Down Payment Assistance Programs for Indiana & Michigan Home Buyers
IHCDA programs for Indiana buyers and MSHDA programs for Michigan buyers can cover your down payment and closing costs. Grants, forgivable seconds, and deferred loans make buying a home in South Bend, Mishawaka, Niles, or Edwardsburg more affordable than you might think.
What is down payment assistance?
Down payment assistance (DPA) is funding provided by state housing agencies, local governments, or nonprofits to help home buyers cover their down payment and sometimes closing costs. DPA comes in three main forms:
- Grants - Free money that does not need to be repaid. Typically smaller amounts.
- Forgivable second mortgages - A second loan that is forgiven over a set period (usually 5 to 10 years) as long as you live in the home. If you sell or move before the forgiveness period ends, you may owe a prorated repayment.
- Deferred second mortgages - A second loan with 0% interest and no monthly payments. Repaid when you sell the home, refinance, or pay off the first mortgage.
In our market, Indiana buyers use programs from the Indiana Housing and Community Development Authority (IHCDA), and Michigan buyers use programs from the Michigan State Housing Development Authority (MSHDA).
Indiana: IHCDA programs
IHCDA offers several programs that pair a first mortgage with down payment assistance. The DPA is typically provided as a forgivable second mortgage.
First Step
First Step is IHCDA's flagship program for first-time homebuyers. It pairs an FHA first mortgage with down payment assistance. The DPA is a forgivable second mortgage, meaning it is forgiven over a set period as long as you remain in the home. Key features:
- Available to first-time buyers (no homeownership in the past 3 years)
- Veterans are exempt from the first-time buyer requirement
- 30-year fixed-rate FHA first mortgage
- DPA as a forgivable second mortgage
- Income limits vary by county and household size
- Purchase price limits vary by county
Next Home
Next Home is IHCDA's program for buyers who are not limited to first-time buyers. It provides down payment assistance for qualified buyers regardless of whether they have owned a home before. Key features:
- Not limited to first-time buyers
- FHA first mortgage with DPA
- DPA as a forgivable second mortgage
- Income limits vary by county and household size
- Purchase price limits vary by county
IHCDA income and purchase price limits
IHCDA income limits and purchase price limits vary by county and household size. For St. Joseph County, Elkhart County, and Marshall County, limits are generally set as a percentage of area median income. A household of 4 may qualify with income up to approximately $90,000 to $100,000, though this changes annually. Contact me to connect with a lender for current IHCDA income and purchase price limits in your county.
Veteran waiver
IHCDA waives the first-time homebuyer requirement for veterans. This means veterans who have owned a home before can still use IHCDA programs like First Step. This is especially valuable when combined with a VA loan, which already offers zero down payment. The DPA can then cover closing costs.
Michigan: MSHDA programs
MSHDA offers programs for Michigan home buyers, including first mortgages and down payment assistance.
MI Home Loan
MI Home Loan is MSHDA's first mortgage program for first-time and repeat buyers. It can be paired with the MI 10K DPA Loan. Key features:
- Available to first-time and repeat buyers
- 30-year fixed-rate mortgage (FHA, conventional, VA, or Rural Development)
- Can be paired with MI 10K DPA Loan
- Income limits vary by county
- Purchase price limits vary by county
MI 10K DPA Loan
The MI 10K DPA Loan provides up to $10,000 in down payment assistance as a 0% interest, deferred second mortgage. Key features:
- Up to $10,000 in assistance
- 0% interest, no monthly payments
- Repaid when you sell, refinance, or pay off the first mortgage
- Must be paired with a MSHDA MI Home Loan first mortgage
- Available statewide, including Berrien County and Cass County
Mortgage Credit Certificate (MCC)
MSHDA also offers a Mortgage Credit Certificate, which provides a tax credit on a portion of your annual mortgage interest. This reduces your federal tax liability, effectively lowering your monthly housing cost. The MCC can be paired with a MSHDA first mortgage. Contact me for current MCC program details and whether it is available in your county.
MSHDA income limits
MSHDA income limits vary by county and household size. For Berrien County and Cass County, limits are generally set as a percentage of area median income. Contact me to connect with a lender for current MSHDA income limits in your county.
Programs for veterans, first responders, teachers, and healthcare workers
Several programs specifically benefit veterans, first responders, teachers, and healthcare workers:
- Veterans - IHCDA waives the first-time buyer requirement. VA loans offer zero down payment. DPA can cover closing costs.
- First responders - Some programs offer enhanced benefits for police, fire, and EMS personnel. Check with IHCDA and MSHDA for current offerings.
- Teachers and healthcare workers - MSHDA programs serve essential workers. Some national programs (like Homes for Heroes) also provide benefits, though I do not endorse specific programs.
If you fall into any of these categories, let me know and I can connect you with lenders who understand the programs available to you.
