15 Home-Buying Myths to Unlearn Right Now

Home buyers have access to a wealth of information about the home-buying process before they even begin talking to a real estate agent. Friends and family, social media — everyone has a lot to offer. While much of this guidance can be solid or well-intentioned, some of it may be outdated or inappropriate for your situation. With that in mind, Zillow asked 112 loan officers to share the most common misconceptions they hear from first-time home buyers. Based on their feedback, and input from other real estate experts we talked to, here are the top 15 myths you should be aware of, along with some truths to set you on the right path.

Myth #1: You need a 20% down payment

Fact: A 20% down payment hasn't been required to buy a home for decades, if ever.

The 20% myth topped the list of misconceptions cited by 71% of the loan officers in our survey, while 65% of those surveyed said borrowers’ most frequent question was about how much of a down payment was needed to buy a home.

Many home loans allow a down payment as low as 3%, as long as you’re borrowing less than the so-called “conforming” loan limit for the county where the home you want to buy is located. The limit for most counties is $766,550, as of 2024. Although down payments of less than 20% are common, keep in mind you will need to pay PMI (private mortgage insurance) on a conventional loan if you put down less than 20% of the home’s purchase price. To see an estimated calculation of your PMI based on your loan and down payment amounts, try our Mortgage Calculator.

Here's a quick overview of some loan types with low down payment options:

HUD/FHA loans allow a 3.5% minimum down. HUD/FHA loans are insured by the Federal Housing Administration (FHA), within the U.S. Department of Housing and Urban Development (HUD). 

USDA/RD loans don't require a down payment. USDA/RD loans are backed by the Rural Development (RD) arm of the U.S. Department of Agriculture (USDA). 

VA loans also allow 0% down. VA loans, primarily for active-duty and veteran military members, are guaranteed by the U.S. Department of Veterans Affairs (VA).

Small, specialty loan programs may also permit very low down payments. One example is a HUD Homes program in Florida that allows just $100 down for qualifying buyers with FHA financing.

All mortgage loans are subject to the lender's guidelines, requirements and restrictions. Ask your mortgage loan officer for details.

Myth #2: Your pre-approval rate is the rate you'll get when you close

Fact: Interest rates adjust daily. The rate you're quoted when a lender pre-approves you for a mortgage is based on current market conditions as well as factors like your loan amount, credit score, property type and where the home is located. In general, your actual rate can't be "locked in" until you find a home and sign a purchase contract with the seller.

“At that time, your loan officer can explain your options and help you choose a rate,' says Wesley Black*, manager for mortgage originations at Zillow Home Loans℠ in Irvine, California.

Your locked-in rate may be higher or lower than your pre-approval rate. But be aware that locked-in rates can expire, so you should ask how long yours will last.

Myth #3: You should wait to buy a home until prices are lower

Fact: Buying a home after a big run up in prices may seem risky, but waiting carries risks as well.

“Price growth is soft for sure, but for a vast majority of areas, prices aren't likely to fall, ' says Zillow® Chief Economist Skylar Olsen. “There are simply enough buyers, even at these prices and mortgage rates, and not enough homes listed for sale. And while mortgage rates should move a bit below where they are now in some distant future, myself and other experts keep putting off when we expect that to happen. If buyers find themselves able to find and win a home they'd like to commit to for the long run and are able to afford it, they can feel comfortable moving forward. In popular neighborhoods, we cannot necessarily promise a more friendly time to buy in the future."

Myth #4: Buying a home is always cheaper and a better investment than renting

Fact: Depending on where you live, renting a home can be cheaper than buying one, and home prices don't always go up and up in a neat, straight line.

Rents and mortgage payments are much closer than they have been in the past, and, in a majority of the nation’s top 50 metros, rents are cheaper than mortgages — even for a comparable home. 

However, a home you own is an asset that can appreciate over time, provide a relatively stable monthly cost and create generational wealth.

Olsen says there are benefits to each option. How the math works out for any individual depends in part on what you expect from the market, how long you expect to live in the home and what kind of lifestyle you’re looking for.

To read more about the benefits of each option, check out The Pros and Cons of Renting vs. Buying a House.

Myth #5: You should find a home before you apply for a home loan

Fact: Getting pre-qualified for a loan before you shop for a home is not just okay, it's smart.

This myth is a pervasive one, with 66% of loan officers in our survey citing it as the second most common question borrowers ask them.

Once you're pre-qualified or pre-approved for a mortgage, you'll have an idea of how much you can borrow to buy a home. Then you can shop for homes in your price range and you won't fall in love with a home outside your budget. If you're not able to get pre-approved, you'll find out what you need to do to position yourself so that you can.

Myth #6: Buying a fixer-upper will save you money

Fact: True fixer-upper homes need a lot more than a fresh coat of paint. These homes generally have major problems, some of which may not be visible. Even a skilled home inspector can't see inside walls.

“If you're looking into a fixer-upper, you should get quotes on the repairs needed beforehand,” says Korenn Meno**, a mortgage loan officer at Zillow Home Loans in Seattle, Washington. “You'll have to be patient, good with finances and willing to sacrifice all your spare time to work on your home or pay someone to get your home fixed up.'

You may end up with a home you love, but you probably won't save money with this strategy. (Take our quiz to see if tackling that fixer-upper is really right for you!) If you’re keen on finding a fixer, we suggest reading How to Find, Afford and Improve a Fixer-Upper on what’s involved in buying a fixer-upper.

