Think you need 20% down to buy a home in Merrillville or Gary? You don’t. If you are a first-time buyer in Lake County, there are real paths to low or even zero down payment when you combine the right loan with state or local assistance. You want clear steps, trusted sources, and a simple plan that fits your budget. This guide breaks down your options, how to qualify, and what to do next so you can move from research to keys. Let’s dive in.
First-time buyer basics in Merrillville
Program types at a glance
- Federal mortgage options
- FHA loans: flexible credit and as little as 3.5% down with qualifying credit; mortgage insurance applies per HUD rules.
- VA loans: for eligible service members, veterans, and certain spouses; often 0% down and no private mortgage insurance.
- USDA loans: 0% down in eligible rural areas; income and property location limits apply.
- Conventional 3% down: Fannie Mae HomeReady and Freddie Mac Home Possible help lower-income borrowers with reduced down payments and flexible sources for funds.
- State and local down payment assistance (DPA)
- Indiana Housing and Community Development Authority (IHCDA) offers assistance paired with approved lenders and required education.
- Nonprofit and lender options
- Local HUD-approved counselors, community nonprofits, and some banks or credit unions may offer DPA, grants, or education.
Why this matters: Most assistance layers on top of a primary mortgage. The right pairing can lower your upfront cash, help you qualify sooner, and keep your monthly payment manageable.
Indiana and local programs to check first
IHCDA statewide assistance
Start with the Indiana Housing and Community Development Authority. IHCDA runs mortgage and down payment help that you access through participating lenders and required education. Income and purchase price limits apply and can change each year. Review current programs and find approved lenders on the IHCDA homebuyers page.
- Learn more at the IHCDA homebuyers hub: Indiana Housing and Community Development Authority
Lake County and city contacts
Lake County, the Town of Merrillville, and the City of Gary may periodically offer homebuyer or rehab assistance funded by HUD. Availability changes with budget cycles. Check local government pages or call:
- Lake County Community Development office
- Town of Merrillville planning or community development
- City of Gary housing or community development
Ask about any current down payment help, purchase price caps, required education, and how to apply.
HUD-approved housing counselors
Many assistance programs require homebuyer education. A HUD-approved counselor can explain options, confirm eligibility, and issue education certificates you may need for IHCDA or local DPA.
- Find a counselor near Lake County: HUD housing counseling
Who qualifies and how it works
First-time buyer definition
Many programs define a first-time buyer as someone who has not owned a principal home in the past three years. Some targeted areas or veteran-focused programs may waive this rule. Always check the program’s specific definition.
Income and price limits
Most DPA and affordable loan products use HUD Area Median Income (AMI) to set eligibility. Limits vary by county and household size. Programs may also cap the purchase price. Make sure you verify the current AMI and price caps for Lake County with the program administrator or your lender.
Property and occupancy rules
- You must plan to live in the home as your primary residence.
- Property types can be restricted. Single-family homes are common, and some programs allow 2–4 units with owner occupancy.
- USDA loans require the property to be in an eligible area. Always confirm on the USDA map.
Credit, DTI, and underwriting
- FHA: 580+ credit score for 3.5% down; 500–579 may require 10% down.
- Conventional 3% down options often require higher scores than FHA.
- VA uses lender-set score requirements; the VA program itself does not set a minimum score.
- Lenders review your debt-to-income ratio and reserves. DPA does not replace underwriting.
Benefits and trade-offs to weigh
- Potential benefits
- Lower upfront cash needed for down payment and closing costs.
- Sooner path to ownership using flexible underwriting and assistance.
- Possible monthly savings when assistance reduces the first-mortgage amount.
- Possible trade-offs
- A second lien on the property if your DPA is a forgivable or deferred loan.
- Repayment triggers at sale or refinance for some DPAs.
- Mortgage insurance may increase monthly costs with low-down-payment options.
- Some programs pair with slightly higher interest rates. Compare scenarios.
How to pair DPA with pre-approval
Step 0: Prepare your finances
- Pull your credit report, dispute errors, and track your score.
- Gather pay stubs, W-2s, tax returns if self-employed, and bank statements.
- List monthly debts to estimate your debt-to-income ratio.
Step 1: Get informed and complete education
- Talk with a HUD-approved counselor about IHCDA and local DPA options.
- Complete required homebuyer education if you plan to use assistance.
Step 2: Choose loan type and lenders
- Confirm which programs you may qualify for and get a list of IHCDA-participating lenders.
- Interview 2–3 lenders experienced with IHCDA and Lake County properties.
Step 3: Pre-qualification vs pre-approval
- Pre-qualification is a quick estimate. Pre-approval verifies your documents.
- Ask your lender to include DPA in your pre-approval with:
- Loan type, estimated rate, and DPA amount and purpose.
- Confirmation of income, education, and first-time status.
- A full monthly payment estimate, including taxes, insurance, and any HOA.
Step 4: Compare scenarios
- Run options: FHA vs conventional with 3% down, with and without DPA.
- Check total funds needed at closing and any limits on seller concessions.
Step 5: Confirm property eligibility
- Verify the home meets program price caps and property rules.
- Include any required contract language to allow time for DPA approval.
Step 6: Closing and after
- Know if your DPA is a grant, forgivable second, or deferred loan.
- Keep copies of your DPA documents and note any timelines for forgiveness.
Tools and resources you can use
- Check state programs and lenders: IHCDA homebuyers
- Find counseling and education: HUD-approved housing counseling
- Explore FHA buying basics: HUD homebuying overview
- VA eligibility and benefits: VA home loan program
- USDA eligibility map: USDA property eligibility
- 3% down conventional: Fannie Mae HomeReady and Freddie Mac Home Possible
- Payment estimates: CFPB mortgage calculator
Local help from Favela Real Estate
Buying your first home is easier when you have a local guide. Our Merrillville-based team works daily across Lake County, including Gary and nearby communities. We help you compare loan options, coordinate with IHCDA-participating lenders and HUD-approved counselors, and target homes that fit program rules and your budget. With our renovation know-how and bilingual service, you can focus on a home that is move-in ready and right for you.
If you are ready to start, reach out to the team at Favela Real Estate for a friendly plan and local next steps.
FAQs
What is considered a first-time homebuyer in Lake County?
- Many programs use a three-year rule, meaning you have not owned a principal residence in the past three years. Some targeted areas or veteran programs may allow exceptions.
How much down payment assistance can I get in Merrillville?
- Amounts vary by program and funding. Check current IHCDA offerings and ask local county or city offices about any available grants or second-mortgage assistance.
Do down payment programs raise my monthly payment?
- They can lower your first-mortgage amount, but some structures require repayment or lead to mortgage insurance, which can affect the monthly cost. Compare scenarios with your lender.
Can I use seller concessions with assistance programs?
- Some programs limit seller contributions. Confirm the rules with your lender and the DPA program before you write an offer.
Will I have to repay assistance if I refinance later?
- Many forgivable or deferred second liens become due at sale or refinance unless you meet the forgiveness timeline. Read your DPA documents and ask about repayment triggers.
Are USDA loans available in Merrillville or Gary?
- USDA loans are limited to eligible areas based on the property’s location and household income. Check addresses on the USDA property eligibility map before you tour homes.
