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7 Myths About Getting a Mortgage You Need to Stop Believing

When you’re a first-time homebuyer, you run into so many different myths about the mortgage industry. Unfortunately, these fictional beliefs can prevent many totally qualified buyers from becoming happy homeowners.

The truth? A lot of what you hear about the mortgage process just isn’t inaccurate. Let’s debunk the industry’s biggest myths now.


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Myth #1: You need to have 20% down payment.

20% down may allow you to waive mortgage insurance, but it’s not a requirement in any way, shape, or form. In reality, down payments vary by loan program. FHA loans require just 3% down, while conventional loans start as low as 5%. If you can qualify for a VA or USDA loan you might have no down payment at all.

Myth #2: Your credit score has to be almost perfect.

The minimum credit score for some mortgage programs goes as low as 580 — well below the perfect mark of 850. And while your credit score is certainly important (it factors into what loans you’re eligible for, as well as what interest rates you’ll get), you don’t need great — or even good — credit to qualify for a loan. Lenders look at many different financial factors, from your income and monthly debts down to your employment, past rent payments, and more. These will all play a role in your ability to get a mortgage.

Myth #3: A past bankruptcy or foreclosure means you’re not eligible.

Though a past bankruptcy or foreclosure will delay your homeownership dreams, it won’t dash them altogether. Consumers can buy a home just 3 years after a foreclosure and 2 years after filing for bankruptcy. In some cases, if there are extenuating circumstances like a job loss or medical situation, it could be even sooner.

Myth #4: Your down payment can’t be a gift.

Though some loan programs require a certain percentage be from your own reserves, many mortgages will allow you to cover your down payment partially (or even fully) with gift money from a parent, friend, or loved one. You’ll just need a letter saying the money is a gift and doesn’t come with any interest attached.

Myth #5: If you want to qualify, you need a steady 9-5 job.

Freelancers, contractors, and self-employed people can get loans just like 9-to-5 workers. Of course, they won’t have the typical W-2 forms that a traditional worker would have, but that’s OK. They just need to prove their income differently — through bank statements, past rent payments, recent tax returns, etc. There are also lenders who specialize in providing self-employed mortgage loans, making the process even easier to come by.

Myth #6: You can’t qualify if you have student loans.

Student loans might make it harder to afford buying a home, but they certainly don’t bar you from it. You can absolutely still qualify for a mortgage with student loans to your name. You’ll just need to 1) have enough income to comfortably cover the costs of your loan payments plus your new estimated mortgage payment and 2) be current on your student loan payments (meaning not late or delinquent.) Payment history (on loans and any credit accounts you have open) has a big impact on your ability to qualify for a loan, as well as what interest rates you’re offered. Don’t fall behind on your payments! If you are right now, get caught up and ensure your accounts are in good standing before applying for a mortgage.

Myth #7: Don’t bother buying a home — it’s cheaper to keep renting.

Too many renters think they’re “saving money.” In reality, they’re actually just throwing cash down the drain. Think of it this way: when you rent, you’re paying your landlord. They then take the money, pay their own mortgage on the property, and pocket the difference. Later on down the line, when they sell the home, they get all those profits, too. What did you, as the renter, walk away with in the end? Absolutely nothing, unfortunately.

That’s the long-term picture, though. What about the here and now? It may seem surprising, but in many markets, a mortgage payment is actually more affordable than monthly rent. Considering that rent costs have been rising for steadily for years now (they jumped 3.3 percent since 2017), this trend will likely continue for years to come.

Just the Facts

Here’s How to Buy a Home

Buying a home shouldn’t be thought of as impossible — no matter what your credit, savings, or employment situation might look like. If you’re a first-time homebuyer, contact your local Embrace loan officer to learn more about buying a home and how Embrace can help.