These Mortgage ‘Myths’ May Be Holding Buyers Back Unnecessarily

With the average rate on 30-year fixed home loans stuck around 6.30%, and median home prices near historic highs, homeownership remains out of reach for many—or does it?

Many would-be homebuyers are giving up on their homeownership dream due to discouraging "mortgage myths," concludes a new survey by Veterans United Home Loans.

"[The myths] are undoubtedly keeping prospective homebuyers on the sidelines, especially first-time homebuyers," Chris Birk, vice president of mortgage insight at Veterans United, tells Realtor.com®. "They think it will be a years' long slog to make this dream a reality, so why should they even start?"

The survey, conducted from March 13 to March 24, crunched numbers from 400 veterans and civilians who intend to buy a home in the next three years.

Among the common myths prospective homebuyers often said they believed were the need for a larger down payment than is necessary in reality, or needing a perfect credit score to get a loan or favorable rates.

"When buyers think they need perfect credit or a huge downpayment, they can take themselves out of the game before they even get started," he says.

As for why so many would-be buyers would not understand the realities of mortgages, Birk notes the lack of public discussion of these topics doesn't help.

"I don't think people are clamoring to hop on their social platforms and talk about the latest Fed decisions or the implications of the secondary market and mortgage-backed securities," he jokes.

The mortgage myths

Nearly half of would-be buyers (46%) think you need to put down more than 5% for a conventional loan, and 15% believe a 20% downpayment is required, according to the survey results.

In actuality, a mere 5% is a common minimum for conventional financing, and some first-time buyers may qualify for a conventional loan with as little as 3% down.

And—believe it or not—there are loans, such as Department of Veterans Affairs (VA) and USDA loans, that don't require any downpayment at all. However, 31% of respondents were certain that a downpayment is required for a mortgage.

Granted, with a downpayment this low (or nonexistent), you may have a higher interest rate, or be required to pay Private Mortgage Insurance (PMI). But it pays (literally) to understand that lenders can be flexible with rates and credit scores.

While average FICO credit score in the U.S. is 713, down from 715 in 2023, according to Experian, there is a strong sense that you need a near-perfect score (in the 800s) to get a mortgage—or lower rates.

According to the survey, more than one-third of respondents (34%) believe a credit score of 700 or higher is required to qualify for a mortgage, while 57% think at least a 650 score is necessary.

But Veterans United wants to bust that myth as well. "Many loan programs allow buyers to qualify with credit scores around 620, and sometimes lower," says the report.

Furthermore, your score doesn't have to be sky high to get the best rate.

"Government-backed loans often offer some of the lowest average rates in the market, even for buyers without elite credit," says the report, which notes that VA loans are commonly given to those with scores of around 620. And Federal Housing Administration (FHA) loans will go even lower—down to 580.

Then there are the misconceptions around who sets the rates for loans. A full 61% of respondents believe the government dictates rates and 66% of those surveyed think the Federal Reserve sets them.

And while the Fed sets short term rates that broadly effect loan rates, rates are actually set by individual lenders and can vary widely based on the borrower’s financial profile, the loan type and overall market conditions.

Not only did many not understand who is setting rates, but nearly two-thirds of respondents (63%) said they believed mortgage rates are higher than they’ve ever been.

In reality, while the 6%-7% rates of the past few years are double the historically low 2%-4% rates during the COVID-19 pandemic, the truth is that today's rates are enviable compared those in the late 1970s through the early 1990s rates, when they reached an astronomical high of 18.6% on October 1981, according to Freddie Mac. 

All of these myths are harmful because they could be keeping the cautious buyer sidelined just when prices have started to turn in their favor, says the report.

The national median list price in April 2026 is $425,000, down -1.4 % year over year, and the median list price per square foot down 2.4%, the sixth-straight month that prices weakened, according to Realtor.com data.

How buyers can do better

Jeff House, an eXp Realty broker and strategic real estate advisor at Real Estate Bees says that, when it comes to mortgages, buyers have more power than they think.

"A lot of people assume the rate, fees, down payment structure, and terms are simply handed to them as the final answer," he tells Realtor.com.

He says his main advice to clients is to get a quote from more than one lender.

"Two lenders can look at the same borrower and come back with very different numbers, often because they have different products or different ways to structure the loan," he says. "That difference may show up in the rate, lender fees, points, closing costs, mortgage insurance, or how much cash the buyer needs to bring to closing."

He suggests rather than a borrower asking, "What is my rate?" instead asking, "What would change this rate?"

Additionally, borrowers may want to consider less cash down.

"Most borrowers don't realize the rate on a 3 to 10 percent down loan is substantially the same as a 20 percent down loan under standard agency guidelines, and at times better," Colette Evans-Hanya of mortgage loan originator at Ritter Mortgage Group tells Realtor.com. "The down payment is a cash decision, not a rate decision, especially now that mortgage insurance premiums are lower than they used to be for borrowers with good credit."

But Bruce Ailion, a ReMax Town & Country broker and attorney, adds it may not always be savvy to negotiate just for the sake of it.

"You can get a loan from a mortgage broker with 30 years of experience that works hard to find you the best loan product at the best rate, and monitors the process to ensure it is smooth and worry-free," he says.

"Or you may save some money by calling an 800 number, never speaking to the same person, and having little assistance if a problem arises."

Despite the prevalence of these mortgage myths, and 1 in 4 Americans feeling they will never be able to afford a home, the survey also shows that people are still highly optimistic about homeownership.

An overwhelming majority of survey respondents (87%) said that owning a home is one of the most important goals in life.