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13 Myths About Homebuying [That You Might Have Fallen For]

There’s a lot of advice out there about homebuying. But not all of it is true. Find out what some of the biggest myths are.

Couple buying house
Updated May 28, 2024
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Certain things are repeated so often concerning the homebuying process that they must be true, right? But if you dig into some of these beliefs, you might find many of them aren’t true at all. In fact, they could rank among the most common money mistakes homeowners make.

So how can you differentiate between fact and fiction while looking for your new home?

We’ve compiled a list of common myths you might run into during the homebuying process. Knowing the truth about them could help you avoid potentially costly mistakes and allow you to grow your wealth instead.

You need to make a 20% down payment

Making a 20% down payment on a home isn’t a bad thing. In fact, it can be a common practice or goal to shoot for. In some cases, if you don’t put down at least 20%, you have to pay private mortgage insurance (PMI). This adds an extra cost to your monthly mortgage payment. In addition, the higher your down payment, the less your monthly mortgage payments are likely to be.

But just because it could be a good idea doesn’t mean you’re required to make a 20% down payment. Needing a 20% down payment is primarily a myth. The actual amount you’re required to put down depends on your loan company.

The best mortgage lenders typically require between 5% and 20% for a down payment. Though, first-time homebuyers could potentially get lower down payment terms.

You’ll save money by going without a real estate agent

Even though it’s typical that a home seller is the one who covers the cost of the agent fees, it’s reasonable to argue that cost is built into the asking price of a home. For that reason, some may be tempted to go without an agent when buying.

But real estate agents are paid to help buy and sell homes. Many agents have been doing this for a long time, which means they’re likely a lot more knowledgeable about how the process works than the average person. This is reason enough to say that avoiding the help of a real estate agent to save money is a homebuying myth.

It may hurt to think about how much commission a real estate agent can make, but the work a good agent does is money and time saved on your end. If you’re considering buying a home without an agent’s help, ask yourself a few questions first. Do you know how your local housing market is trending? Do you know how to negotiate house deals so you get the best price? Do you already have connections with people looking to sell a home? Do you know how to get a loan?

There’s a lot that goes into what a real estate agent does to make sure you get into the new home of your choice. Remember this if you think you can do it all on your own without any professional experience.

You need to have a perfect credit score

You do not need a perfect credit score to buy a home. In fact, you might not need anywhere near a perfect credit score, which would be an 850 on either the FICO Score or VantageScore credit scoring models.

A conventional loan requires at least a 620 FICO Score, while FHA loans require at least a 580. However, if you have a FICO Score above 740, which is considered very good, you’re likely to qualify for a lower down payment and lower interest rates from different lenders. You may also have some flexibility with the mortgage term lengths if you have a high credit score.

This is why it’s generally considered more advantageous to have good credit when searching for a home loan. But that doesn’t mean your credit score has to be perfect to get a mortgage.

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You should go with whatever bank approves you

Every mortgage lender is different and has different loan products to offer. This means you shouldn’t typically choose the first bank or lender that approves you. It can be exciting to get approved for a loan, but that doesn’t mean you need to rush into buying a home with the first lender who’s willing to work with you.

The first lender who approves you might not have the best offer. They might be offering high interest rates and have down payment requirements that don’t work for your situation. It could be worth it to wait to see if you receive more approvals and get offered better deals.

You should choose the home loan with the lowest interest rate

It’s essential to consider the interest rate when buying a home, but it’s not the only factor. The truth is you need to consider all the fees and costs associated with the home you want to buy. The homebuying process typically involves many costs, which could include closing fees, origination fees, and documentation fees.

So looking at the interest rate is only one piece of the puzzle. You should look at all the costs together to get the best idea of how much you have to pay. The total cost of a home loan, including the interest rate, is often referred to as the annual percentage rate (APR). This is the rate you would likely want to consider over just the interest rate when comparing home loans.

You need to pay off your student loans first

Having to pay off your student loans before being able to buy a home is a myth. It’s possible to have multiple loans simultaneously, especially if you have a good history of making your payments in full and on time.

Of course, it’s wise to consider whether it makes sense to get a mortgage when you still have student loans to pay off. Will adding another monthly bill be too much for your budget, or will you be able to handle it? Adding more loans is the same as having more debt, so you have to be careful when making this type of decision.


You shouldn’t bother getting a loan pre-approval

The idea that getting a mortgage pre-approval is a waste of time just isn’t true. This is an important step of the homebuying process because it helps you make connections with lenders willing to loan you money based on your financial circumstances.

