Home buying myths can mislead first-time buyers, causing unnecessary delays and costly mistakes. With so much advice from friends, family, and online experts, it’s easy to fall for common misconceptions.
As an experienced real estate agent, I’ve heard many first-time buyers share inaccurate assumptions about mortgages, down payments, and home prices. While well-intended, much of this advice is outdated or simply incorrect.
To help you make informed decisions, let’s bust six of the most common home buying myths and set the record straight!
Home Buying Myth 1: You Need a 20% Down Payment to Buy a Home
Reality: You can buy a home with as little as 5% down, depending on your lender and loan type.
Many first-time buyers delay purchasing because they believe they must save a full 20% deposit before they qualify for a mortgage. However, many lenders offer lower down payment options, such as:
- FHA Loans: Require as little as 3.5% down.
- Conventional Loans: Some programs allow 5% or even 3% down.
What’s the Catch?
If you put down less than 20%, your lender will require you to pay Lender’s Mortgage Insurance (LMI). This insurance protects the lender—not you—in case of default.
- LMI is an additional cost that is added to your mortgage payment.
- It reduces how much you can borrow for your home.
The Takeaway: While 20% down is ideal, you don’t need to wait years to save that amount. Work with a mortgage broker to explore your best options based on your budget.
Home Buying Myth 2: Your Pre-Approval Interest Rate is Guaranteed
Reality: Pre-approval locks in your loan eligibility, not your final interest rate.
Many buyers assume that once they receive pre-approval, their mortgage rate is fixed. But in reality, interest rates fluctuate, and the rate you’re offered at closing may be different from your pre-approval.
How Does This Work?
- If interest rates drop before you finalize your loan, you’ll pay less on your mortgage.
- If interest rates rise, you’ll be paying more than expected.
Lenders issue pre-approvals based on current rates, but they reserve the right to adjust them at closing.
The Takeaway: Keep track of market rates after pre-approval and ask your lender if rate locks are available.
Home Buying Myth 3: Wait Until Prices Drop Before Buying
Reality: Delaying your home purchase could cost you more in the long run.
Many first-time buyers wait for home prices to fall, believing they’ll get a better deal. However, real estate markets tend to be stable, with values generally increasing over time.
Consider These Facts:
- The average annual home price growth is 3.9%.
- In major markets like New York, price growth is 7.2% annually.
If you wait too long, you might end up:
- Paying more as home prices continue to rise.
- Facing higher interest rates, which increase your monthly payments.
- Struggling to compete in a seller’s market when demand surges.
The Takeaway: Instead of waiting for perfect market conditions, buy when you’re financially ready.
Home Buying Myth 4: Fixer-Uppers Save You Money
Reality: Buying a fixer-upper can be more expensive than purchasing a move-in-ready home.
Many first-time buyers believe that buying a “fixer-upper” is a cheaper alternative to buying a home in great condition. While the initial purchase price might be lower, renovation costs can quickly add up.
Hidden Costs to Watch For:
- Labor & Material Costs: Prices are rising, making renovations more expensive than expected.
- Structural Issues: Many older homes have hidden problems like foundation cracks or plumbing issues.
- Unexpected Expenses: Remodeling projects always take more time and money than planned.
How to Avoid Costly Mistakes:
- Hire a contractor to inspect the home before purchasing.
- Get accurate cost estimates for renovations.
- Factor in permits, labor, and material costs before committing.
The Takeaway: Fixer-uppers can be a good investment—but only if you know what you’re getting into.
Home Buying Myth 5: A 30-Year Fixed-Rate Mortgage is Always the Best Option
Reality: The best mortgage depends on your financial goals—not every buyer should default to a 30-year loan.
A 30-year fixed-rate mortgage is one of the most common loan options, but it’s not the best choice for everyone.
Alternative Loan Options:
- 15-Year Mortgage: Higher monthly payments but lower total interest paid.
- Adjustable-Rate Mortgage (ARM): Lower initial rates but fluctuating interest over time.
Factors to Consider:
- How long do you plan to stay in the home?
- Can you afford higher monthly payments to save on interest?
- Are there hidden fees or prepayment penalties?
The Takeaway: Work with a mortgage broker to explore all loan options and find the best fit for your financial situation.
Home Buying Myth 6: If You’re Self-Employed, You Can’t Get a Mortgage
Reality: Self-employed individuals can get a mortgage—it just takes extra paperwork.
Many people believe that being self-employed makes it impossible to qualify for a mortgage, but this isn’t true. Lenders just require more documentation to verify your income stability.
What Lenders Will Ask For:
- Tax returns for the last two years.
- Profit & loss statements (if applicable).
- Bank statements to verify cash flow.
- Debt-to-income ratio assessments to ensure loan affordability.
The Takeaway: While self-employed borrowers face more scrutiny, having strong financial records will increase approval chances.
Final Thoughts: Avoid These Myths and Buy Your First Home with Confidence
Buying your first home is a major milestone, but misinformation can hold you back.
- You don’t need 20% down—many loans allow for lower deposits.
- Pre-approval doesn’t lock in your rate, so keep an eye on market changes.
- Waiting for lower prices could cost you more in the long run.
- Fixer-uppers aren’t always a bargain—unexpected costs can add up.
- A 30-year mortgage isn’t the only option—explore different loan structures.
- Self-employed buyers can qualify with the right paperwork.
By separating fact from fiction, you can approach home buying with confidence and make informed financial decisions.
Thinking about buying your first home? Contact our real estate experts today to start your journey with the right guidance!
