Save Smarter, Not Harder: Down Payment Myths & Saving Strategies

Saving for a down payment can feel like scaling a mountain, especially for first-time buyers. Between rising home prices, the common myth that you need 20% down, and a multitude of program options, it’s easy to assume you need tens of thousands of dollars saved before you even start house-hunting. But the truth is far more approachable.

We will cover common myths about down payments, what different loan types actually require, state and federal low and zero-down options, and some saving strategies.

Common Misconceptions

“I need 20% down to buy a home.” Not true. While a 20% down payment does eliminate private mortgage insurance (PMI), many first-time buyers manage with much less and simply budget PMI into their monthly payment.

“Smaller down payments mean I’ll never own equity.” Even a 3–5% down payment starts you building equity from day one. With rising home prices, it’s possible to grow equity in your home quickly. We break down the numbers behind how financially beneficial a home purchase is. Plus, some assistance programs pair with low down payment loans to cover the gap.

What Different Loans Really Require

State Down Payment Assistance Programs

Illinois: IHDA Mortgage Products

For Illinois homebuyers aiming to minimize upfront costs, Homestead Financial Mortgage’s guide—Buying a Home with Low Down Payment or 0 Down in Illinois—breaks down every avenue for low or zero-down purchases. It explains how federal VA and USDA loans can finance 100 percent of your home’s price (with seller concessions or rolled-in closing costs), and details IHDA’s state-sponsored programs and a few county-specific programs.

The Illinois Housing Development Authority offers three DPA options for both first-time and repeat buyers statewide (minimum 640 credit score, $1,000 or 1 percent borrower contribution, primary residence):

• Access Forgivable: 4% of purchase price (up to $6,000) as a grant—no repayment needed

• Access Deferred: 5% (up to $7,500) interest-free loan, deferred until sale, refinance, or payoff
• Access Repayable: 10% (up to $10,000) interest-free loan, repaid over 10 years

IHDA mortgages are underwritten in accordance with FHA, USDA, or Conventional guidelines. Per IHDA, the minimum credit score is 640. If you want to read more about the specific programs and income requirements, head to ihdamortgage.org.

Missouri: MHDC First Place Program

For Missouri homebuyers looking to ease the burden of a down payment, Homestead Financial’s guide—Missouri Down Payment Assistance Programs—breaks down both federal and state-specific options. Explore zero-down VA and USDA loans, and dive deep into MHDC’s offerings: the First Place Loan Program, the Next Step Program’s interest-free assistance, and the Mortgage Credit Certificate that returns a portion of your mortgage interest each year.

The Missouri Housing Development Commission’s First Place program provides:

• A 100% forgivable second loan equal to 4% of your total mortgage for down payment and closing costs—fully forgiven after 10 years if you stay in the home
• Option for a Non-DPA loan at rates 0.25–0.50% below DPA rates, for buyers who already have sufficient funds
• No minimum down payment requirement beyond your MHDC assistance

If you’d like to read more about the specific programs and income requirements, head to mhdc.com/services/homebuyer-programs.

Kansas: KHRC First-Time Homebuyer Program

For Kansas homebuyers eager to minimize upfront costs, Homestead Financial’s guide—Buying a Home in Kansas: Down Payment Assistance—outlines how to reduce cash at closing. It details the statewide Kansas DPA grant program (income and location-based assistance for buyers with a minimum 640 credit score), highlights the State of Kansas first-time homebuyers program, and even spotlights city-specific aid in Lawrence, Leavenworth, and Topeka.

Administered by the Kansas Housing Resources Corporation, this program offers:

• 15 – 20% of purchase price in soft-loan assistance (forgiven over time), allocated by income bracket
• Eligibility for first-time buyers (no home owned in past 3 years); must meet HUD income limits; borrower contributes at least 2% of purchase price

If you’d like to read more about Kansas program qualifications, you can read more at kshap.org.

Federal Zero-Down Options: VA & USDA Loans

• VA Loans: Available to qualifying Veterans and service members, with no down payment required as long as sale price ≤ appraised value; also, no PMI—there is a one-time funding fee, which can sometimes be rolled into the loan.
• USDA Loans: For low-to-moderate income buyers in eligible rural areas, USDA loans guarantee 100% financing; you only need to cover closing costs (typically 2–5% of loan amount)

Strategies to Save Faster

1. Automate Your Savings
   • Round-up apps (e.g., Qapital, Acorns) round transactions up to the next dollar, sweeping spare change into savings.
   • Rules-based apps (e.g., Qapital, Oportun) analyze your cash flow and tuck away small amounts you won’t miss, generally per rules you set. For example, you could automatically set aside 3% from any paycheck that comes in.
2. Set Up a Dedicated “Down Payment” Account
   • A separate high-yield savings account makes it psychologically easier to resist dipping into those funds.
3. Cash-Back & Rewards
   • Funnel credit card cash-back or bank rewards into your down payment fund each month.
4. Family Gifting
   • A relative can gift you part or all of the down payment. Lenders typically require a gift letter stating no repayment is expected—check your lender’s guidelines.
5. Side Hustles & Windfalls
   • Extra income streams—freelancing, selling unwanted items, or applying year-end bonuses—can give your savings a boost.

Final Thoughts

Putting together a down payment doesn’t have to be overwhelming. Homeownership is within reach sooner than you might think with low down payment loan options, state and federal assistance programs, and smart saving tactics. Talk to one of our lenders about which programs you qualify for, set up automated savings, and consider family for gift options—and you’ll be closing on your first home before you know it!