Buying a home for the first time can be overwhelming, especially when misinformation about mortgages is everywhere. If you’ve ever heard that you need a 20% down payment or that you can’t buy a home with student loans, it’s time to set the record straight.
In this guide, we’re debunking common mortgage myths to help you make informed decisions about homeownership.
Why Understanding Mortgage Myths is Crucial
Buying a Home is More Attainable Than You Think
Many first-time buyers delay homeownership because they think they can’t afford it, but with low down payment options, assistance programs, and competitive interest rates, buying may be more accessible than you realize.
Avoiding Costly Mistakes
Believing mortgage myths can lead to poor financial decisions, such as overpaying in rent or missing out on valuable loan programs.
Working with Experts Makes a Difference
Partnering with a trusted lender and real estate agent ensures you navigate the mortgage process with confidence and clarity.
Common Mortgage Myths (and the Truth Behind Them)
Myth #1: You Need a 20% Down Payment to Buy a Home
✅ The Truth: Many loan programs allow for 3-5% down payments, and VA or USDA loans require zero down.
🔗 Learn about FHA loans and down payment assistance programs for first-time buyers.
💡 Pro Tip: Even with a smaller down payment, private mortgage insurance (PMI) can be temporary—once you build 20% equity, you may be able to remove it.
Myth #2: Your Credit Score Must Be Perfect to Qualify
✅ The Truth: While a higher credit score helps, many loan programs accept scores as low as 580 for FHA loans and 620 for conventional loans.
🔗 Learn how credit scores impact mortgage rates.
💡 Pro Tip: Improve your credit by paying down debt, making on-time payments, and avoiding new credit applications before applying for a mortgage.
Myth #3: Pre-Approval Isn’t Necessary Until You Find a Home
✅ The Truth: Getting pre-approved first strengthens your offer and helps you understand your budget before house hunting.
🔗 Start with a mortgage pre-approval guide to understand why it’s essential.
💡 Pro Tip: Sellers favor pre-approved buyers, especially in competitive markets.
Myth #4: Renting is Always Cheaper Than Owning
✅ The Truth: In many cities, monthly mortgage payments are lower than rent, and owning builds equity and wealth over time.
🔗 Use this calculator to compare costs in your area.
💡 Pro Tip: Homeownership provides tax benefits and long-term appreciation that renting does not.
Myth #5: You Can’t Buy a Home If You Have Student Loans
✅ The Truth: Many lenders work with buyers who have student loans, focusing on debt-to-income (DTI) ratio rather than just total debt.
🔗 Check Fannie Mae’s guide on student loan mortgages.
💡 Pro Tip: Consider an income-based repayment plan to reduce your monthly debt obligations and improve your DTI.
Myth #6: Mortgage Rates Are the Only Thing That Matters
✅ The Truth: While rates impact your payment, loan terms, fees, and closing costs are just as important.
🔗 Learn how APR vs. interest rates impact your total mortgage cost.
💡 Pro Tip: Compare multiple lenders and get a loan estimate before committing.
Myth #7: You Should Always Pay Off Your Mortgage Early
✅ The Truth: Paying off your mortgage faster saves on interest, but keeping cash reserves for investments or emergencies can sometimes be the smarter choice.
🔗 Explore the pros and cons of early mortgage payoff.
💡 Pro Tip: Consider biweekly payments or extra principal payments if you want to reduce interest without draining savings.
How to Get Mortgage-Ready as a First-Time Buyer
✔ Improve Your Credit Score – Pay bills on time and reduce credit card balances.
✔ Save for a Down Payment and Closing Costs – Look into down payment assistance programs.
✔ Get Pre-Approved Early – Connect with a lender to understand borrowing power before house hunting.
How Lockstep Realty Helps First-Time Buyers
At Lockstep Realty, part of eXp Realty, we help buyers navigate the mortgage process and avoid common mistakes by:
✔ Connecting You with Trusted Lenders – Get the best mortgage options based on your financial situation.
✔ Guiding You Through Pre-Approval – Understand your budget before house hunting.
✔ Finding Homes Within Your Price Range – We match you with properties that align with your financial goals.
Frequently Asked Questions (FAQs)
✔ 1. What is the biggest mortgage myth first-time buyers believe?
That a 20% down payment is required—many buyers purchase homes with as little as 3-5% down.
✔ 2. Can I get a mortgage with bad credit?
Yes! FHA loans allow scores as low as 580, and lenders offer credit-building programs.
✔ 3. Should I get pre-approved before house hunting?
Absolutely. Pre-approval helps set your budget and strengthens your offers.
✔ 4. Are there first-time buyer programs in Indiana?
Yes! Down payment assistance programs and low-interest loans are available.
✔ 5. How does Lockstep Realty help first-time buyers?
We provide expert mortgage guidance, lender connections, and personalized home searches.