How DPA works with different loan types
| Loan Type | DPA Compatibility | How DPA Helps |
|---|---|---|
| FHA | Excellent | Covers the 3.5% down payment + closing costs |
| Conventional | Good | Covers the 3% to 5% down payment + closing costs |
| VA | Good | Down payment is $0, DPA covers closing costs |
| USDA | Good | Down payment is $0, DPA covers closing costs |
FHA is the most common pairing because FHA explicitly allows the entire down payment to come from DPA or gift funds. See the FHA loans guide, conventional loans guide, VA loans guide, and USDA loans guide for details on each loan type.
How to apply for down payment assistance
- Contact me - I will connect you with lenders who participate in IHCDA and MSHDA programs. Not all lenders offer DPA, so working with the right lender is essential.
- Get pre-approved - The lender will verify your income, credit, and eligibility for both the first mortgage and the DPA program. See the home buying process guide for what to prepare.
- Find your home - Work with me to find a home within the program's purchase price limits for your county.
- Make an offer - I will help you craft an offer with your pre-approval and DPA qualification.
- Close - The DPA funds are provided at closing. With DPA covering your down payment and seller concessions covering closing costs, your out-of-pocket can be minimal.
The key is working with a lender who is approved to offer IHCDA or MSHDA programs. I maintain relationships with local lenders who specialize in these programs on both sides of the state line.
Frequently asked questions about down payment assistance
How much down payment assistance can I get in Indiana?
Indiana down payment assistance through IHCDA typically provides a percentage of the purchase price (often around 3% to 5%) as a forgivable second mortgage or deferred loan. The exact amount depends on the program, your income, and the purchase price. For many South Bend area homes, this can cover most or all of your FHA 3.5% down payment requirement. Contact me for current IHCDA program amounts and eligibility in St. Joseph County.
What is the IHCDA First Step program?
IHCDA First Step is a down payment assistance program for first-time homebuyers in Indiana. It pairs a first mortgage (typically FHA) with down payment assistance in the form of a forgivable second mortgage. The DPA is forgiven over a set period (usually 5 to 10 years) as long as you live in the home. Income limits and purchase price limits apply and vary by county. Veterans are exempt from the first-time homebuyer requirement.
Does Michigan have down payment assistance?
Yes. Michigan offers down payment assistance through MSHDA (Michigan State Housing Development Authority). The MI Home Loan program pairs a first mortgage with the MI 10K DPA Loan, providing up to $10,000 in deferred down payment assistance. MSHDA also offers a Mortgage Credit Certificate (MCC) that provides a tax credit on annual mortgage interest. Income limits apply and vary by county.
What is the MI 10K DPA loan?
The MI 10K DPA Loan is a Michigan State Housing Development Authority program that provides up to $10,000 in down payment assistance as a 0% interest, deferred second mortgage. There are no monthly payments on the DPA loan. It is repaid when you sell the home, refinance, or pay off the first mortgage. The MI 10K DPA must be paired with a MSHDA MI Home Loan first mortgage. Income limits apply.
Can veterans get down payment assistance in Indiana?
Yes. IHCDA waives the first-time homebuyer requirement for veterans, which means veterans can use IHCDA down payment assistance programs even if they have owned a home before. This is a significant benefit for veterans who may also qualify for a VA loan with zero down payment. The DPA can help cover closing costs or supplement a VA loan. Contact me for current IHCDA veteran program details.
Do I have to repay down payment assistance?
It depends on the program structure. Grants do not need to be repaid. Forgivable second mortgages are forgiven over a set period (typically 5 to 10 years) as long as you live in the home. Deferred second mortgages (like the MSHDA MI 10K) require no monthly payments but must be repaid when you sell, refinance, or pay off the first mortgage. Each program has different terms, so I can connect you with a lender to explain the specific repayment structure for the program you qualify for.
What are IHCDA income limits in St. Joseph County?
IHCDA income limits vary by county, household size, and program. Limits are generally set as a percentage of area median income. For St. Joseph County, a household of 4 may qualify with income up to approximately $90,000 to $100,000, though this changes annually and varies by program. Contact me to connect with a lender who can verify current IHCDA income limits for your household and county.
Can I use down payment assistance with an FHA loan?
Yes. Down payment assistance programs are commonly paired with FHA loans because FHA allows the entire 3.5% down payment to come from gift funds or DPA programs. IHCDA First Step specifically pairs with FHA. DPA can also work with conventional, VA, and USDA loans. The specific loan type depends on the DPA program requirements. I can connect you with lenders who participate in both the DPA program and your preferred loan type.
Related guides
Ready to explore down payment assistance?
Call or text Worm at 574-240-WORM to find out which DPA programs you qualify for in Indiana or Michigan. I will connect you with local lenders who participate in IHCDA and MSHDA programs.