Articles, Buying Real Estate, Housing

9 Common Myths About Buying a Home

Written By: Angela Petteys
Reviewed by: Mike Reyes
Last Updated September 26, 2021

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man wondering home buying myths

For most people, a house is one of the most significant purchases they ever make. Not just in terms of how the right house can affect a person’s day-to-day lives, but also financially. While it can be fun to look around on sites like Zillow and imagine the possibilities, seriously going through the house hunting process can be extremely stressful.  Having said that, there are many myths around buying a home, and in this article, I’ll cover the top 9.

It can be hard enough to find the right house, especially in a hot real estate market. It certainly doesn’t help matters that there are lots of misconceptions and myths out there about the right way to buy a home. This advice typically comes from people who mean well, but don’t realize that some of the things they recommend either aren’t true or are now a bit out-of-date. Or perhaps you’ve heard some of them over the years and have always just believed they were true. 

If you’re starting to think the time is right for a new home, make sure you know the truth about some of the most common myths about buying a home. 

Myth #1: A 20% Down Payment is Necessary

Whether you’re getting ready to buy your first house or it’s time for you to buy a new home, you might feel like a 20% down payment is the norm. This used to be the case, but today, it’s a home buying myth. As more mortgage options became available, it became increasingly less standard. According to the National Association of Realtors, the average down payment for a house/condo in 2019 was 12%. Among first-time homebuyers, the average down payment in 2019 was 6%. 

The larger your down payment is, the less money you’ll have to borrow, so it’s good to strive to put down as large of a down payment as possible. But trying to save up a 20% down payment can make the concept of homeownership unattainable for many people. Depending on the type of mortgage involved, you may be able to purchase a house with a substantially lower down payment. For example, if you are eligible for VA or USDA loan, you may not have to make a down payment at all. Or with an FHA mortgage, you could only need a 3.5% down payment. Conventional mortgages can involve down payments as low as 3%. But for down payments under 20%, home buyers will need private mortgage insurance (PMI). 

Myth #2: A 30-Year Fixed Rate Mortgage is Best

There are a lot of different mortgage options out there and the 30-year fixed-rate mortgage is easily one of the most popular. It’s just important to remember that they’re not necessarily always the way to go. With a fixed-rate mortgage, people can more confidently plan their budgets because they don’t have to worry about their mortgage rate suddenly changing. But while adjustable-rate mortgages aren’t as predictable, they might not be as unpredictable as you think. For example, an adjustable-rate mortgage might have restrictions on how much the interest can change. Or, the mortgage rate could be fixed for a certain amount of time before it can change. So it’s entirely possible that a 30-year fixed-rate mortgage isn’t necessarily the best option for you, depending on the exact terms of the loan. 

When weighing your mortgage options, it’s also important to think about what a mortgage would mean for your financial life in the big picture. According to Genisys Credit Union, if you can afford the payment on a mortgage with a shorter term, it may be worth considering because you will not only pay less interest over time, the rate on the loan will also be lower. 

Myth #3: You Need Perfect Credit to Buy a House

For this home buying myth, it’s true that to get the best possible rate on a mortgage, a good credit score is going to be very important. But if your credit score is less than perfect, as it is for many of us, that doesn’t mean you should just give up on the idea of owning a home unless you can pay cash.

Ultimately, your credit score is just part of the picture, not the whole thing. Lenders look at several other factors in addition to your credit score, including your current debt-to-income ratio (DTI), your work history, and other assets. So even if you don’t have an excellent credit score, you may still be in luck if, for example, you have a steady work history and have a manageable amount of outstanding debt. 

It’s also important to note that minimum credit scores can vary from lender to lender when it comes to mortgages. So even if you don’t meet one lender’s minimum credit score, you still might qualify with another. It’s also possible that you might be able to qualify for a different type of mortgage. Home buyers can obtain FHA mortgages, for instance, with credit scores as low as 500.

Myth #4: You Can’t Get a Mortgage if You Have Student Loans

Having student loans — or any other type of debt — in and of itself isn’t going to prevent you from being able to get a mortgage. As long as you have a steady source of income, are actively paying off any existing loans you have, and your DTI ratio is at a comfortable level, you can still get a mortgage. 

In the case of student loans specifically, there may be situations in which lenders can exclude student loans from your debt-to-income ratio, such as if you have an employer that offers student loan assistance as a benefit. And under recent changes by the Federal Housing Administration, it may now be easier to qualify for an FHA mortgage thanks to changes in the way lenders calculate student loan debt for this type of mortgage. Meeting with a loan officer will be able to help you understand how, exactly, your student loans will impact your search for a mortgage. 

