The single most common thing keeping people in a rental they have outgrown is a number they got from somewhere and never checked: twenty percent down.
It is not a requirement. It never was for most loan types. And in Greater Lafayette, where a lot of homes sit in a range that working families can genuinely reach, that misunderstanding costs people years.
Here is what Indiana buyers actually use.
Where the twenty percent idea comes from
It is real, just not as a requirement. On a conventional loan, putting twenty percent down is the point at which you avoid private mortgage insurance.
That is a genuine benefit. It is not the same as a rule, and treating it as one means waiting years to save an amount you may not need while paying someone else's mortgage in the meantime.
The right question is not "how do I get to twenty percent." It is "what is the total monthly cost under each option, and which one fits my situation."
Conventional loans
The standard option, and available with far less than twenty percent down. Several conventional programs allow down payments in the low single digits for qualifying buyers, with private mortgage insurance added to the monthly payment.
The advantage over some other options is that conventional mortgage insurance can typically be removed once you have built enough equity, either through payments or appreciation. That makes a low down payment a temporary cost rather than a permanent one. The Consumer Financial Protection Bureau has plain-language explanations of how mortgage insurance works and when it can come off.
Credit standards are generally tighter than government-backed options, which is the tradeoff.
FHA loans
Backed by the federal government and designed for buyers with smaller down payments or less established credit. Requirements, current limits, and the minimum down payment are published by the Department of Housing and Urban Development, and it is worth reading their material rather than a blog summary, mine included, because the specifics change.
The tradeoff is mortgage insurance that, on most current FHA loans, stays for the life of the loan unless you refinance. For a buyer who plans to refinance or move within a reasonable window, that matters less. For someone planning to stay thirty years, it matters more.
FHA also has property condition standards. That is worth knowing if you are shopping older housing stock, which we have plenty of here. My guide to buying an older home in Lafayette covers what tends to come up.
VA loans
If you are a veteran, active duty, or a surviving spouse, this is very often the best option available, and it allows qualifying buyers to purchase with no down payment and no monthly mortgage insurance.
Eligibility and current terms come from the Department of Veterans Affairs. If you have any military service in your history, confirm whether you qualify before assuming you do not. I have had clients discover they were eligible years after they could have used it.
USDA rural development loans
This one gets overlooked constantly in our area, and it should not.
USDA loans allow no down payment for qualifying buyers in eligible areas, with income limits that vary by household size and location. The thing people miss is that "rural" is broader than it sounds, and parts of Tippecanoe County and much of the surrounding area can qualify. USDA Rural Development publishes the eligibility maps and current income limits.
If you are open to the small towns around Lafayette, this program is genuinely worth a look.
Indiana down payment assistance
The Indiana Housing and Community Development Authority runs programs aimed at helping qualifying buyers with down payment and closing costs. Eligibility generally depends on income, purchase price, credit, and sometimes whether you are a first-time buyer, and program terms change.
Check their current offerings directly rather than trusting any secondhand summary. Then talk to a lender who actively originates those loans, because not every lender does, and the ones who do it regularly make the process much smoother.
The costs beyond the down payment
This is where buyers get caught, so plan for it now.
You also need closing costs, which typically run a few percent of the purchase price in Indiana and cover lender fees, title work, appraisal, prepaid taxes, and insurance. I break down what they are and roughly what to expect in closing costs for Indiana buyers.
You need earnest money up front, explained in earnest money in Indiana. You need inspection costs, covered in what a home inspection covers. And you need reserves after closing, because homes need things.
Sellers sometimes contribute toward closing costs as a negotiated term, and in the right situation that is a meaningful help. It is one of the levers I use when structuring an offer, which I get into in writing a winning offer.
Where the money can come from
Buyers often have more available than they realize once they look properly.
Gift funds from a family member are allowed under most programs, with a documented gift letter and a clear paper trail showing where the money originated. Lenders care a great deal about sourcing, so talk to yours before any money moves between accounts.
Retirement accounts sometimes allow borrowing or withdrawals for a home purchase, with rules and tax consequences that vary by account type. That is a conversation for your lender and a tax professional together, not something to decide from an internet article.
And plain savings, built deliberately over a defined stretch, is still how most buyers get there. If you are twelve months out, knowing the exact number and the exact date beats vague intentions by a wide margin.
One warning worth repeating. Lenders trace deposits. A large unexplained transfer into your account two weeks before closing creates a documentation problem at the worst possible time. Move money early and keep records.
Is more down always better?
No, and I want to push back on the instinct.
More down means a smaller loan, a lower payment, and possibly no mortgage insurance. All good. But it also means less cash left over, and a buyer who closes with an empty account is one water heater away from a credit card balance.
I would rather see someone put a bit less down and keep a real cushion. The furnace does not care how much equity you have.
What to do first
Talk to a lender before you do anything else, and get fully underwritten rather than casually pre-qualified. The difference is explained in pre-approval versus pre-qualification, and it matters enormously when you are competing for a house.
Ask that lender to run your numbers under two or three programs side by side. Total monthly payment, cash needed at closing, and what happens to mortgage insurance over time. Seeing them next to each other usually makes the choice obvious.
And if the answer comes back that you are not ready yet, that is useful too. Knowing you are eight months out with a specific plan beats guessing for another two years.
If you want a straight conversation about what buying here would actually take for you, grab a time on my calendar, or start with my first-time buyer guide. No pressure either way. Let's get you home.