Home Buying Myths That Can Cost You

The 20% figure comes from a real place: putting down that amount typically eliminates the requirement for private mortgage insurance (PMI) and can result in lower monthly payments. But it has never been a universal requirement. FHA loans can be obtained with as little as 3.5% down, conventional loans backed by Fannie Mae or Freddie Mac offer 3% down options for eligible buyers, and VA and USDA loans are available with zero down payment to qualifying borrowers.

The tradeoff is worth understanding clearly. A smaller down payment often means paying PMI — an added monthly cost that protects the lender, not you — and it means borrowing more, which increases total interest paid over the life of the loan. See how down payment size shapes your loan terms for a side-by-side comparison. You can also explore the four main loan types to understand which programs you may qualify for.

Touring homes before knowing what you can borrow is a common and emotionally costly mistake. You may fall in love with a home outside your budget, or make an offer that a seller dismisses because it isn't backed by financing evidence. In competitive markets, sellers routinely favor or even require pre-approval letters alongside offers.

Pre-approval is not the same as pre-qualification. Pre-qualification is a rough estimate based on self-reported information; pre-approval involves a lender actually reviewing your credit, income, assets, and debts to issue a conditional commitment. The process usually takes a few days and gives you a concrete number to shop within.

Historically, seller's agents offered a portion of their commission to cooperating buyer's agents as an incentive to bring buyers. Even as industry practices continue to evolve following legal settlements and rule changes, the idea that bypassing an agent puts money in the buyer's pocket is generally a misconception. Sellers price their homes independent of whether a buyer is represented, and unrepresented buyers often lack negotiating leverage, contract expertise, and market knowledge.

A buyer's agent represents your interests specifically — reviewing disclosures, flagging red flags, negotiating terms, and guiding you through contingencies. That guidance has real value, particularly for first-time buyers navigating a transaction they may never have completed before. Always confirm representation arrangements and compensation structures in writing with any agent you work with.

In hot markets, some buyers waive inspection contingencies to make offers more attractive. This is a real risk that deserves clear-eyed consideration, not a routine tactic. A home inspection — typically performed by a licensed professional for a few hundred dollars — can uncover issues with roofing, foundations, electrical systems, plumbing, HVAC, and more that are invisible in a showing.

The cost of major undiscovered defects can run into the tens of thousands of dollars. Even in competitive situations, there are alternatives to a full waiver, such as an informational inspection (you inspect but waive the right to request repairs). Understand what you're giving up before signing away that protection. For more on what can go wrong in a deal, see why buyers lose deals after going under contract.

Perfect credit is not a prerequisite for homeownership. FHA loans, for example, allow credit scores as low as 580 with a 3.5% down payment, and some lenders work with scores below that threshold under specific conditions. Conventional loans generally favor higher scores, but borrowers with scores in the 620–660 range can still qualify, often at a higher interest rate.

What your credit score does affect — significantly — is the interest rate you're offered. Even a half-point difference in rate on a 30-year mortgage can amount to tens of thousands of dollars over the life of the loan. That's a strong reason to review your credit report, correct any errors, and pay down revolving balances before applying, even if you already qualify. Knowing where you stand financially before you begin is foundational — preparing your finances before you start house hunting explains what lenders actually look at.

Sellers set asking prices based on their goals, their agent's guidance, and their read of the market. That number isn't certified or independently validated until an appraisal is ordered by a lender. In some markets and for some properties, buyers offer below list price; in others, competitive bidding pushes offers above it.

The right offer price is informed by comparable recent sales (often called "comps"), the property's days on market, its condition, and current buyer demand in that area. Assuming you must pay exactly the asking price — or that you can always negotiate down significantly — are both oversimplifications. How appraisals work is also worth understanding, since a lender will only finance up to the appraised value regardless of what you agreed to pay.