Myth 1: You need 20% down to buy a home
You don't. Most buyers put down 5–10%. FHA loans accept 3.5% down. VA and USDA loans accept 0% down. Conventional loans for first-time buyers accept 3% down.
The 20% rule isn't a requirement — it's the threshold above which mortgage insurance is no longer required. Mortgage insurance is the cost of buying with less down, but it's not a dealbreaker.
Myth 2: You need perfect credit to qualify
Conventional loans typically start at 620, with the best rates above 740. FHA loans go down to 580 with 3.5% down, or 500 with 10% down. VA loans don't have a strict minimum, though most lenders want 580+.
What underwriters care about is the full picture — score, payment history, debt levels, and recent activity — not just one number.
Myth 3: Pre-qualification and pre-approval are the same thing
They're not. Pre-qualification is an estimate based on info you provide, with no verification. Pre-approval involves the lender pulling credit and verifying income, assets, and employment.
Sellers and their agents take pre-approvals seriously. Pre-qualifications are useful for self-planning but don't carry the same weight in an offer.
Myth 4: The lowest advertised rate is the best deal
The advertised rate is one input. The Loan Estimate's Annual Percentage Rate (APR), which includes fees, is closer to a true cost. And even APR misses things like prepayment penalties, escrow handling, and lender service quality.
Compare two or three lenders' Loan Estimates side-by-side. Look at total cost over your expected time in the home, not just the rate.
Myth 5: You can't qualify if you're self-employed
You can — it just takes more documentation. Most lenders need two years of self-employment tax returns and business returns. Income is calculated from net business income, which can sometimes work against business owners who write off heavily for tax purposes.
Bank statement loans, profit-and-loss-only loans, and DSCR loans (for investment properties) are alternatives for self-employed borrowers whose tax-return income doesn't fully reflect their cash flow.
Myth 6: Pre-approvals are binding contracts
They're not. A pre-approval indicates the lender will likely fund the loan based on the information available at the time. Final approval still requires a property appraisal, updated income/asset verification, and clear underwriting.
Pre-approvals can also be revoked if your financial situation changes — losing a job, opening new credit, or large unexplained deposits can all trigger a re-evaluation.
Myth 7: It's cheaper to rent than to buy
Sometimes true, sometimes not. The right comparison includes:
- Mortgage P&I + taxes + insurance + maintenance vs. rent.
- Equity build vs. zero equity build from rent.
- Tax deductibility of mortgage interest (in some scenarios).
- Appreciation potential.
- Opportunity cost of the down payment.
The math depends on your local rents vs. local home prices, your tax bracket, and how long you plan to stay. Worth running both ways.
Myth 8: Refinancing always saves money
Not always. Refinancing has closing costs (2–5% of the loan). If you'll move before recouping those costs through monthly savings, you'll lose money.
Refinancing also re-amortizes your loan over a new 30-year term. Even at a lower rate, that can mean more total lifetime interest if you're far into your current loan.
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