IHCDA First Step vs. Next Home: Indiana Down Payment Assistance Programs Compared

Indiana has more down payment assistance options than most buyers realize — and the differences between programs genuinely matter. The Indiana Housing and Community Development Authority (IHCDA) runs several parallel programs, and statewide options are layered on top of regional alternatives like Hoosier Homes and Club 720 that serve higher-income earners in specific counties. Picking the wrong program — or not knowing all your options — can leave thousands of dollars on the table.

Here's a direct comparison of the main Indiana DPA programs, who each one is designed for, and how to decide which one fits your situation.

The Core IHCDA Lineup

IHCDA administers Indiana's statewide down payment assistance through approved participating lenders. All IHCDA programs share a few common requirements: minimum 640 FICO score, income limits that vary by county and household size, property price limits, a $250 reservation fee (except H2O at $100), and 30-year fixed-rate financing as the primary mortgage.

First Step: Maximum Upfront Cash for Long-Term Owners

What it offers: 5% of the purchase price as a down payment assistance second mortgage.

Key terms: 0% interest rate, no monthly payments required, non-forgivable. The balance must be repaid when you sell, refinance, or the property is no longer your primary residence.

First-time buyer requirement: Yes — you cannot have owned a primary residence in the past three years. The requirement is waived for veterans or buyers purchasing in a HUD-designated target census tract.

Loan pairing: Compatible with FHA, Freddie Mac, and Fannie Mae 30-year fixed-rate products.

Who it's for: On a $260,000 purchase, First Step provides $13,000 — more than enough to cover a 3.5% FHA down payment ($9,100) with $3,900 left toward closing costs. It's the highest-dollar amount among IHCDA's programs and makes the most mathematical sense for buyers who intend to stay in the home at least 7–10 years. Because the DPA must be repaid at sale or refinance, short-term buyers end up effectively paying it back without the benefit of time — the program favors those with a genuine long-term holding horizon.

Important caveat: The First Step DPA comes with potential IRS recapture tax exposure. If you sell the home within the first nine years, earn more than the income threshold at that point, and realize a gain, a portion of your federal tax savings could be recaptured. This isn't automatic — it depends on income at time of sale and whether you actually made a profit — but it's a real consideration for buyers in rapidly appreciating Indianapolis neighborhoods.

Next Home: Flexibility Without the First-Time Buyer Restriction

What it offers: Up to 3.5% DPA for FHA-paired loans (or 2.5%–3% for conventional), structured as a second mortgage.

Key terms: Program documents describe forgivability provisions — review your specific promissory note, as terms have tightened in recent IHCDA program updates. Historically, Next Home offered forgivability after a two-to-three-year holding period, but the 2026 Universal Program Guide imposes stricter conditions. Confirm the exact repayment structure with your participating lender before selecting this program.

First-time buyer requirement: None. Next Home is open to both first-time and repeat buyers.

Loan pairing: FHA (Next Home / NH MAE product), Fannie Mae (NH MAE), or Freddie Mac (NH MAC) conventional.

Who it's for: Two primary use cases. First, buyers who technically owned a property more than three years ago but have since been renting — they don't qualify for First Step's first-time requirement but can still access DPA through Next Home. Second, buyers anticipating a shorter holding horizon (e.g., a professional in Indianapolis buying a starter home for 3–5 years before upgrading) who want maximum DPA flexibility without the long-term repayment commitment of First Step.

Next Home pairs particularly well with the Indiana Mortgage Credit Certificate (MCC), which converts 20%–25% of annual mortgage interest into a direct federal income tax credit (up to $2,000 per year). The MCC costs $800 at reservation but generates potentially $10,000+ in cumulative tax credits over a five-year hold. The combination of Next Home DPA for upfront cash plus MCC for ongoing annual tax benefits is one of the most cost-effective strategies available to Indiana first-time buyers.

H2O (Helping To Own): The True Grant Option

What it offers: Up to 3.5% of the purchase price as a grant — not a loan. No repayment required, ever.

Key terms: FHA loans only. Cannot be combined with any other IHCDA programs. Minimum 660 FICO (higher than other IHCDA programs). $100 reservation fee.

First-time buyer requirement: Yes.

Who it's for: FHA borrowers with credit scores comfortably above 660 who want the cleanest possible assistance structure — money that never needs to be repaid under any circumstances. The trade-off is the slightly higher credit requirement and the inability to layer with other IHCDA programs. If your credit score is 660+ and you're using FHA, H2O eliminates the silent second mortgage obligation entirely, which simplifies your liability picture at resale.

