Homebuying Myths That Trip Up First-Timers

The 20% figure endures because it is the threshold at which lenders typically waive private mortgage insurance (PMI) on conventional loans. But it is not a requirement to purchase. FHA loans, backed by the Federal Housing Administration, allow down payments as low as 3.5% for borrowers with qualifying credit scores. VA loans (for eligible veterans and service members) and USDA loans (for qualifying rural properties) can require zero down payment. Conventional loan programs offered through Fannie Mae and Freddie Mac also have 3% down options for first-time buyers. Down payment assistance programs offered by many states and localities can further reduce the upfront burden. Buyers should weigh the tradeoffs — a smaller down payment means a larger loan balance and potentially higher monthly costs — but the 20% threshold is a financial goal, not a gatekeeper.

Conventional loans typically require a minimum score around 620, though lenders may set their own floors above that. FHA loans can be accessible to borrowers with scores as low as 580 (with 3.5% down) or even 500 (with 10% down), depending on the lender. VA and USDA loans do not set a federal minimum score, though individual lenders impose their own standards. A score in the 600s doesn't disqualify you — it may simply route you toward a different loan product or a slightly higher interest rate. For a broader look at credit scoring mechanics, see common myths about credit scores that persist among borrowers.

Pre-qualification typically involves answering a few questions about income, assets, and debts — no documentation required, no credit pull in most cases. It produces a rough estimate of what you might be able to borrow. Pre-approval, by contrast, requires submitting pay stubs, tax returns, bank statements, and authorizing a hard credit inquiry. The lender then issues a conditional commitment to lend up to a specific amount. In competitive markets, sellers often won't seriously consider an offer from a buyer who only has a pre-qualification letter. Arriving with pre-approval signals that a lender has scrutinized your finances and found you creditworthy.

Traditionally, the seller paid a commission that was then split between the listing agent and the buyer's agent. This structure has been under legal and regulatory scrutiny, and industry practice is shifting. Buyers may now be asked to sign a buyer representation agreement that specifies how their agent will be compensated — and in some cases, buyers may need to negotiate that compensation directly. The specifics vary significantly by market and transaction. Understanding what you're agreeing to before signing any representation agreement is essential. Our article on working with a buyer's agent explains the relationship in detail.

The 'renting is wasting money' framing ignores several realities. Buyers incur significant transaction costs — closing costs typically range from 2% to 5% of the purchase price — that require time to recover through equity accumulation. If a buyer sells within a few years, those costs can outweigh any appreciation gained. Renting also offers flexibility and lower maintenance obligations. In high-cost markets, the monthly cost of buying often exceeds renting for a comparable unit. The right choice is deeply personal and depends on how long you plan to stay, your financial stability, and what alternatives exist for the capital you'd put toward a down payment. For those weighing their options, a first-timer's renting roadmap can provide useful context.

Sellers stage homes to show well, but visual appeal has no bearing on the condition of the roof, foundation, electrical panel, HVAC system, or plumbing. A licensed home inspector evaluates these systems and surfaces issues that can cost tens of thousands of dollars to repair. Waiving an inspection contingency — sometimes done to make an offer more competitive — carries real financial risk. Even in markets where waiving contingencies is common, buyers can often still schedule an informational inspection to understand what they're purchasing. Understanding contingencies before you sign an offer protects your interests without necessarily making your bid less attractive.