Navigating the mortgage process can feel daunting, especially with so much misinformation circulating. Whether you’re a first-time homebuyer or a seasoned homeowner, it’s easy to fall for some of the most persistent myths about mortgages. To help you make more informed decisions, we’re debunking 10 common mortgage myths that could stand in the way of your homeownership goals.

1. You Need a 20% Down Payment

One of the most widespread misconceptions is that you must put down 20% of the home’s purchase price. While putting down 20% can help you avoid private mortgage insurance (PMI), many loan programs allow for much smaller down payments. For instance, FHA loans require as little as 3.5%, and VA loans offer 0% down for qualifying veterans. Conventional loans may also offer low down payment options, making homeownership more accessible than you might think.

2. Your Credit Score Has to Be Perfect

Many people believe they need a near-perfect credit score to qualify for a mortgage. While having a higher credit score can secure better interest rates, you don’t need an 800+ score to get a mortgage. FHA loans, for example, accept scores as low as 580, and some lenders offer loans for even lower scores. It’s important to know that lenders consider more than just your credit score—they look at your overall financial profile, including your debt-to-income ratio and employment history.

3. Pre-Qualification is the Same as Pre-Approval

Pre-qualification and pre-approval are often confused, but they serve different purposes. Pre-qualification is a rough estimate of how much you can borrow based on self-reported information, while pre-approval is a more in-depth process where the lender verifies your financials. Pre-approval gives you a more accurate loan amount and demonstrates to sellers that you’re a serious buyer.

4. You Can Only Get a Mortgage from Your Bank

While your bank is certainly an option for securing a mortgage, it’s not the only choice. Mortgage brokers, credit unions, and online lenders also provide competitive loan products. Shopping around with multiple lenders can help you find the best rate and terms that fit your unique financial situation. Don’t assume your bank will automatically give you the best deal!

5. The Lowest Interest Rate is Always the Best Option

While a low interest rate is important, it’s not the only factor to consider when choosing a mortgage. Some loans with low rates come with higher closing costs, or they may have terms that aren’t suitable for your financial goals. It’s essential to look at the total cost of the loan over time, including fees and the type of interest (fixed vs. adjustable).

6. Once You’re Pre-Approved, You’re Guaranteed a Mortgage

Pre-approval is a significant step, but it doesn’t guarantee you’ll get the loan. If your financial situation changes—such as taking on new debt or changing jobs—your loan approval could be jeopardized. It’s crucial to maintain financial stability between pre-approval and closing to ensure a smooth process.

7. Paying Off Debt Before Applying Will Always Help

While paying down debt can improve your credit score and reduce your debt-to-income ratio, it’s not always the best move right before applying for a mortgage. Some types of debt, such as student loans, don’t weigh as heavily in the mortgage approval process. Additionally, wiping out your savings to pay off debt could hurt your ability to cover the down payment and closing costs.

8. You Should Always Choose a 30-Year Fixed Mortgage

The 30-year fixed mortgage is a popular option, but it’s not the only one. Depending on your financial goals, a 15-year mortgage or an adjustable-rate mortgage (ARM) could make more sense. A shorter term can save you thousands in interest over the life of the loan, while an ARM might offer a lower initial rate if you plan to sell or refinance in a few years. Consider all your options before committing to a loan term.

9. You Can’t Get a Mortgage If You’re Self-Employed

Self-employed individuals often believe that getting a mortgage is impossible due to their fluctuating income. While it’s true that self-employed borrowers may need to provide more documentation, such as tax returns and profit-and-loss statements, many lenders offer mortgage options for entrepreneurs. The key is to show consistent income and a healthy financial track record.

10. Renting is Always Cheaper Than Buying

While renting might seem cheaper in the short term, homeownership often proves more affordable in the long run. With a fixed-rate mortgage, your monthly payments remain stable, while rent can increase over time. Additionally, homeownership allows you to build equity, which can significantly benefit your long-term financial health. Depending on your market and circumstances, buying a home can be a smarter financial decision than renting.

Understanding the facts about mortgages can help you make better decisions when it’s time to buy a home. By debunking these common myths, you’ll feel more confident navigating the mortgage process and taking that critical step toward homeownership. If you have questions or need personalized guidance, working with a knowledgeable mortgage advisor can ensure you’re on the right track.