Mortgage Myths That Trip Up First-Time Buyers

The 20% figure persists because it's the threshold at which most lenders waive private mortgage insurance (PMI) on conventional loans. But it is not a universal requirement. FHA loans accept down payments as low as 3.5% for borrowers with qualifying credit scores. Conventional programs backed by Fannie Mae and Freddie Mac offer 3% down options for eligible first-time buyers. VA and USDA loans, available to qualifying borrowers, can require zero down. See our overview of government-backed home loan programs to understand eligibility for each.

Lenders evaluate the full picture of your finances — not just your credit score. FHA loans may be accessible to borrowers with scores as low as 580 (with 3.5% down) or even lower with a higher down payment, depending on the lender. Conventional loans generally require scores in the 620–640 range as a baseline, though higher scores do improve your rate. If you have misconceptions about how credit scoring works, the truth about credit score myths is worth reviewing before you apply.

Pre-qualification typically involves answering questions about your income, debts, and assets without submitting documentation or undergoing a credit check. It gives you a rough sense of what you might qualify for. Pre-approval is meaningfully different: lenders verify your income, pull your credit, and review documentation before issuing a conditional commitment letter. In a competitive market, sellers often won't consider offers from buyers who are only pre-qualified. See why pre-approval matters when making offers for a fuller breakdown.

Shopping multiple lenders within a short window — typically 14 to 45 days, depending on the credit scoring model — is generally treated as a single credit inquiry for scoring purposes, limiting the impact on your credit. Comparing loan estimates across lenders can reveal meaningful differences in interest rates, fees, and loan terms. The Consumer Financial Protection Bureau (CFPB) encourages borrowers to get quotes from multiple sources rather than accepting the first offer. Getting pre-approved is a research step, not a binding commitment.

Closing costs include lender fees, title insurance, appraisal fees, prepaid property taxes, homeowners insurance, and more. On a $300,000 loan, that could mean $6,000–$15,000 in additional costs due at closing, on top of the down payment. Some of these costs can be rolled into the loan or offset through seller concessions in certain transactions, but buyers should plan for them as a distinct budget item. Our guide on documents to gather before applying for a home loan also covers the financial records you'll need to organize early.

A 30-year fixed mortgage offers predictable payments and is appropriate for many buyers — but it's not universally optimal. A 15-year fixed loan typically carries a lower interest rate and builds equity faster, though monthly payments are higher. Adjustable-rate mortgages (ARMs) may offer lower initial rates for buyers who plan to sell or refinance within a defined period, though they carry rate risk after the fixed period ends. Understanding the trade-offs — including when refinancing might make sense later — is part of making a fully informed decision. The basics of mortgage refinancing can help you think through long-term strategy.