Myth #7: You have to get your loan from the lender who pre-approves you

Fact: A pre-approval is a great starting point for getting a mortgage, but you're not obligated to stay with that lender. You can shop around for a lender that makes a competitive offer and is a good fit for you.

Keep in mind that it’s best practice to shop for a lender before you go under contract or lock in a rate. Once you are under contract and have completed inspections and appraisals, it’s usually not a good idea to shop around for a new lender. If you do, you will need to notify the seller's agent of the change. Any delays or changes could put you at a higher risk of getting your offer rejected by the seller. 

Myth #8: You shouldn't buy until you can afford your 'forever' home

Fact: Selling a home can be costly, but if you wait to buy until you can afford your ‘forever' home rather than buy a lower-cost ‘starter' home, you may never buy at all.

Or in the relatively more affordable markets where appreciation is still happening, you may miss out on years of equity building that could offset your selling costs when you trade up to your forever home.

Caveat: Considering a home you already know that you'll outgrow in the very near future? It may make sense to wait until you find a home where you can stay for at least five or more years.

"Over-committing to waiting without exploring your current options and how they may change with this ever-changing market or without taking proactive steps, like credit counseling or exploring down payment programs, may be the bigger strategic mistake,’’ Olsen says. “Existing housing from older generations will continue to return to the market in ideal neighborhoods for many families. But it is true that the financial benefits of buying accrue over a longer time now that mortgage rates are higher."

Myth #9: A 30-year, fixed-rate mortgage is always the best choice

Fact: Depending on rate movements, adjustable-rate mortgages (ARMs) can save thousands of dollars of interest over the life of the loan compared with a fixed-rate. ARMs have an initial fixed-rate period, and then can adjust up or down, resulting in monthly payments that can change over time.

This misconception was cited by 16% of the loan officers in our survey as one of the top 10 questions they hear from borrowers.

“Finding the right loan program and term is kind of like picking an outfit,” says Black. “Everyone is going to want or need something slightly specific to fit their unique situation.”

ARMs aren't a fit for everyone, but for many, they are worth considering.

Myth #10: You can't buy a home if you have student loans

Fact: Student loans can both help and hurt your chances of buying a home.

The potential help comes from boosting your credit scores, if you make your payments on time. The potential hurt comes from raising your debt-to-income ratio, or DTI, which is a factor in loan approval. Student loans are not an automatic barrier. They're just another form of debt that's part of your DTI calculation. Many people have student loans and a home mortgage.

For tips on how to buy a home when you have student loan debt, check out Can I Buy a Home With Student Loan Debt.

Myth #11: You have to pay the seller's asking price to buy a home

Fact: The seller's asking price is the amount the seller hopes you'll pay, but it's not necessarily the price you'll actually pay.

This may seem obvious, but home prices are typically negotiated with offers and counter-offers until you and the seller agree on a price. Be sure to ask your agent for “comps” for a home you’re interested in — this is a report of prices of recently sold, similar homes nearby — in order to draft a competitive offer or understand whether the listing price fits in your budget.

Myth #12: You need excellent credit to buy a home

Fact: Good home loans and attractive rates are available for people with less-than-perfect credit as well as those with excellent credit. This is likely to come as news to a lot of borrowers since half of the loan officers surveyed cited it as the third highest misconceptions among prospective buyers.

Who can't qualify? People who develop a habit of always paying cash for their purchases. “Establishing positive tradelines and using credit responsibly is what we're looking for,' says Casey Godwin***, a mortgage loan officer for Zillow Home Loans in Overland Park, Kansas.

Myth #13: Fall and winter are bad times to buy a home

Fact: Fall and winter can be advantageous times of the year to buy a home.

Spring is sometimes called the “home-buying season” because many families prefer to move when their children are out of school for the summer. That doesn't mean you have to buy in the spring or that you'll pay less if you do. 

Myth #14: You cannot buy a home if you are self-employed

Fact: Nearly one-fourth of loan officers surveyed said this was a common misconception among borrowers. You absolutely can buy a home if you’re a self-employed freelancer or gig worker or business owner. But the rules for getting a mortgage are different for those who receive a W-2 from an employer versus those who receive a 1099-NEC, which reports non-employee compensation.

Lenders will generally require more documentation of income if you’re self-employed, including recent invoices and proof of a steady income over a longer period of time. To learn more about what might be required, read this guide to getting a mortgage when you’re self-employed.

Myth #15: All lenders are the same when buying a home

Fact: Getting a mortgage is more than an exercise in rate shopping, and there are significant differences among lenders when it comes to the customer service, the ability to close on time and the fees attached to their loans.

Nearly a third of loan officers surveyed (30%) say borrowers falsely believe that all lenders are equal. While getting the best interest rate is rightfully a top concern for home buyers, most lenders offer a variety of competitive rates and loan products.

However, fees can vary widely and some lenders have a better track record for closing on time, communicating regularly though buyers’ preferred methods, including text and email, and making things easier on borrowers with technology to keep the process moving smoothly through closing.

For instance, with Zillow Home Loans, buyers and their agents can check on the status of their loan online, increasing visibility into the process and reducing the stress that can be generated when you’re in the dark about what’s going on.

Source: Zillow Blog

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