Buying a home can feel complicated, especially when you’re sorting through advice from friends, family, and the internet. From how much you need for a down payment to when you should apply for a mortgage, misinformation can make the process seem more intimidating than it needs to be.
The good news? You don’t need perfect finances or a perfect market to explore homeownership. Understanding how mortgages work can help you make informed decisions based on your own financial situation and goals.
Here are nine common mortgage myths worth leaving behind.
Myth #1: You Need a Perfect Credit Score to Get a Mortgage
Fact: You may have more mortgage options than you think.
Your credit score is an important part of the mortgage process, but it’s not the only factor lenders consider. Your income, existing debts, employment history, savings, and other aspects of your financial profile may also affect your eligibility.
Different loan programs have different requirements, and some are designed to help borrowers who don't have excellent credit.
If your credit score needs work, don't assume homeownership is out of reach. A mortgage professional can help you understand where you stand and identify steps that may strengthen your application.
Myth #2: You Need a Large Down Payment to Buy a Home
Fact: Some mortgages allow for a lower down payment.
Saving for a down payment can take time, but you may not need to put down 20% to purchase a home. Depending on your eligibility and loan program, you may qualify for a mortgage with a smaller down payment. Certain eligible VA and USDA loans may offer zero-down-payment options.
Keep in mind that a smaller down payment can affect your monthly payment, loan costs, and whether mortgage insurance is required. You'll also need to plan for closing costs and other expenses associated with buying a home.
Explore your options before assuming you need to save a specific amount. You may have more paths to homeownership than you realize.
Myth #3: You Have to Be Debt-Free to Get a Mortgage
Fact: Having debt doesn't automatically disqualify you.
Student loans, car payments, and credit card balances are common. Lenders generally consider your existing monthly debt obligations alongside your income when evaluating whether a mortgage payment may fit your budget.
This is one reason your debt-to-income ratio, or DTI, matters. It compares your monthly debt payments with your gross monthly income.
Paying down debt may improve your financial profile, but you don't necessarily have to eliminate every balance before applying. A lender can review your circumstances and explain how your current obligations may affect your options.
Myth #4: You Can't Get a Mortgage If You're Self-Employed
Fact: Self-employed borrowers can qualify for mortgages.
Being self-employed doesn't automatically prevent you from getting a mortgage. The process may involve additional documentation because lenders need to evaluate your income and determine whether it is sufficient and likely to continue.
Depending on your situation, you may need tax returns, bank statements, profit-and-loss statements, or other financial records. The specific documentation and income calculations vary by loan program and borrower.
If you work for yourself, start organizing your financial records early and speak with a loan officer about what you'll need. Planning ahead can help you better understand the process before you begin house hunting.
Myth #5: You Have to Accept the First Offer You Make on a Home the first home you offer on.
Fact: An offer is part of a negotiation.
Making an offer doesn't automatically mean you have to move forward with the purchase. Depending on the seller's response and the terms of your offer, you may be able to negotiate price, closing dates, contingencies, and other details.
Your REALTOR® can help you understand the local market, evaluate the seller's response, and decide how to proceed. Keep in mind that once an offer becomes a signed contract, your obligations and options depend on the contract terms and applicable law.
Before making an offer, understand your budget, identify your priorities, and discuss your strategy with your real estate agent.
Myth #6: If You've Been Denied a Mortgage, You'll Never Qualify
Fact: A denial doesn't necessarily mean you can't qualify in the future.
A mortgage application can be denied for several reasons, including credit concerns, income documentation, debt levels, or the property's eligibility. The right next step depends on the reason for the denial.
Ask the lender to explain what affected the decision and what you could do to address it. You may need time to build credit, reduce certain debts, document income differently, or strengthen your savings.
You can also ask whether another loan program or a different approach may fit your circumstances. Approval is never guaranteed, but understanding the issue can help you make a plan.
Myth #7: You Should Wait to Buy a Home Until Mortgage Rates Come Down
Fact: Mortgage rates matter, but they shouldn't be the only factor in your decision.
When rates are high, it's understandable to wonder whether you should put your homebuying plans on hold. A higher interest rate can increase your monthly principal-and-interest payment, affecting how much home you can comfortably afford. But waiting for rates to drop isn't automatically the best choice for every buyer.
Here's why: No one can guarantee when mortgage rates will fall, how much they might change, or what home prices and inventory will look like at that time. If rates decrease, more buyers may enter the market, potentially changing the competition for available homes. If you buy now, you may find a home that fits your needs and budget, but you still need to account for today's borrowing costs and the full cost of ownership.
Instead of trying to time the market, consider your individual circumstances:
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Your budget: Can you comfortably manage the estimated mortgage payment, property taxes, homeowners insurance, maintenance, and other expenses?
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Your financial readiness: Do you have funds for your down payment and closing costs, along with savings for unexpected expenses?
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Your plans: Do you expect to stay in the home long enough to make the purchase worthwhile for you?
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Your options: Have you explored different loan programs and compared financing options with a qualified loan officer?
If rates decrease in the future, refinancing may be an option, depending on market conditions, your eligibility, the costs involved, and whether a new loan makes financial sense. However, refinancing isn't guaranteed, so don't buy a home based on the assumption that you'll be able to refinance later.
The bottom line: You don't have to buy a home just because you're able to, and you don't necessarily have to wait just because rates are higher than you'd like. Focus on whether the home and payment make sense for your life today.
Myth #8: You'll Always Be Penalized for Paying Off Your Mortgage Early
Fact: Prepayment penalties depend on your loan terms.
Some borrowers worry they'll be charged extra if they pay off their mortgage ahead of schedule. However, prepayment penalties aren't a feature of every mortgage.
If you plan to make additional principal payments or pay off your loan early, review your mortgage documents and ask your lender whether any restrictions or penalties apply.
Also consider your broader financial priorities. Paying down your mortgage faster may help reduce interest over time, but maintaining an emergency fund and addressing other financial needs are important, too.
Myth #9: All Mortgages Can Be Transferred to Another Buyer
Fact: Some mortgages may be assumable, but not all are.
A mortgage assumption allows a qualified buyer to take over an existing mortgage under its terms, subject to the loan's rules and the lender's approval. This can be appealing when an existing mortgage has favorable terms, but assumptions aren't available for every loan.
Certain government-backed loans may be assumable if specific requirements are met. The buyer generally must qualify, and the process needs to be handled according to the loan's terms.
If you're selling a home or considering buying one with an existing mortgage, ask the lender whether an assumption is permitted and what requirements apply.
Get the Facts Before You Make Your Next Move
Your mortgage journey doesn't have to be based on guesswork or outdated advice. Understanding your credit, down payment options, debt, and financing choices can help you take the next step with more confidence.
And remember, there's no single homebuying timeline that works for everyone. The right decision depends on your finances, your goals, and the costs involved.
Have questions about your mortgage options? Connect with an Embrace Home Loans loan officer to discuss your circumstances, explore potential financing options, and better understand what preparing to buy a home could look like for you.
Disclaimer: Mortgage qualification, rates, costs, and loan features vary by borrower, property, loan program, and market conditions. Speak with a qualified mortgage professional about your specific situation.
