Compare Current Mortgage Rates in Indiana

The Hoosier State hasn’t seen the drastic pandemic-fueled price increases that other areas of the country have experienced. Despite the recent increase in rates, this makes Indiana a good candidate if you’re looking for affordable housing.

Like most places in the U.S., Indiana’s real estate market is tight, with low inventory and homes that last about a month on the market. Even with low prices for homes, increased interest rates can jeopardize housing affordability.

You can make your homebuying journey smoother by learning how mortgage interest rates in Indiana work, and how to get a better interest rate or homebuyer assistance in Indiana. 

Several items affect whether mortgage interest rates go up or down, both across the nation and locally. On a macro level, the federal funds rate, which is set by the Federal Reserve, has a big impact on mortgage rates. This is the interest rate that banks charge each other, so it provides a floor for interest rates. These rates are then marked up for consumers.

The Federal Reserve raised interest rates in 2022 and 2023 in an effort to tame high inflation. As a result, mortgage interest rates increased during that time.

Mortgage interest rates are also connected to U.S. Treasury securities and the bond market. The interest rates on mortgages usually exceed the interest on these securities because they wouldn’t be competitive investments otherwise.

There are several first-time homebuyer assistance programs available to Hoosiers through the Indiana Housing and Community Development Authority (IHCDA). All IHCDA programs require a nonrefundable $250 reservation fee. There are income limits that vary by census tract, so talk with your lender to see if you qualify.

Here are the programs that the IHCDA offers:

• First Step: Formerly called First Place, this program gives homebuyers down payment assistance up to 6% of the appraised value of the home or the price of the home (whichever is less). It is a nonforgivable second mortgage with no payments or interest. First Step can be used with an FHA or conventional mortgage. You must be a first-time homebuyer to use First Step.
• Step Down: With this arrangement, buyers make the down payment on their own and use Step Down to buy down the interest rate. You must be a first-time homebuyer to qualify. Step Down also works with FHA and conventional mortgages.
• Next Home: You don’t have to be a first-time homebuyer for this down payment assistance program. Next Home offers 2.5% or 3.5% for down payment assistance, which is forgiven after three years. 
• Next Step: This program launched in February 2024 and provides a refinance option for First Step and Step Down mortgages.

You can’t do much about the average mortgage interest rate at the moment, but there are steps you can take to improve your borrower profile. Here are a few tips that could net you a better mortgage interest rate:

• Check your credit score: Lenders use your credit score as a predictive tool to determine how likely you are to repay your loan, so it’s to your advantage to have as high a score as possible. Pull your credit report to ensure it doesn’t have any errors, and check for ways to raise your score if possible.
• Make a large down payment: When you put a large amount down on your home, this signals to your lender that you have skin in the game and makes you a more appealing mortgage applicant.
• Opt for a shorter loan term: The shorter the repayment period, the less risk the lender takes on. Lenders reward lower risk with lower interest rates, so consider a 15- or 20-year loan if you can afford the payments.
• Compare lenders: Rates and terms will vary by lender, so it’s worth your while to get pre-approved with at least three institutions to ensure you’re getting the best deal.

There are multiple varieties of mortgages in Indiana. Many of these (FHA, VA, USDA) are overseen by a federal agency and have specific guidelines. Conventional loans are backed by private lenders but must meet Fannie Mae’s regulations. Jumbo loans exceed the limits set by the Federal Housing Finance Agency, so their qualifications are set by the lender.

Conventional

• A mortgage issued by a bank or mortgage lender
• 620 minimum credit score
• 45% maximum DTI ratio
• 3% minimum down payment
• Private mortgage insurance (PMI) is usually required if you put less than 20% down
• Some loans offer low down payments and no PMI, but these may have high interest rates

VA

• Mortgage loans backed by the Department of Veterans Affairs
• Minimum credit score varies by lender
• 41% maximum DTI ratio
• 0% minimum down payment
• No mortgage insurance required
• Only for qualifying veterans and surviving spouses

USDA

• For low- to middle-income borrowers in designated rural areas
• 640 minimum credit score
• 41% maximum DTI ratio
• 0% minimum down payment
• No PMI, but there is an annual fee
• Fees can be rolled into monthly mortgage payments 

FHA

• Loans insured by the Federal Housing Administration
• 580 for most; 500 with a 10% down payment
• 43% maximum DTI ratio
• 3.5% minimum down payment
• Mortgage insurance premium (MIP) is due regardless of the down payment
• Mortgage insurance includes both an upfront and monthly payment, typically for the life of the loan

Jumbo

• These mortgages exceed conventional loan limits 
• 680 minimum credit score
• Around 43% maximum DTI ratio
• 10% minimum down payment
• PMI is required if you put less than 20% down
• Total amounts for jumbo loans are based on your location