Important Changes to IHCDA Down Payment Assistance – And Why It’s Not the End of the World

Important Changes to IHCDA Down Payment Assistance - And Why It's Not the End of the World

Homeownership is a powerful and emotional milestone - it represents security, community, and a place to build your future. For many first-time buyers, down payment assistance (DPA) can be the key that unlocks the door to this dream.

On April 29, 2025, the Indiana Housing & Community Development Authority (IHCDA) issued an update that introduces two important changes to its DPA programs effective May 1st, 2025

• The minimum credit score requirement has increased from 640 to 660, across programs including First Step, Step Down, and Next Home.
• The down payment assistance amount on the First Step program has been reduced from 6% to 5%.

At first glance, these changes might seem concerning. But the truth is: you shouldn't panic. While these adjustments might come as a surprise for most lenders, understand that in many cases, there are far better alternatives to IHCDA's programs that may offer greater benefits, flexibility, and long-term savings.

The Honest Truth About IHCDA

IHCDA has helped thousands of Indiana homebuyers over the years - but today, its programs are simply not as competitive as they once were.

• Most IHCDA assistance is not forgivable. This means the DPA must be paid back when you sell, refinance, or pay off your home - unlike true grants or forgivable loans.
• Many IHCDA Programs come with HIGHER rates than current market. Often with these programs come higher rates, costs and other fees.
• They charge a $250 reservation fee, and interest rates on IHCDA mortgages are often higher than other available options.
• Now, with the increased credit score requirement and reduced DPA, the program provides less value than many local or national alternatives.

This isn't to knock the program - it still helps many buyers - but it's important to recognize when better options are available.

Stronger Programs You Should Consider

There are several alternative programs that may offer more generous, forgiving, and cost-effective support for homebuyers in Indiana:

• USDA Loans - For eligible rural properties, USDA offers zero down payment, low mortgage insurance, and competitive interest rates. It's one of the most affordable options available, and you don't even need a separate DPA program.
• Lake County Economic Development DPA - This local program offers up to $5,000 in forgivable assistance after a period of occupancy, making it a true grant for committed homeowners in Lake County, you just need to have $2,500 of your own funds towards the transaction.
• Hammond Homebound Program - Buyers purchasing within the City of Hammond can qualify for up to $10,000 in down payment and closing cost assistance, which is forgivable after a five-year residency period.
• Gary, Indiana DPA Program - Gary's program provides flexible, forgivable assistance that supports the city's revitalization while helping families build wealth through homeownership.
• Chenoa Fund DPA - A nationwide program that we have available, Chenoa offers both repayable and forgivable options, including FHA-compatible assistance for buyers with credit scores as low as 600 in some cases. It's a flexible and powerful tool for buyers who need a little help getting started.

The Bottom Line: Empowering Buyers with Better Options

We understand that buying a home is deeply personal - and that financial decisions should be made with confidence and clarity. While IHCDA has long been a go-to name in down payment help, today there are better programs, more forgiving structures, and lower-cost alternatives that deserve attention.

At SouthShore Region Mortgage Group, we don't believe in one-size-fits-all solutions. We believe in transparency, strategy, and putting your long-term financial wellbeing first. Whether you're a first-time buyer, relocating, or helping a client navigate their options, we're here to guide you every step of the way.

Let's make smart moves together - without panic, and with purpose.

Need help figuring out which DPA program is best for you or your client?

Call us today at 219-237-8026 or visit www.SouthShoreRegion.com to schedule a free consultation with our team of local mortgage experts.

Your home is closer than you think - and we're here to help you reach it.