Homebuying Myths That Catch People Off Guard

The 20% figure comes from a legitimate goal — avoiding private mortgage insurance (PMI), a monthly premium added to loans where the buyer's equity is below 20%. But PMI is not a dealbreaker for most borrowers; it's a cost that can be weighed against the benefit of buying sooner. FHA loans allow down payments as low as 3.5% for borrowers with qualifying credit scores. Conventional loans backed by Fannie Mae and Freddie Mac offer 3% down options for eligible buyers. VA loans and USDA loans have zero down payment requirements for qualified veterans and rural borrowers, respectively. See what every first-time buyer should know about down payments for a detailed look at the trade-offs between down payment sizes.

Lenders do use credit scores to assess risk and set interest rates, but the threshold for qualifying is lower than many people assume. FHA loans are available to borrowers with scores as low as 580 with a 3.5% down payment, and in some cases down to 500 with a larger down payment. Conventional loan minimums are generally around 620. A higher score will typically earn a better interest rate, so improving your credit before applying can reduce your long-term costs — but waiting for a perfect score is rarely necessary. For a broader look at how credit works, the common credit score myths article covers frequent misunderstandings worth clearing up.

These two terms are often used interchangeably, but they represent very different levels of commitment. A pre-qualification is typically based on self-reported income, assets, and debt — no documents are reviewed, no credit hard-pull is performed. It gives a rough borrowing range but carries little weight with sellers. Pre-approval, by contrast, requires submitting pay stubs, tax returns, bank statements, and authorizing a credit check. A lender reviews the file and issues a conditional commitment to lend up to a stated amount. In competitive markets, sellers may not seriously consider offers from buyers who cannot show a pre-approval letter. Going further, some buyers pursue full underwriting before finding a home — a process sometimes called a credit-approved or verified approval — which reduces the risk of financing issues after an offer is accepted.

This misconception catches buyers off guard at the worst possible moment — right before closing. Closing costs include lender origination fees, title insurance, appraisal fees, attorney fees (where applicable), prepaid homeowner's insurance, and escrow deposits for property taxes, among others. On a $350,000 home, that could mean an additional $7,000 to $17,500 due at closing, entirely separate from your down payment. Some of these fees are negotiable, and sellers can sometimes be asked to contribute toward closing costs as part of the purchase agreement. Closing costs explained line by line breaks down each fee so you know what to expect.

Sellers set asking prices with negotiation in mind. In a buyer's market, offers below list price are common and accepted regularly. Even in competitive markets, buyers often negotiate seller concessions — contributions toward closing costs, repairs identified during inspection, or appliances and fixtures included in the sale. Understanding how to make a strong, well-structured offer matters more than paying the sticker price. How the offer process works and buyer negotiating approaches explain how to engage this process with confidence.

Offer acceptance starts a transaction, not a transfer of ownership. Most purchase contracts include contingencies — conditions that must be met for the sale to proceed. A home inspection may surface significant defects that require negotiation or cause the buyer to walk away. An appraisal below the purchase price can trigger a price renegotiation or leave the buyer responsible for covering the gap. And financing approved in principle can still be denied if the buyer's financial situation changes — taking on new debt, changing jobs, or large bank withdrawals can all raise lender concerns. Understanding what can go wrong helps buyers protect themselves. What can derail a home purchase after offer acceptance covers these risks in detail.