Top Mortgage Myths

Purchasing a home is one of the largest and most expensive investments you will ever make, and can be an overwhelming experience if you aren’t familiar with the process. Because buying a home and getting a mortgage go hand-in-hand, it’s important to educate yourself to avoid feeling intimidated. There are a number of commonly-believed mortgage myths that can make the process even more daunting.

Myth 1: You Need a 20% Down Payment

This is perhaps the most persistent mortgage myth. While a 20% down payment lets you avoid private mortgage insurance (PMI) and often results in better loan terms, many loan programs allow you to buy with much less. FHA loans require as little as 3.5% down. Conventional loans can go as low as 3%. VA and USDA loans may require no down payment at all for qualifying borrowers.

Myth 2: You Need Perfect Credit

While excellent credit will get you the best rates, you don’t need a perfect score to qualify for a mortgage. FHA loans accept credit scores as low as 580 (or 500 with a larger down payment). Conventional lenders often work with scores of 620 and above. The key is to know your credit profile and work with a lender who can find the right program for your situation.

Myth 3: You Should Always Go With the Lowest Rate

Interest rate is important, but it’s not the only factor. Fees, points, loan terms, and the quality of service all matter. A lender offering a slightly higher rate but lower fees and excellent communication may actually be a better deal over the life of the loan. Always compare the APR (Annual Percentage Rate), not just the interest rate.

Myth 4: Getting Pre-Approved Hurts Your Credit Score

A mortgage pre-approval does result in a hard inquiry on your credit report, which can temporarily lower your score by a few points. However, multiple mortgage inquiries within a short window (typically 14 to 45 days) are treated as a single inquiry by scoring models. The impact is minimal and temporary.

Myth 5: Your Rate Is Locked in at Pre-Approval

Pre-approval quotes you a rate based on current market conditions, but it is not a locked rate. Rate locks typically happen later in the process, once you are under contract on a specific property. Rate lock periods typically range from 30 to 60 days.