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For many young adults and first-time buyers, the idea of owning a home often feels out of reach. Between headlines about rising prices, the fear of costly down payments, and confusion about loan options, it’s easy to see why people hesitate. But the truth is that a lot of what you’ve heard about mortgages simply isn’t true.

The homebuying process involves many moving parts, and that complexity leaves plenty of room for myths and misconceptions to spread. Let’s take a closer look at seven of the most common mortgage myths and uncover the facts - helping you to become more confident about the homebuying process.

Myth #1: You Need 20% Down to Buy a Home

It’s a common belief that you must make a 20% down payment when buying a home. While putting 20% down helps you avoid private mortgage insurance (PMI), it’s not a requirement.

There are a variety of mortgage programs that offer low-to-no down payment requirements, making homeownership more accessible for many people. FHA loans allow as little as 3.5% down, VA loans provide no-money-down options for eligible borrowers, and many state and local programs help first-time buyers minimize upfront costs.

For example, let’s compare different down payment amounts on the same $200,000 home:

• 20% down = $40,000
• 3.5% down = $7,000

As you can see, buying a home is possible even if you don’t have decades of savings set aside.

Myth #2: Renting is Always Cheaper

Many renters assume they’re saving money compared to homeowners, but that’s not always the case. Rent prices have risen steadily in most areas, and monthly rent can easily equal or even exceed a mortgage payment for a similar home.

The bigger difference is what you get in return. Rent only covers today’s housing, but mortgage payments help build ownership and long-term wealth.

Let’s examine two similar scenarios, one with rent and another with a mortgage:

• Rent: Paying a landlord $1,500 in rent each month adds up to $18,000 a year. Once your payment is made, that’s it - you do not earn equity or any potential return.
• Mortgage: Each $1,500 monthly mortgage payment builds equity in your property. As a homeowner, you can affordably tap into your equity to remodel your home, pay for higher education, and consolidate debt. Plus, your property’s value may appreciate over time – allowing you to sell it and earn a substantial gain.

Myth #3: Adjustable-Rate Mortgages (ARMs) are Bad

Adjustable-rate mortgages often get a bad reputation for being risky, but that’s not the whole story. In many instances, they’re a wise choice for specific buyers.

An ARM offers a lower, fixed introductory rate for the first several years. Then, the rate can adjust based on the economy.

• For example, a 5/1 ARM means the loan rate over the first (5) years is fixed. After five years, the mortgage rate can adjust annually.

For first-time buyers moving into a starter home, ARMs are an ideal strategy. They will experience lower rates and payments at first while they settle into being homeowners. Then, once they’ve built equity, they can sell the house and move into a larger home before the adjustments ever take place.

Many military families use the same tactic. They can build equity while stationed in one location, save with lower interest rates, and then sell before the loan adjusts and interest increases. With the right timing, an ARM can be a valuable tool for reaching your short-term homeownership goals.

Myth #4: Your Credit Must Be Perfect

Contrary to popular belief, perfect credit isn’t a requirement for a mortgage. Unlike credit cards or personal loans, mortgage lending takes a broader view of your full financial picture.

A steady income, manageable debt, and a reasonable down payment often outweigh a few credit blemishes. Plus, the home itself serves as collateral for the loan, which gives lenders more security.

If you’re planning to apply for a mortgage, following a few smart steps can improve your approval odds:

• Avoid changing jobs before applying or during the mortgage process. A steady income is weighed heavily by lenders, so switching jobs could distort your recurring income.
• Hold off on opening new credit cards or loans in the months leading up to your application. New debt could negatively affect key figures, such as your debt-to-income ratio.  
• Skip putting large purchases on credit cards right before applying. Racking up higher balances can negatively shift your credit utilization ratio and damage your credit score.

Myth #5: The Lowest Rate is Always Best

While everyone wants to secure the lowest rate possible, it’s not the only factor to consider. The “best” loan is the one that fits your budget and long-term goals - not just the one with the lowest interest rate.

For example, a lower interest rate might come with:

• Higher upfront costs (prepaid points, closing costs, down payment)
• Unfavorable terms (15-year vs. 30-year loan, pre-payment penalties)
• Loan structure that doesn’t align with your lifestyle (traditional vs. adjustable-rate mortgage)

Home loans have many parts, meaning the loan that works best for your friend might not be ideal for you. Evaluating the whole picture helps ensure your mortgage supports your finances, not the other way around.

Myth #6: Pre-Qualification = Pre-Approval

These two terms may sound similar, but their meanings are as different as night and day:

• Pre-qualification is a quick estimate of how much you can afford, based on basic information you provide to a lender. A pre-qualification is helpful for budgeting and browsing within your means. It gives you a ballpark figure but comes with no guarantees.
• Pre-approval means a lender has thoroughly reviewed your finances, credit report, and supporting documentation. It’s an official green light for how much you are approved to borrow.

The difference between these two terms matters tremendously when you’re ready to make an offer on a property. Sellers almost always require buyers to be pre-approved before accepting an offer, since it shows that you have secured financing. For buyers who want to shop seriously, obtaining a pre-approval offers both credibility and peace of mind.

Myth #7: Closing Costs are Fixed

Closing costs are not a set amount, and they vary for every property transaction. The expenses associated with closing on your mortgage loan include lender fees, title and appraisal costs, prepaid property taxes, homeowner’s insurance, and more.

On average, closing costs for buyers range from 3% to 6% of the home’s purchase price. For example, closing costs on a $250,000 home could range anywhere from $7,500 to $15,000.

By including these expenses in your overall homebuying budget and asking about available assistance programs, you can approach closing day with greater confidence.

We’re Here to Help!

The homebuying process is semi-complex and contains many moving parts. However, don’t let negative headlines and myths derail your dreams of becoming a homeowner. With the right guidance, homeownership is often easier to achieve than most consider.

If you have questions about the homebuying process or would like to speak with a mortgage specialist, we’re ready to help. Please stop by any of our convenient branch locations, Chat with Us, or call 702-791-4777 to schedule an appointment.

Each individual’s financial situation is unique and readers are encouraged to contact the Credit Union when seeking financial advice on the products and services discussed. This article is for educational purposes only; the authors assume no legal responsibility for the completeness or accuracy of the contents.