At Rate Simple Mortgages, we’re here to clear things up. Below, we break down 10 of the most common home loan myths so you can move forward with confidence.
- You Need a 20% Down Payment to Get a Home Loan
Myth: If you don’t have 20% down, you can’t buy a home.
Reality: Many home loans require far less. FHA loans allow as little as 3.5% down, and some conventional loans offer 3% options. VA and USDA loans even offer 0% down options for eligible buyers.
While putting down 20% helps you avoid private mortgage insurance (PMI), it's not a requirement to get approved.
- You Must Have Perfect Credit
Myth: Only borrowers with excellent credit scores qualify for mortgages.
Reality: While a higher score helps you get better rates, many lenders offer home loans to those with credit in the low- to mid-600s. FHA loans, for example, are designed for buyers with less-than-perfect credit.
Even if your score isn’t ideal now, you can still get approved or work with a lender to improve your credit before applying.
- You Can’t Get a Loan If You’re Self-Employed
Myth: Being your own boss makes it impossible to get a mortgage.
Reality: Self-employed borrowers can absolutely qualify for home loans, though they may need to provide extra documentation like tax returns, profit-and-loss statements, and bank statements.
Lenders just want to see a steady income and solid financial foundation, regardless of how you earn your money.
- Getting Pre-Approved Guarantees Loan Approval
Myth: Once you're pre-approved, you're guaranteed a mortgage.
Reality: Pre-approval is a strong indication that you’re eligible, but it’s not a final commitment. The loan still needs to go through underwriting, where details like income, assets, and the property itself are fully reviewed.
Stay financially stable between pre-approval and closing to keep things on track.
- The Lowest Interest Rate Is Always the Best Deal
Myth: The lower the rate, the better the loan.
Reality: A low rate is great—but only if the fees and terms make sense. Some lenders advertise low rates but charge high closing costs or offer less favorable terms.
Look at the annual percentage rate (APR) and total cost over the life of the loan—not just the interest rate.
- You Should Always Wait for Home Prices or Rates to Drop
Myth: It’s smarter to wait for “the perfect time” to buy or refinance.
Reality: Trying to time the market is risky and often leads to missed opportunities. If you're financially ready and find a home you love, it's usually better to act. You can always explore a home refinance later if rates improve.
The best time to buy or refinance is when it aligns with your personal and financial goals.
- All Lenders Are the Same
Myth: It doesn’t matter who your lender is—just get the lowest rate.
Reality: Lenders vary widely in terms of service, fees, loan options, and turnaround times. A great lender offers competitive pricing and a smooth, supportive experience from application to closing.
At Rate Simple Mortgages, we’re known for simplifying the home loan process and delivering responsive, transparent support.
- You Can’t Refinance If Your Home Has Dropped in Value
Myth: If your home’s value has fallen, you can’t qualify for a home refinance.
Reality: Several government programs exist to help homeowners refinance even with little or no equity. Also, if your property value is recovering, it may still be possible to refinance under new terms.
Speak with a professional to explore your refinance options based on your home’s current value.
- You Should Pay Off Your Mortgage as Fast as Possible
Myth: The faster you pay off your mortgage, the better.
Reality: While it feels great to be debt-free, putting all your money into your mortgage may not be the most strategic move. Consider whether you’d benefit more from saving, investing, or keeping liquid cash available.
It’s all about balance—some homeowners even choose to refinance to free up funds for other goals.
- Pre-Qualification Is the Same as Pre-Approval
Myth: There’s no difference between pre-qualification and pre-approval.
Reality: Pre-qualification is an estimate based on basic info, while pre-approval involves verifying your credit, income, and assets. Pre-approval carries more weight with sellers and gives you a clearer picture of your home loan eligibility.
For serious homebuyers, pre-approval is the better choice.
How Rate Simple Mortgages Helps You Navigate the Truth
At Rate Simple Mortgages, we believe that informed borrowers make smarter decisions. That’s why we take the time to educate our clients, debunk common myths, and provide personalized support for everything from home loans to home refinance options.
With our easy online tools and experienced loan experts, you’ll never be left in the dark about your mortgage choices.
Conclusion
Understanding the truth behind common home loan myths can empower you to move forward with confidence, clarity, and the right strategy for your goals. Whether you’re buying your first home, upgrading, or exploring a home refinance, don’t let misinformation stand in your way.