Home buying myths busted

Whether you’re a first-time homebuyer or an experienced homeowner — home buying often comes with mixed messages, confusing concepts and stress.

We'll help you sort through some of the most common home buying myths.

Home buying myths

Myth 1 — you must have a 20% down payment

Affordability is often a major concern for prospective homebuyers, and this includes gauging how much money to save for a down payment on a home. While a 20% down payment could provide some benefits, like avoiding private mortgage insurance (PMI) or lowering your monthly mortgage payment, it isn't the only option. Other down payment amounts like 5%, 10% or 15% may provide you with more flexibility as you determine what price of home to aim for and it may be a less daunting amount of money to save prior to closing on your home.

Myth 2 — there's a perfect time to buy a house

The housing market is difficult to predict and depends on many factors like current interest rates, neighborhoods you’re interested in, demand and even tax reform. The main consideration for home buying a home is based on your financial preparedness. If your down payment is saved and you are prepared for other expenses, like closing costs, inspections and possible renovations, your timing may be just right, regardless of the market. This may especially be the case if you've also prepared a monthly budget for your upcoming cost of home ownership to validate that you are buying a home at a time that works well for you. Before home shopping, your first step should be putting your finances in order. You may really like a house but not be able to qualify for the required mortgage amount.

Myth 3 — spring is the best time of year to buy

While spring blooms and temperate weather conditions may allow for a more pleasant home-touring experience, it may not be beneficial to buy during the season. The reality is that along with the weather, the competition heats up during spring which can drive up home prices. In the off-season, more available houses mean less competition, which may help give you the time you need to get home inspections done and make up your mind before rushing into an offer.

Myth 4 — renting is more affordable than buying

This is not always the case, though it is highly dependent on where you live. The long-term savings or cost of renting compared to buying can be based on your location. That said, it’s important to consider the value you place on the intangible benefits of home ownership. Some of those factors include stability, pride of ownership and home equity that you can eventually borrow against or leverage for future investments.

At the end of the day, the home buying process depends on your individual situation. Invest time in the process by doing your research and speaking with professionals to see that you are taking various perspectives into consideration over the course of the home buying journey.

Myth 5 — you need to have a perfect credit score

While it’s better to have a good score, you don’t necessarily need a perfect one. If you’re unsure about what defines a good credit score, 620 is typically the minimum qualifying score for conventional loans. With that in mind, you still have options if your score isn’t high enough yet. You may want to consider getting a co-borrower with a higher score. If you do, your scores can be combined and averaged which may positively impact your chance of securing a loan. 

Myth 6 — you need to pay student loans first

There’s no requirement to have your student loans fully paid off before engaging in a purchase agreement, but keep in mind you’ll need to have a low debt-to-income ratio in the range of 0% to 36% to secure a mortgage. Additionally, there will be credit score requirements, so be cautious about being late with your student loan payments.

Myth 7 — interest rates are going up

While it’s true that interest rates have spiked since 2022, data from Freddie Mac shows, they are still lower in comparison to rates seen before the year 2000. Ultimately, interest rates aren’t particularly volatile and aren’t predicted to decrease greatly anytime soon, so you may not want to wait for a drop in rates.

Myth 8 — down payment is the only cost at closing

You might have many more expenses beyond the down payment when you close, including origination fees, title insurance, appraisal fees, credit report charges, prepaid property taxes and homeowners insurance among other things.  

As the buyer, you'll also be responsible for covering the loan’s closing costs which occur when the title is transferred from the seller. Closing costs typically range between 2% to 5% of the loan amount, depending on the state in which you purchase.

Myth 9 — always choose the lender who offers the lowest interest rate

Lenders across the board offer a wide range of interest rates, but you may end up paying more despite a lower interest rate with some lenders. A good way to compare costs between lenders is to look at their holistic Annual Percentage Rates (APR), which combine the quoted interest rate and fees to give you an accurate comparison of exactly how much you’ll be charged. A higher interest rate with lower fees could end up costing you less overall. 

Additionally, while fixed rate mortgages are generally more popular and simpler to manage, it doesn’t necessarily mean you have to choose one. Consider the pros and cons of fixed-rate and adjustable-rate mortgages before deciding. 

Myth 10 — pre-approval guarantees approval

While pre-approval may improve your chances of being accepted for your mortgage loan, changes in your application may affect the ultimate result. If your financial situation or income experiences dramatic changes between your pre-approval and your application, your lender may reconsider their decision in the final underwriting. 

Myth 11 — cheaper is better

Many buyers look to buy fixer-uppers as they appear to be a good budget choice at first glance. However, while you may spend less money up front, it’s possible you’ll end up spending just as much if not more than you would on another house after repairs and renovations. Take the time to have a thorough home inspection conducted before taking a risk. Additionally, if you decide to fix the house up yourself instead of hiring someone, you should consider factoring in what the labor is going to cost you, both monetarily and in terms of time. 

Similarly, while condos may seem cheaper on the surface, they may come with a variety of hidden costs like Homeowners Association (HOA) dues or building improvement fees, which could make them more expensive than originally thought. When considering a condo, remember that your mortgage is not going to be the only cost.

What now?

Now that you’ve uncovered some home buying myths, check our guide on the home buying process. You can get a homeowners insurance quote now, or give us a few details and a State Farm^® agent will reach out to you.