules on stacking depend on each program, so buyers should ask their lender to confirm what combinations are permitted.

IHCDA also offers other homeownership programs, such as Next Home and Mortgage Credit Certificates (MCCs). First Step is specifically tied to first-time homebuyer status, while Next Home can serve non-first-time buyers. MCCs provide a federal tax credit for a portion of mortgage interest paid each year, reducing federal tax liability and improving cash flow.

Pros and Cons to Weigh

First Step is not the only down payment program, and it is not always the best fit. Buyers should weigh:

Pros: 6 percent is significant, the 30-year mortgage is predictable, no monthly payment is required on the assistance, and the program is widely available through many lenders.
Cons: The assistance must eventually be repaid, refinancing triggers repayment, and program rules can affect resale options.

Forgivable programs may be better for buyers who plan to stay in the home long-term and meet the forgiveness requirements. Grant programs may be better for buyers with very limited income. First Step sits in the middle: flexible, widely available, and meaningful but with a defined repayment structure.

Why the Program Matters

Cash at closing is the single biggest barrier for many first-time homebuyers. Even buyers with solid incomes and good credit often save slowly because of rising rents, student loan payments, and child care costs. First Step's 6 percent closes that gap for thousands of Hoosiers each year.

Indiana's homeownership rate has climbed back into the high 60s after a pandemic dip, and state programs like First Step are part of the story. For Indiana buyers ready to make the leap, the combination of a fixed-rate first mortgage, 6 percent down payment help, and the state's relatively affordable housing market can make ownership meaningfully within reach.

Indiana IHCDA First Step: 6% Down Payment Help for Homebuyers