7 Mortgage Myths Debunked

Even if you’re buying a home for the first time, it’s probably not the first time you’ve heard or received advice about mortgages. While some guidelines have changed over time, other tips you might have received have never been true at all. Advice can be helpful, but in one of the most important financial decisions of your life, you’ll want to make sure it’s based in fact.

We set out to tackle and dispel seven common mortgage myths and to also bring you more accurate advice on the flip side of those misconceptions. Check out these busted myths and walk away with confidence as you start your next home purchase.

1. You Can’t Afford to Buy a Home

If you’re already paying rent, and you can find a home with a comparable mortgage payment, then you can afford to buy your own place.

Many states have first-time and move-up buyer programs that can help address any concerns you may have about being able to afford a home, too. From down payment assistance, to closing cost grants, to federal tax credits, these programs help solve many of the roadblocks that could prevent you from enjoying homeownership.

Of course, you will want to ensure you have funds set aside for maintenance and improvement expenses, along with taxes and HOA fees. Setting a budget allows you to figure out what homes are in your price range and start your home search – the first step in your buying process.

2. You Have to Put 20% Down

Gone are the days that the only mortgage option is a loan with a 20% down payment. A wide array of loan options are now available, including some that allow for little or no money down at all. From USDA and VA loans to FHA and conventional loans, there are plenty of programs for you to consider.

Government-backed loan programs, such as USDA and VA, allow for buyers to finance up to 100% of their purchase price, meaning you might not have to put any money down. Those programs have specific qualifying criteria, such as the location of your purchase or military affiliation. But FHA and conventional loans are available to even more buyers and have down payment requirements as low as 3%.

In fact, the national average down payment is now just 12% as of 2020, dipping as low as 7% when you segment out first-time buyers. So don’t let this outdated advice stop you from realizing your homeownership goals.

3. Only High Credit Scores Get Approved

Back to the wide variety of loan programs we go! The impact of your credit score on your loan approval is usually directly related to the requirements of the loan program you’re applying for. That means you just need to find a loan program with minimum requirements that work for your current credit score.

Naturally, the higher the credit score you have, the more loan programs you’ll have accessible to you. And your credit score can help you secure better interest rates, but you don’t have to have a top score to get approved and enjoy being a homeowner.

Most loan programs will require at least a 640 as the minimum requirement, but one of our loan officers can help you plan to achieve your homeownership goals wherever you’re at.

4. Renting is Cheaper Than Buying

Most of the time, this just isn’t the case. To calculate a fair comparison, you’ll need to add up your total rental expenses. Then, compare that to the estimated monthly mortgage cost of the houses in your budget. You’ll need to factor in that you are investing into your home’s equity with each mortgage payment, compared to rental payments, which have no return-on-investment (ROI).

Unless you’re saving a significant amount renting as compared to buying, factoring in the home equity you’re building, and you’re planning to invest the difference, you’ll get more ROI with a home purchase.

5. You Should Always Get a 30-Year Fixed-Rate Mortgage

You’ve probably heard that 30-year fixed-rate mortgages are the gold standard when it comes to home financing. In fact, it really depends on your personal financial situation, how long you plan to stay in your house, and how much you’re willing to bet on changing market conditions.

The average homebuyer today lives in their house for 7 years. If you aren’t planning to stay in the same house for the entirety of your mortgage, you can easily benefit from lower initial interest rates offered on adjustable-rate mortgages.

Another consideration is that no one knows where the housing and lending markets will be in the future. If you finance with a 5% fixed interest rate today, and rates drop to 2.5% in 5 years, then you would need to refinance to take advantage of that drop.

It’s no exact science, but defining your current financial priorities, having an idea of how long you plan to keep the property, and identifying your comfort with the risk of changing market conditions can help guide your selection of fixed-rate versus adjustable-rate options.

6. The Lowest Interest Rate is Always the Best Offer

Your interest rate plays a large role in determining the cost of your loan, but it’s not the only factor. Lenders can impose other costs, like origination fees. You also have to think about closing costs, which can range from 2 to 5 percent of your loan amount on average.

A more reliable method to compare loan options and decide on the best one for you is through applying with multiple lenders and comparing the loan estimates they provide you. A loan estimate is a standardized form that lenders must send to you after you complete an application with them. Because they’re required to be prepared using a standardized format, you’ll be able to compare different loan options against one another easily.

And you don’t have to worry about multiple applications negatively impacting your credit score, since most credit bureaus count multiple inquiries for the same type of line-of-credit within a certain time frame as a single inquiry.

7. If You’re Denied, You’ll Never Be Able to Get a Mortgage

Just because you’ve endured financial difficulties before doesn’t mean they will haunt you forever. Lenders do look at your credit history, but they also recognize and acknowledge the improvements you’ve made.

What’s more important is being able to meet the minimum qualifications for the loan program you’re applying for. And, if there are requirements you haven’t quite met yet, be prepared to speak to the actions you’re taking to get there.

Like many areas of improvement in life, knowing where you’re going – in this case, the loan requirements – and having a plan to get there are the two most important pieces of advice you can follow.


Now that you’ve learned the truth behind these common mortgage myths, you’re well-equipped to begin planning your next home purchase with ease. Our team of mortgage experts can help you get started with a free consultation.


The included content is intended for informational purposes only and should not be relied upon as professional advice. Additional terms and conditions apply. Not all applicants will qualify. Consult with a finance professional for tax advice or a mortgage professional to address your mortgage questions or concerns. This is an advertisement. Prepared 9/16/2021.