6 Mortgage Myths Homebuyers Still Believe
Written by
Vance Cariaga
Edited by
Rebekah Evans
Commitment to Our Readers
GOBankingRates' editorial team is committed to bringing you unbiased reviews and information. We use data-driven methodologies to evaluate financial products and services - our reviews and ratings are not influenced by advertisers. You can read more about our editorial guidelines and our products and services review methodology.
20 Years
Helping You Live Richer
Reviewed
by Experts
Trusted by
Millions of Readers
If you’re in the market for a home loan, here’s the good news: Mortgage rates are falling thanks to a couple of recent Federal Reserve rate cuts, according to Freddie Mac — and they might push even lower in the months ahead.
Before heading to the nearest loan officer, though, you should be aware of common misconceptions about mortgages. Below are six mortgage myths many homebuyers still believe, according to experts.
Also here are mortgage hacks that actually work.
Pre-Qualification and Pre-Approval are the Same
There’s a big difference between being pre-qualified and pre-approved for a mortgage loan. With the former, the application hasn’t been submitted to underwriting for review, according to Kylee Gladwell, mortgage loan officer at Wasatch Peaks Credit Union.
But when you get pre-approved, your file has been both submitted to underwriting and approved. This can simplify the process considerably.
“If you are able to get a pre-approval done, that would be the best option,” Gladwell said.
You Need an Excellent Credit Score To Qualify
While having an excellent credit score (800 or higher) can help you get the best loan terms, it’s not a requirement for getting a mortgage. You will have a hard time getting approved with a poor score (typically, 579 or less, according to Experian), but anything above that might put you in place for a loan.
Lenders in 2025 are focused on “total financial health — not just a credit score,” said Karl Benjamin, executive vice president of third party origination at Cardinal Financial.
You Should Always Aim for a 30-year Fixed Mortgage
If your budget requires a low monthly payment, then a 30-year fixed mortgage is a good option. But that doesn’t mean it’s always the best one.
“If you are looking at paying your mortgage off faster or looking for the best rate possible, the 30-year fixed mortgage wouldn’t be the best option,” Gladwell said.
You Need To Put 20% Down
This is a common misconception that discourages many would-be home buyers from even applying for a loan. In fact, Chad Cummings, attorney and certified public accountant (CPA) at Cummings & Cummings Law, calls the 20% down-payment rule the “biggest myth” out there when it comes to mortgages.
The main advantage of putting 20% down is that it helps you avoid private mortgage insurance.
“While avoiding private mortgage insurance is ideal, most conventional loans allow down payments as low as 3% to 5%,” Cummings explained. “In Florida and Texas, waiting to save 20% often means getting priced out entirely. Meanwhile, rents continue rising and no equity is built.”
Only First-Time Buyers Qualify for VA Loans
This is a common mortgage myth that might prevent some homeowners from seeking a second or third VA loan.
“VA loans are not limited to first-time homebuyers,” said Destinee Stice, vice president of loan origination at NewDay USA. “Veterans and active-duty service members can use their benefits multiple times and it’s possible to have multiple at once.”
You Can’t Get a Mortgage If You’re Self-Employed
Many self-employed workers might miss out on good home buying opportunities because they think they can’t get a mortgage without a regular paycheck from another employer. But that’s not the case.
“You can certainly get a mortgage if you’re self-employed,” Gladwell said. “Depending on how your taxes are done, you can go with the more traditional lending route or there is a non-traditional route for your mortgage. Just know that typically the non-traditional route tends to have a higher rate than doing the traditional route.”
More From GOBankingRates