Step Down: Rate Reduction Without DPA

Step Down provides a below-market interest rate on a 30-year conventional mortgage without any accompanying down payment assistance. It's designed for buyers who have already saved their down payment and are focused on reducing monthly payment burden rather than accessing upfront capital. The rate subsidy doesn't translate to cash at closing — it reduces your interest rate, which saves money gradually over years rather than immediately.

This program is structurally distinct from the DPA options and serves a different buyer profile: someone with savings but constrained by monthly income in qualifying for a higher payment.

Hoosier Homes and Club 720: Higher Income, More Forgivability

While IHCDA operates at the state level with income caps designed for low-to-moderate earners, a parallel program called Hoosier Homes — administered in partnership with the Indianapolis Housing Agency, Fort Wayne Housing Authority, and the fintech platform Club 720 — serves a significantly higher income bracket.

What Hoosier Homes offers: Up to 5%–6% down payment assistance, structured as a 0% interest second mortgage that is forgivable over 3–7 years provided the buyer maintains the home as a primary residence.

Income limits: Capped at 140% of the local Area Median Income (AMI). In Marion County (Indianapolis), this allows households earning up to approximately $154,980 to qualify. In LaGrange County, the limit is around $139,160. This is substantially higher than traditional DPA programs and opens Hoosier Homes to the middle- and upper-middle-class professional demographic that is typically excluded from low-income housing assistance.

Geographic availability: Participating counties include major markets — Marion, Allen, Lake — plus dozens of rural counties statewide.

No first-time buyer requirement: Hoosier Homes is available to both first-time and repeat buyers, making it relevant for buyers who owned previously and have since moved back to renting.

Club 720: Club 720 is the fintech platform that administers the Hoosier Homes program in many markets. Buyers who don't meet standard credit thresholds can access Club 720's credit coaching pathway — completing their program to reach a 720 FICO score unlocks eligibility for preferred rates and DPA terms. For buyers slightly below the credit threshold who need six to twelve months of credit rehabilitation, Club 720 provides a structured roadmap rather than a simple rejection.

How to Choose Between Programs

The decision framework simplifies into a few key questions:

Are you a first-time buyer (no ownership in 3 years)?

• Yes and long-term hold (7+ years): First Step (maximum DPA amount)
• Yes and FHA with 660+ credit, want no repayment obligation: H2O
• No or shorter hold: Next Home or Hoosier Homes

What's your household income?

• Below IHCDA county income limits: Any IHCDA program
• Up to 140% AMI in a participating county: Hoosier Homes may offer higher DPA with forgivability

How long do you expect to own the home?

• Short-term (2–5 years): Forgivable options like Hoosier Homes (3–7 year forgiveness period) or Next Home (review current terms); avoid First Step's non-forgivable structure
• Long-term (7+ years): First Step's higher DPA amount justifies the non-forgivable structure because you benefit from years of 0%-interest deferred payment

Do you plan to refinance within a few years?

• Non-forgivable DPA programs (First Step) require repayment upon refinance — this matters if rates drop significantly and you want to refi. Forgivable structures (Hoosier Homes) generally survive refinance after the forgiveness period.

Regional Programs Worth Knowing

Within Marion County, the Indianapolis Neighborhood Housing Partnership (INHP) offers its own parallel DPA programs — up to $24,999 in assistance for standard homebuyer opportunity loans, with as little as 1%–3% down payment, no PMI, and minimum credit scores of 620. For buyers targeting the Indianapolis urban core or specific revitalization corridors (Crown Hill, Riverside, Englewood, Mapleton-Fall Creek), INHP's place-based Anchor Housing grants (up to $12,862) are worth investigating alongside IHCDA options.

In Bloomington (Monroe County), the Housing and Neighborhood Development (HAND) program offers up to $10,000 in fully forgivable assistance over five years for buyers under 80% AMI — targeted at the University Hub buyer competing in an inflated rental market.

In Evansville, the HOPE program provides up to $15,000 in forgivable first-time buyer assistance within specific geographic boundaries.

Getting Started

All IHCDA programs require working with an IHCDA-approved participating lender — you cannot access these programs through just any bank or credit union. The IHCDA website maintains an approved lender directory, and the Hoosier Homes / Club 720 program has its own participating lender network. Identifying your lender and confirming program availability in your target county before you begin active home searching lets you make an informed offer the moment you find the right property.

The Indiana First-Time Home Buyer Guide at /us/indiana/first-home/ includes a side-by-side comparison worksheet of all active Indiana DPA programs with eligibility criteria, repayment terms, and income limit tables by county — giving you a clear picture of exactly which programs you qualify for before you sit down with a lender.

See more Indiana guides →