8 Homebuying Myths Debunked By a Realtor

When it comes to buying a home, don’t believe everything you hear. If you do, you might miss out on your dream of homeownership because you’re listening to wrong advice.

I should know. I’m a Realtor who has sold over $100 million in real estate and worked in the industry for a decade. I see it every day.

Let's explore some of the most common myths and uncover the truths behind them so you can approach your homebuying journey with clarity and confidence.

Myth 1: You Need 20% Down

While a 20% down payment can help you avoid paying private mortgage insurance (PMI) and may reduce your monthly payment, it’s not a requirement. Many homebuyers today are able to secure mortgages with much lower down payments.

There are several mortgage options for buyers who can’t afford to put down 20%.

• FHA loans, which are particularly popular among first-time buyers, require only 3.5% down.

• Conventional loans are best for those who meet specific eligibility criteria and only require 3-5% down.

• VA loans are available to military veterans and active service members, often require no down payment at all.

• USDA loans, which are designed for homebuyers in rural areas, also offer 0% down payment options for eligible buyers.

While these lower down payment options can make homeownership more accessible, they do come with trade-offs. Buyers may face higher monthly payments, the requirement for PMI, or slightly higher interest rates. It’s important to have a conversation with your loan officer about which program and down payment amount is right for you.

Myth 2: Your Down Payment is the Only Money You Need

Some people hear “0% down!” and think buying a home can be free with the right loan program. But that’s unfortunately not the case. In any home purchase transaction, there are always going to be additional fees, often referred to generally as closing costs.

Closing costs cover various fees such as title insurance, loan origination fees, appraisal costs, and other administrative expenses, often adding up to 2% to 5% of the home’s purchase price.

Additionally, homebuyers typically need to pay for a home inspection which can cost several hundred dollars. Depending on the market and specific home transaction, buyers may also need to deposit earnest money to escrow, typically around 1% to 2% of the purchase price, which can be applied to costs at closing.

And with recent changes to the way real estate agents are compensated, you may need to account for the cost of paying your agent’s fee as well.

While many loan officers and real estate agents might mention you can ask the seller for a credit to cover these expenses, you may not want to limit your home search by only looking at properties offering a credit. Aiming to have your closing cost funds saved before you start your home search will put you in a better position to buy your dream home.

Myth 3: You Must Have Great Credit

While having excellent credit can make the mortgage process go more smoothly and help you secure a lower interest rate, you don’t need a perfect credit score to buy a home. In fact, people often put too big of an emphasis on their credit score. Someone with an 800 credit score but a debt-to-income (DTI) ratio that is too high might actually be worse off than someone with a 650 credit score who has a high income and no debts.

FHA loans are available to buyers with credit scores as low as 580 and those with scores around 620 may qualify for conventional loans. However, in both cases you will likely receive a better interest rate if your score is higher.

For borrowers with scores lower than 580, there are alternative lending options available through certain banks. However, these options may come with higher interest rates to offset the perceived risk.

Myth 4: You Can’t Get a Mortgage if You’re Self-Employed

Self-employed individuals often believe that getting a mortgage is out of their reach, but that’s not true. It may be slightly more difficult to qualify for a mortgage when you're self-employed, but with the right documentation, you can absolutely secure a loan.

Self-employed individuals usually need to provide more documentation than those who are salaried. In addition to providing tax returns for the past two years, self-employed buyers may be asked to submit a profit-and-loss statement, business records, and bank statements. While salaried workers can prove their income with pay stubs and W2 forms, self-employed individuals will need to demonstrate income stability with a broader set of financial records.

Self-employed buyers can improve their chances by making sure their business is stable for at least two years before applying. Avoid large business expenses or changes, such as taking on significant debt or changing business models.

Myth 5: You Should Pay Off All Debt Before Buying a Home

While it’s a good idea to reduce your debt load before buying a home, completely paying off all debt may not be necessary or practical. Eliminating all your debt could actually leave you without enough funds for a down payment or emergency savings, which are crucial for homeownership.

Lenders primarily focus on your debt-to-income (DTI) ratio, which compares your monthly debt obligations to your monthly income. So if you have a large debt but the monthly payment for it is actually quite small in comparison, spending thousands to pay it off might not be the right move. It may be more beneficial to pay off smaller debts like fully paying off a credit card than it is to put a large chunk towards paying off a car or student loans.

Paying off your debts may not help your credit score either. Paying off certain debts can boost your credit score, but not all debt affects your credit negatively. Longstanding accounts with a history of on-time payments can positively influence your score, so ensure you are making strategic choices when it comes to paying off debt.

For many buyers, keeping manageable debt levels and a comfortable cash cushion is more advantageous than eliminating every last debt.

Myth 6: You Shouldn’t Buy a Home if You Plan on Moving in a Few Years

The idea that buying a home only makes sense if you plan to stay long-term is another common myth. While buying and selling a home involves costs, it can still make sense to buy even if you plan to move within a few years.

In some markets, home values may rise quickly, allowing you to build equity even in a short time frame. In a hot real estate market, you could see a return on your investment even if you live in the home for only a couple of years. Additionally, buying a home could make sense if you’re looking to start a real estate portfolio. You could turn your primary residence into a rental property if you need to relocate. Just make sure your loan agreement allows for this.

Myth 7: Your Planned Renovations Will Always Create Added Value

Many buyers assume that any home improvement will automatically add value to the property. However, that’s not always the case. Not all renovations yield a good return on investment. In some cases, home upgrades can even decrease your property’s value.

For example, converting a garage into a bedroom might make sense in one neighborhood, but in an area where families typically need two-car garages, this renovation could lower the property’s value. Cosmetic updates, such as painting walls or adding landscaping, are often considered necessary maintenance rather than true value-boosting improvements.

More expensive renovations, such as kitchen or bathroom remodels, have the potential to increase the home’s value. However, partial upgrades, like replacing only the countertops without upgrading cabinets, may not offer the same return on investment. Additionally, highly personalized renovations, such as installing a full-wall aquarium or a regulation basketball court in the backyard, may not appeal to the next buyer and, therefore, not add any tangible value to the home.

Before embarking on a major renovation project, it’s wise to consult with a real estate professional or appraiser to assess whether the changes will increase the home’s value.

Myth 8: Your Monthly Payment is Fixed and Will Never Go Up

With a fixed-rate mortgage, it’s easy to assume that your monthly payment will stay the same throughout the life of the loan. However, there are several factors that can cause your monthly payment to increase, even with a fixed-rate mortgage.

Property taxes can rise as your home’s value increases, which will raise your monthly payment. Homeowner’s insurance premiums can also increase, especially if you live in an area prone to natural disasters. Additionally, if your home is part of a homeowner’s association (HOA) or a similar entity like a special tax district, the association may raise fees to cover maintenance or improve services.

If you put less than 20% down on your conventional loan, you may also have to pay private mortgage insurance (PMI), which can increase your monthly payment. On the bright side, once you’ve built enough equity in your home, you can request to have PMI removed. That can significantly reduce your monthly expenses.

Fact Versus Fiction: Don’t Get Caught Out

Buying a home is a complex decision, and it’s easy to get misled by common myths, things your friends and family tell you, or incorrect information you find online. Understanding the realities of home buying can make the process smoother, more affordable, and less stressful. By knowing what’s fact and what’s fiction, buyers can approach the process confidently and make informed choices that align with their financial and personal goals.