Knowing you have a lender’s support can help you get the house you want because a seller can see you’re serious about buying — and actually qualified. Plus, getting loan pre-approvals early in the homebuying process can save you time later on when you’re actually ready to buy.

However, be aware that loan pre-approvals don’t necessarily last forever. A financial institution pre-approves you based on your financial circumstances, and they know your situation could change. So if you wait too long, you might have to go through the process again if the original pre-approval expires.

You should/shouldn’t buy right now

No matter what time of the year you start looking for a home, you’re likely going to hear that it’s not a good time to buy real estate and that you should buy during another season. But the truth is that many real estate agents are busy throughout the year. This is likely because every buyer and seller has their own unique situation that doesn’t conform to generally accepted beliefs about the real estate market.

If you feel now is the time for you to buy a home, whatever season you’re in, then you’re likely right. There’s no better time than the present, especially if you have your finances in order and are ready to start the homebuying process. It doesn’t matter if it’s a seller’s market or buyer’s market if there are houses available that you like at prices you’re willing to pay.

You should buy a house for whatever loan amount you qualify for

You might have a specific number in mind when applying for a home loan, but that doesn’t mean a lender will offer you that exact number. In fact, they might offer you more. This could be surprising and possibly exciting if you start thinking that you now have more money to spend.

But don’t fall for this myth of thinking you have to buy a house according to the loan amount you qualified for. You don’t. Instead, you should negotiate a loan amount that works for what you can afford in your budget. Consider your debt-to-income ratio, or how much debt you owe versus how much income you have, when deciding what the right loan amount could be for your situation.

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You’ll save money by buying a fixer-upper

You might be tempted to buy a fixer-upper because of a potentially lower overall cost, but this is likely a myth if you don’t know what you’re doing. A general contractor or professional real estate agent could have the required experience to assess whether a fixer-upper would be a better purchase than getting a more expensive house that doesn’t have issues.

But how many first-time homebuyers have that type of experience? It’s far more likely that a first-time homebuyer will have to do extensive and expensive renovations with a fixer-upper, potentially making costly mistakes along the way. And considering your time is also valuable, it probably makes sense to buy a home that doesn’t need major repairs if you aren’t experienced in this realm.

You can’t negotiate real estate commissions

Thinking you can’t negotiate things is a huge life myth, especially when it comes to real estate commissions. Real estate agents have very competitive jobs, which means they’re all fighting for your business. This could work to your advantage if you have multiple agents who want to work with you. If one is willing to negotiate their commissions, they might be able to beat out the other agents.

And even though it’s typical for the seller of a home to pay for both the buyer’s and seller’s agents fees, it’s not mandatory. Sometimes a buyer will volunteer to pay some or all of those fees to sweeten an offer on a house. In this situation, knowing how to negotiate your real estate commission could mean you end up with more money to put toward a bigger down payment or to help pay closing costs. Money saved in one area of the homebuying process can immediately be used somewhere else.

You should rent instead of buying

This is a myth for the most part because paying rent money doesn’t typically benefit you in the long run. But when you pay a mortgage, you’re spending money to eventually own your home and build equity. There are also some tax advantages to buying a home and expenses you can deduct. However, the debate between renting and buying may well depend on your situation.

If you pay a very low amount of money while renting, it may not be cost-effective to buy a home and pay a higher amount each month. Still, this likely isn’t the situation for most renters, so it should often make sense to put your monthly payment toward an investment (your future home) instead of someone else’s asset.


You shouldn’t buy unless it’s your dream home

For many people, your actual dream home is just that — a dream. It’s likely to have an unrealistic floor plan, cost too much, or have some other quality that makes it a bit of a fantasy. That’s why it’s a myth to wait to buy unless it’s your dream home.

If you’re going to wait until you find the perfect home, you’re likely to wait forever. Instead of looking for perfect homes, look for homes that can work for you and your family. Pick a few things as priorities, such as a certain number of bedrooms, maybe some yard space, and a kitchen you like. These are more realistic expectations that can find you in an ideal housing situation a lot quicker than waiting for the perfect home to show up.

Bottom line

The homebuying process can be challenging to understand and navigate, which is why it’s essential to separate fact from fiction and weed out common misconceptions. This can help you feel more confident as a potential homebuyer, whether you’re in the middle of the process or still saving for a house.


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Author Details

Ben Walker, CEPF, CFEI®

Ben Walker, CEPF, CFEI®, is credit cards specialist. For over a decade, he's leveraged credit card points and miles to travel the world. His expertise extends to other areas of personal finance — including loans, insurance, investing, and real estate — and you can find his insights on The Washington Post, Debt.com, Yahoo! Finance, and Fox Business.