Now that the housing market is finally calming down after the pandemic, buyers are facing a new challenge: Soaring mortgage rates.
In Indiana, the average 30-year fixed mortgage rate is 5.54% — up from 2021's historic lows. This raises the average monthly mortgage payment to $1,036 (assuming a 20% down payment at the median home value).
But buying a home in Indiana is still possible, even for first-time home buyers. Many markets are seeing frequent price drops and fewer offers, giving motivated buyers the upper hand in negotiating for the best price.
In this guide, you’ll learn how to buy a house in Indiana with confidence no matter what the market brings. Learn why you can trust our advice.
Whether you're actively house hunting or just starting to browse homes on Zillow, it's never too early to find a great local realtor to guide you on your search. An experienced agent can help you navigate a tricky housing market, explore your financial options, and negotiate the best deal possible.
Best of all, hiring a real estate agent comes at no extra cost to you — since the seller typically pays both their listing agent and your buyer's agent.
Ready to find a great local realtor, but not sure where to start? The best (and easiest!) option is to try a free agent matching service like Clever Real Estate. Answer a few simple questions about your home buying goals, and Clever will match you with hand-picked agents from Keller Williams, RE/MAX, and other top brokerages in your area. Find a top local agent and make your home buying dreams a reality today!
Step 1: Save for a down payment
Your down payment is the first part of your home's purchase price that you pay at closing. Your mortgage lender will pay the remaining balance.
Typically, mortgage lenders in Indiana want you to contribute 20% of the purchase price as a down payment. That would be $45,433 for a $227,165 home — the typical home value in Indiana.
However, you have options to lower your down payment amount.
Government backed loans, like VA and FHA loans, allow you to contribute 0% and 3.5% of your home's purchase price respectively. Even conventional loans allow for down payments as low as 3-5% (though the minimum varies by lender).
Minimum down payment (%)
Down payment ($)
Based on typical home values from Zillow (August 2022)
But making a down payment of less than 20% comes with some risks.
First, because you're borrowing more money, you'll have a higher monthly payment and pay more in interest over the life of your loan.
Based on home values from Zillow (August 2022) and a 5.54% interest rate for a 30-year loan.
Second, you may have to purchase mortgage insurance.
Conventional loans require private mortgage insurance (PMI) until your loan balance reaches 80% of the purchase price. FHA loans, on the other hand, require a mortgage insurance premium (MIP) for the life of your loans.
Mortgage insurance costs around 1% of your mortgage balance annually. However, rates vary based on your down payment and credit score. Typically, your mortgage insurance payment is added to your mortgage payment each month.
VA loans don't charge mortgage insurance. Instead, you'll pay a VA loan funding fee at closing, which can range from 1.4% to 3.6% of the purchase price.
Indiana down payment assistance programs
Across the country, there are numerous down payment assistance programs that offer financial aid to first-time and low-income buyers. In the state of Indiana, eligible homebuyers can choose from an array of programs to offset the cost of a down payment.
Here are some programs in Indiana that you might be eligible for:
IHCDA First Place
The Indiana Housing and Community Development Authority (IHCDA) offers two programs for residents: the First Place program and the Next Home program.
The First Place program is a second mortgage offered to first-time homebuyers. Borrowers may receive up to 6% of the purchase price or 6% the home's appraised value (whichever is lower) to cover the down payment or closing costs. Eligible participants must have a credit score of at least 640 if their debt-to-income ratio is below 45% or 680 if their debt-to-income ratio is 45% to 50%.
IHCDA Next Home
The Next Home program offers up to 3.5% of a home's purchase price to first-time homebuyers. This program can be combined with the Mortgage Credit Certificate (MCC).
Eligible borrowers must have a credit score of at least 640 with a debt-to-income ratio of less than 45% or 680 with a debt-to-income ratio between 45% and 50%.
U.S. Department of Housing and Urban Development
HUD has a list of alternative programs for Indiana residents here.
Step 2: Find a great real estate agent in Indiana
Your real estate agent will be your main ally during the home buying process. Besides finding and showing you properties, your agent will help you make offers, negotiate contracts, and navigate the closing process. Plus, they can recommend other service providers like title companies and inspectors to help you buy your home in Indiana.
Don't rush into choosing an agent. Instead, take the time to research and interview multiple real estate agents who have experience in the neighborhoods you're interested in. You should pay attention to a realtor's:
- Years of experience
- Number of transactions in the last year (the more the better!)
- Experience in your price range
- Overall review score
- Individual reviews and complaints
Step 3: Get preapproved for a mortgage
A mortgage preapproval letter is an offer to lend you up to a certain amount of money to purchase a home. It shows sellers that you are a serious buyer who is financially qualified to make an offer on a home.
Most sellers in Indiana will require preapproval before showing you their home.
You don't have to decide on one lender right now. In fact, you should compare interest rates and preapproval amounts from several lenders to make sure you're getting the absolute best terms when you buy your Indiana home.
Step 4: Choose the right location
Currently, the typical home value in Indiana is $227,165, but don't worry if that doesn't perfectly match your budget. Home prices vary dramatically from city to city and even from neighborhood to neighborhood!
Also, look at past home value trends. This will give you an idea of how much your home's value could go up over the next few years.
To give you an idea of how appreciation could impact what your house is worth in the future, consider these examples from three neighborhoods in Indianapolis:
Home value appreciation in Indianapolis
Chapel Hill-Ben Davis
Step 5: Start house hunting in Indiana
Searching for homes in Indiana is the fun part of the home buying process! You'll get to look at a variety of homes and discover what you really want in a home.
