Indiana mortgages: the 1% tax cap, IHCDA help and what a home costs

#Indiana’s property tax cap on homesteads

Indiana law limits property tax on a homestead — the home you own and live in — to 1% of its gross assessed value. If the combined local rates would produce a larger bill, a circuit breaker credit cuts it back to the cap. Rentals, second homes and other property have higher caps, which matters if you buy to rent out.

On a home at the state’s median value, the cap works out to $2,435 a year. The median Indiana homeowner actually pays $1,798, below that ceiling, partly because homestead deductions shrink the assessed value before rates apply. The statewide effective rate of 0.74% is below the national ratio of 0.89%.

#What the median Indiana home costs a month

Indiana’s median home value is below the national figure — the 11th-lowest of the 50 states and DC — and its median household income of $71,959 is below the US figure.

The FHA payment is $134 higher a month here, and the assistance has to be repaid when you sell, refinance or pay off the loan — the trade for keeping your savings. The payment calculator opens with Indiana’s median price and tax rate.

#IHCDA First Step and Next Home

The Indiana Housing and Community Development Authority (IHCDA) runs its purchase programs through participating lenders, with FHA or conventional 30-year fixed-rate first mortgages:

In both programs the assistance is a non-forgivable second lien: it comes due when the first mortgage ends — at a sale, refinance or payoff — or when the home stops being your primary residence. IHCDA sets income and purchase price limits by county and family size, and the credit score and debt-to-income limits come from IHCDA and its master servicer, so ask a participating lender for the current figures. Each occupying borrower needs a homebuyer education certificate; IHCDA accepts Fannie Mae’s and Freddie Mac’s online courses. See the homebuyer education guide and the first-time buyer programs guide for how this compares with other help.

#Closing costs without a transfer tax

Indiana has no state real estate transfer tax, so the main closing costs are lender fees, title insurance, recording fees, prepaid interest and escrow deposits. The CFPB puts typical closing costs at 2%–5% of the price — $4,870–$12,175 on the median home. Your Loan Estimate gives the real numbers; the closing cost estimator gives a first look.

#Indiana incomes and Indiana prices

Prices and paychecks line up better here than in most states. The median home costs 3.4 times the median household income, against 4.4 for the US — the 8th-lowest ratio of the 50 states and DC. On the median income, Freddie Mac’s guideline of keeping housing under 30% of gross income allows $1,799 a month, enough for about $236,000 with 10% down at today’s average rate — $7,500 less than the median home value. Owning the median home on those terms takes an income of about $74,100; test your own in the affordability calculator.

Indiana’s owner share is the 14th-highest in the country. If you rent now, the rent vs buy calculator opens with Indiana’s median price and rent so you can see how long it takes owning to come out ahead.