Buying a Home in Indiana: Closing Costs, Inspections, Taxes and Down Payment Help
Buying a home in Indiana is simpler than in many states, but there are a few local rules that surprise first-time and out-of-state buyers: property taxes paid a year behind, a homestead deduction you have to file for, and state down payment programs that only work with approved lenders. This guide walks through the costs, inspections, taxes and assistance programs South Bend and Michiana buyers should know.
Step by step: how buying a home in Indiana works
Get pre-approved. A lender reviews your income, credit and savings and tells you what you can borrow. In a competitive market, sellers expect a pre-approval letter with your offer.
Choose your agent and sign a buyer agreement. Since 2024, buyers sign a written agreement with their agent before touring homes. It spells out the agent's services and how the agent is paid, which is negotiable.
Tour homes and make an offer. In Indiana, offers are made on a written purchase agreement that sets the price, earnest money, inspection period, financing terms and closing date.
Inspections. Most buyers use the inspection period to hire a licensed home inspector and decide whether to ask for repairs or credits.
Appraisal and loan approval. Your lender orders an appraisal and finalizes your loan.
Title work and closing. A title company searches the property's ownership history, issues title insurance and usually handles the closing.
Closing costs for buyers in Indiana
Buyers in Indiana commonly pay closing costs of roughly 2% to 5% of the purchase price, depending on the loan and the home. Your lender must give you a Loan Estimate within three business days of your application, and a Closing Disclosure at least three business days before closing, so you'll know the real numbers in advance. Typical buyer costs include:
Lender fees: origination, underwriting, credit report and any points you choose to pay.
Appraisal fee.
Title and closing fees: the lender's title insurance policy, closing or settlement fees and recording fees. In many Indiana sales the seller pays for the owner's title policy, but it is negotiable.
Prepaids and escrow: homeowners insurance and a starting balance for your escrow account.
Inspection fees: paid directly to your inspectors, usually before closing.
Good news: Indiana does not charge a state real estate transfer tax, which keeps closing costs lower than in many states. You can also ask the seller for a credit toward closing costs as part of your offer.
Home inspections in Indiana
Home inspectors in Indiana must be licensed by the state. A general home inspection covers the roof, structure, foundation, electrical, plumbing, heating and cooling, and visible signs of water damage. In the South Bend area, also consider:
Radon testing. The St. Joseph County Department of Health reports that about one in four homes in the county has elevated radon. A radon test during your inspection period is inexpensive and worth it.
Sewer line scope. Recommended for older homes, especially in established South Bend neighborhoods.
Well and septic inspections. Common for homes outside city limits in Granger, Osceola and rural St. Joseph County.
Wood-destroying insect inspection. Often required for VA loans and smart for older homes.
After the inspection, you can ask the seller to repair items, offer a credit, lower the price, or, depending on your purchase agreement, walk away. Read more in my guide to the home inspection process.
Property taxes for Indiana homebuyers
Taxes are paid a year behind
Indiana property taxes are paid in arrears. The bill you pay this year is for the previous year, and it's usually due in two installments, around May 10 and November 10. Because of that, the seller typically gives you a credit at closing for the taxes that built up while they owned the home. Your purchase agreement and title company handle the exact split.
File for your homestead deduction
If the home will be your primary residence, file for the homestead deduction. It lowers your assessed value and caps your tax bill. You can apply on the Indiana Sales Disclosure Form at closing, or with the county auditor. File by January 15 of the year after you buy, and confirm it shows up on your tax bill. Missing it can cost you hundreds of dollars a year.
Indiana's property tax caps and 2026 changes
Tax caps: Indiana's "circuit breaker" limits property taxes on a homestead to 1% of its gross assessed value. Rental and other residential property is capped at 2%.
2025 reform: Legislation passed in 2025 increases the supplemental homestead deduction each year through 2031 and adds a homestead credit of 10% of the bill, up to $300, starting with 2026 tax bills. Homeowners with a homestead deduction on file receive it automatically.
For local details, see my guide to St. Joseph County property taxes.
Down payment help in Indiana
The Indiana Housing and Community Development Authority (IHCDA) offers several homebuyer programs through approved lenders:
First Step: down payment assistance for first-time buyers, or buyers purchasing in a targeted area, paired with a 30-year fixed FHA or conventional loan. The assistance is a deferred loan that is repaid when you sell, refinance or pay off the mortgage.
Next Home: down payment assistance of 2.5% or 3.5% of the purchase price, paired with a 30-year fixed FHA or conventional loan.
Step Down: a reduced-rate loan option for eligible buyers, without down payment assistance.
Income limits, purchase price limits and credit requirements apply, and program terms change, so check current details with IHCDA and an IHCDA-approved lender. Also ask your lender about FHA loans (as little as 3.5% down), VA loans for eligible veterans (often no down payment) and USDA loans for eligible homes outside city limits.
Frequently asked questions
How much are closing costs for a buyer in Indiana?
Roughly 2% to 5% of the purchase price is common, depending on your loan and lender. Your Loan Estimate gives you the real figure early.
Does Indiana have a real estate transfer tax?
No. Indiana does not charge a state real estate transfer tax.
When do I file for the homestead deduction?
You can apply at closing on the Sales Disclosure Form or with the county auditor. File by January 15 of the year after you buy.
Do I need an attorney to buy a home in Indiana?
Indiana does not require an attorney at closing. Most closings are handled by a title company, but you can hire a real estate attorney if you want legal advice.
Ready to buy in South Bend or Michiana?
I'm Jennifer Lillie, a REALTOR® with Cressy & Everett Real Estate, with 18 years of experience helping buyers across South Bend, Granger, Mishawaka and Michiana. I'll help you line up the right lender, write a strong offer and get through inspections and closing without surprises. Contact me or call 574-286-9667.
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This guide is general information, not legal, tax or lending advice. Tax rules and program terms change. Confirm details with your lender, title company, county auditor or a tax professional.