Make a list of everything you want in a home and prioritize them. At the top of the list should be the items that are most important to you. This will help you separate your "must-haves" from your "nice-to-haves."
Your agent can help you understand if your wants are realistic for your budget and favorite neighborhoods or if you need to rethink what you're looking for.
Look at current housing inventory
The timing of your house hunt in Indiana can have a big impact on your number of options. For example, in Indiana, June has historically seen the most homes for sale. Searching in this season could give you more options and a greater likelihood of finding your dream home.
On the other hand, December gives you the fewest choices in Indiana. Historically, there are 49.4% fewer homes for sale than during Indiana's peak season.
Housing inventory in Indiana by season
New listings per month
Based on data from Realtor.com (October 2022)
Step 6: Make an offer
Once you find a Indiana house you love, it's time to make an offer. Your real estate agent will help you write a compelling offer that gives you the best shot of convincing the homeowner to sell to you.
Currently, in Indiana, homes stay on the market for 60 days before going under contract. However, every market goes through seasonal changes. During busier months, homes get snatched up more quickly than others.
Historically, Indiana homes sell fastest in July, where the average property is only on the market for 48 days. If your home search falls around this time, you should be prepared to move quickly and potentially make offers on several homes before yours is accepted.
On the other hand, if you buy in February, you have a bit more time to search. Homes typically stay on the market 22 days longer than Indiana's annual average.
Average time homes spend on market in Indiana
Based on data from Realtor.com (October 2022)
» LEARN MORE: What should an offer include?
Step 7: Inspections and appraisals
Inspections and appraisals are an opportunity for you to better evaluate the home's condition and value before officially purchasing it. You may have an opportunity after this step to renegotiate the terms of your contract with the seller if something unexpected pops up.
Home inspections in Indiana
Having your Indiana home inspected by a licensed inspector gives you peace of mind about the condition of the property before you commit thousands of dollars to purchase it.
Your inspector should check out the following parts of the property:
- Electrical system
- HVAC system
If the home has a septic system, you should also pay for a septic inspection to make sure it doesn't have any problems that wouldn't be covered in a typical home inspection.
Sellers in Indiana are required to fill out a property disclosure form, but this may not reveal all potential problems. Before closing on a home, it's recommended to have the following tests done, in addition to a general home inspection:
- Radon testing: Radon is prevalent in Indiana, so it's important to make sure radon levels are within safe limits. If the seller hasn't done a radon test in the past year, consider doing a test prior to closing.
- Termite and pest inspection: Damage caused by termites and pests might not be immediately noticeable, but it can decrease the value of a property over time. It's a good idea to have a pest inspection completed to ensure that the home is structurally sound and safe for you and your family.
Appraisals determine the value of the property. If you're using a mortgage to buy your new home, your lender will order an appraisal to make sure the home is worth the money that it's loaning you.
Step 8: Close on your new home!
To become the legal owner of your Indiana home, you'll meet at the title company to finalize some paperwork and settle your closing costs.
Be prepared to read and sign several documents on closing day. These forms will transfer the title of the home into your name, so make sure all the information is correct before signing anything.
Here are just a few documents you can expect to see:
- The final loan application
- The mortgage promissory note
- The deed
- The disclosure statements
Once the paperwork is finished, you'll settle your closing costs. The title company will collect the total sum you owe to your various providers and disburse the funds on your behalf.
If you're curious about where your money is actually going, closing costs can usually be divided into four categories:
- Title and escrow charges: Fees paid to the title company for facilitating the closing and transferring the title.
- Lender fees: Fees paid to your mortgage lender for originating and underwriting your loan. This category may also cover expenses related to your loan, such as survey fees and appraisal fees.
- Prepaid costs: Ongoing costs of homeownership that new buyers pay up front. Some lenders require certain expenses to be paid ahead of time, such as property taxes and homeowners insurance.
- Other closing costs: Miscellaneous fees that differ according to each homebuyer. Expenses like home inspection fees and real estate attorney fees often
Buyers in Indiana typically pay 3–5% of the purchase price in closing costs. For a $227,200 home — the typical home value in Indiana — that's between $6,816 and $11,360!
Frequently asked questions
Indiana does not require you to hire a real estate attorney to buy a home. However, depending on your circumstances, you might consider hiring one anyways. If you do, treat the process similarly to hiring an agent. Interview multiple attorneys and proceed with the one that best meets your needs.
- Save for down payment
- Get pre-approved for a mortgage
- Choose your preferred Indiana neighborhoods
- Partner with the right real estate agent in Indiana
- Go house hunting
- Make a strong offer
- Inspections and appraisals
- Do a final walkthrough and close
Yes! The Indiana Housing and Community Development Authority offers down payment assistance to eligible buyers through its First Place program. Program participants can receive a second mortgage of up to 6% of their home purchase price, and the mortgage is forgiven after 9 years.
Qualified applicants must have an FHA first mortgage and be a first-time buyer or a buyer in a target county. A minimum credit score of 640 is required, and your debt-to-income ratio cannot exceed 50%. Income and purchase price limits also apply and vary by county.ARTICLE SOURCES
Federal Reserve. "Housing Market Tightness During COVID-19: Increased Demand or Reduced Supply?." Accessed October 11, 2022. Updated July 08, 2021.
Consumer Protection Financial Bureau. "The Fed is raising interest rates. What does that mean for borrowers and savers?." Accessed October 11, 2022. Updated March 17, 2022.