Debunking Common Mortgage Myths

24 December 2025

When it comes to mortgages, misinformation spreads like wildfire. From down payment misconceptions to credit score paranoia, plenty of myths scare people away from homeownership. The problem? These myths stop people from making informed decisions.

So, let's clear the air and set the record straight. We’re diving deep into some of the most common mortgage myths and busting them once and for all!

Myth #1: You Need a 20% Down Payment to Buy a Home

This is one of the biggest misconceptions about homeownership. While a 20% down payment can help you avoid private mortgage insurance (PMI), it’s not a requirement.

Many loan programs allow as little as 3-5% down, and if you're eligible for VA or USDA loans, you could even finance 100% of the home price.

Sure, putting 20% down reduces your monthly payment and interest costs, but waiting until you save that much could delay your homeownership dreams for years. Instead of holding off, consider the options available and choose what works best for your situation.

💡 Pro Tip: If you're worried about PMI, compare lenders because some offer options to roll PMI into the loan or remove it once you reach a certain equity percentage.

Myth #2: You Need a Perfect Credit Score to Get a Mortgage

Think you need an 800+ credit score to qualify for a mortgage? Nope! Many lenders approve borrowers with credit scores as low as 580, and some programs allow even lower scores with compensating factors like a larger down payment.

Here’s the deal:
- FHA loans may require a minimum 580 credit score (or 500 with a larger down payment).
- Conventional loans often start around 620.
- VA and USDA loans have flexible credit requirements.

Having a better credit score can help you get a lower interest rate, but that doesn’t mean homeownership is off the table if your credit isn’t perfect.

💡 Pro Tip: If your score is on the lower side, work on improving it by making on-time payments and reducing your debt. Even a small increase in your score can lead to better loan terms.

Myth #3: Renting is Always Cheaper Than Owning

This is a classic myth that keeps renters stuck in a cycle of renting instead of building wealth through homeownership.

Yes, buying a home comes with upfront costs, but let's do some quick math:
- Rent payments go straight into your landlord’s pocket.
- Mortgage payments build your home equity over time, increasing your net worth.

In many cities, monthly mortgage payments are actually lower than rent—especially as rental rates continue to climb. When you buy, you’re locking in a stable payment instead of dealing with rent hikes every year.

💡 Pro Tip: If you plan on staying in the same place for a while, buying almost always makes better financial sense than renting over the long run.

Myth #4: You Should Always Get a 30-Year Fixed Mortgage

A 30-year fixed mortgage is a great option for many buyers, but don’t assume it’s the only choice.

There are plenty of other mortgage options out there, including:
- 15-year fixed loans that build equity faster and save on interest.
- Adjustable-rate mortgages (ARMs), which can offer lower initial rates.

The best loan depends on your goals. Planning to stay in the home for the long haul? A fixed-rate mortgage is likely the safest choice. If you expect to move in a few years, an ARM could save you money in the short term.

💡 Pro Tip: Always compare multiple loan types before making a decision. The right mortgage should fit your lifestyle and long-term plans.

Myth #5: Pre-Qualification and Pre-Approval Are the Same Thing

These two terms sound similar, but they’re very different when it comes to getting a mortgage.

- Pre-qualification is a quick estimate of how much you can afford based on self-reported information.
- Pre-approval is a more in-depth process where a lender verifies your financial details, giving you a stronger position when making an offer on a home.

If you’re serious about buying, always go for pre-approval. It shows sellers and real estate agents that you’re financially ready to make a purchase.

💡 Pro Tip: A pre-approval letter gives you an edge in competitive markets where multiple buyers are bidding for the same property.

Myth #6: You Can’t Get a Mortgage if You Have Debt

Many people assume that if they have student loans, car payments, or credit card balances, mortgage lenders won’t approve them. Not true!

Lenders focus on your debt-to-income ratio (DTI) rather than debt alone. Most lenders allow a DTI of up to 43%, meaning as long as your income can comfortably cover your existing debts plus your mortgage payment, you can still qualify.

💡 Pro Tip: If you have a lot of debt, consider paying down high-interest credit cards first. This can free up more of your monthly budget for mortgage approval.

Myth #7: You Should Pay Off Your Mortgage as Fast as Possible

Being debt-free sounds amazing, right? But paying off your mortgage too fast isn’t always the smartest financial move.

Why?
- Mortgage interest rates are often lower than other types of debt.
- You might miss out on investment opportunities with higher returns.
- You lose potential tax deductions associated with mortgage interest.

If you have extra cash, consider other financial priorities first—like paying off high-interest credit cards or building an emergency fund.

💡 Pro Tip: Instead of aggressively paying off your mortgage, making one extra payment per year can shave years off your loan without straining your budget.

Myth #8: The Lowest Interest Rate Is Always the Best Loan Option

Sure, a low interest rate is important, but it’s not the only factor to consider when choosing a mortgage.

A mortgage with the lowest rate may come with:
- High closing costs
- Prepayment penalties
- Variable rates that increase over time

Lenders offer different loan programs with varying fees, so it’s crucial to look at the full picture. Always compare annual percentage rates (APR), which factor in both the interest rate and loan costs.

💡 Pro Tip: A mortgage with a slightly higher rate but lower closing costs could save you more money in the long run.

The Bottom Line

There’s a lot of misinformation surrounding mortgages, and believing these myths could stop you from achieving homeownership. Whether it’s worrying about needing perfect credit, a huge down payment, or assuming renting is always cheaper, don’t let these misconceptions hold you back.

Speaking with a mortgage professional and doing your own research is key to making the best decision for your situation. Because when it comes to mortgages, knowledge truly is power!