If you want to minimize the impact student loan payments have on your DTI ratio, another option to consider is refinancing your student loans. If you’re able to reduce your monthly payments, you may have an easier time qualifying for a mortgage. However, it’s important to note that refinancing student loans will still involve fees and refinancing might not be right for everyone, so make sure you do your research to determine if it’s something you want to pursue. 

Myth #5: Buying a Fixer-Upper Can Be a Great Bargain

There’s a common idea around this buying a home that it’s a good idea to buy the worst house in the best neighborhood, and its a myth. And when you can see the potential in a house that needs some TLC and the price is right, it can be very tempting to go for it. But unless you have the skills to do the work yourself or are extremely diligent about sticking to budgets, this very often doesn’t work out as planned. 

In many cases, buying a fixer-upper ends up costing more than expected in the end and takes longer to finish than originally anticipated. Sellers of a house that truly just needs a fresh coat of paint aren’t going to cut the price by that much. By the time all the work is complete, you may end up spending just as much on your house as you would have on a house that was in better condition upfront. 

Myth #6: The Maximum Loan You Qualify For is How Much You Should Spend

Sometimes, the amount you can reasonably afford to spend on a house and the loan amount a lender approves for you aren’t the same. Lenders will consider a lot of different factors when determining how much to approve your loan for. But, it’s possible this amount won’t fit into your monthly budget when other factors are considered. 

Debt-to-income ratio is calculated based on your recurring, essential monthly payments, such as car payments, student loan payments, child support/alimony payments, and HOA fees. Things like general cost-of-living expenses (groceries, utility bills, etc.), contributions to retirement savings, and home maintenance expenses are not factored in as part of DTI since those are more variable expenses. But even though those types of expenses are more flexible, they’re still an important part of your monthly budget.

It’s also important to note that DTI is calculated based on your minimum monthly payments. So if you wanted to pay off existing loans faster by paying more than the minimum, that’s something you’ll need to consider when figuring out how much to spend on a house. 

Myth #7: Spring is the Best Time to Buy

There are a lot of different factors that can determine whether or not it’s a good time to buy a house or not, so broad statements like this aren’t necessarily accurate. Strictly speaking on a seasonal basis, the housing market can be at its most competitive during the spring months. For example, families who are looking to move will want to be settled in their new homes by the beginning of the school year, which means they’ll be shopping around in the spring and early summer. 

If it’s possible to wait until the fall or winter, the wait may prove to be worthwhile. Even though this is often thought of as a bad time of year to buy, less competition can help you get a better deal. Houses that didn’t sell during the spring or summer are likely to get marked down after Labor Day. Sellers will also likely want to have their homes sold before the holidays and adjust their asking prices accordingly. If you’re in the market for a starter home in particular, it’s been reported that starter home inventory increases by about 7% during the fall compared to the spring. 

Myth #8: You Don’t Really Need a Real Estate Agent

It’s true that it’s absolutely possible to go it alone and purchase a house without a real estate agent. However, working with one can be an option worth considering. People who go without an agent usually do so as a way to save money, but they also often end up with hidden costs elsewhere, such as over details they didn’t know could be negotiated.

Working with a real estate agent can help give you a more competitive edge. It’s the job of a real estate agent to know their markets inside and out and are seasoned experts at negotiating the best price for their clients. They also know how to handle the buying process as efficiently as possible. Even if inventory seems to be low, a good agent may still be able to help you find a new home. 

Myth #9: Find a House You Like First, Worry About Loans Later

If you’re really serious about buying a new home, it’s a very good idea to get preapproved for a loan before you get too deep into your search. Getting all of your ducks in a row ahead of time helps make the process easier. Getting pre-approved for a mortgage makes you more attractive as a buyer because it means you’re less likely to encounter delays in actually getting the mortgage. Just remember that getting pre-approved doesn’t necessarily mean you are required to actually borrow the money. So if you find a better mortgage after getting preapproved for one loan, you aren’t locked into that first loan. 

Getting preapproved for a loan also helps you identify any potential problems while you’re still early in the process. For example, you might find out there’s an issue on your credit report that you weren’t aware of. Or, if you get preapproved for a smaller loan than you were expecting, it gives you a chance to reconsider the price range you shop in. 

Now that you know the truth behind the myths, best of luck to you on your house hunting mission!

1 thought on “9 Common Myths About Buying a Home”

  1. I am planning to sell my house at the end of this year and I am looking for potential buyers. Its interesting when you said that people can plan their budgets more confidently with a fixed-rate mortgage because they don’t have to worry about their mortgage rate changing unexpectedly. I will need to talk to a real estate agent so that they can help me sell my house as soon as possible. Thanks for the tips!


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