Common Mortgage Myths Debunked

The mortgage world is riddled with myths and misconceptions. These can range from the oversimplified to the overly complex, and can often deter potential homeowners from taking the plunge into the property market. It’s important to differentiate fact from fiction, and to understand the truths underlying these common beliefs. Here, we aim to debunk some of the most prevalent mortgage myths, so you can make informed decisions with clarity and confidence.

1. A 20% Down Payment is Mandatory

The Myth: One of the most pervasive myths is that you need to put down 20% of the home’s purchase price to secure a mortgage.

The Reality: While a 20% down payment can help you avoid paying private mortgage insurance (PMI), there are many loan programs available, especially for first-time buyers, that allow for smaller down payments. Some even permit as little as 3% or 5% down. Research and consultation with a mortgage specialist can open up options you might not have considered.

2. Perfect Credit is a Must-Have

The Myth: Only those with a flawless credit score can get approved for a mortgage.

The Reality: A high credit score might get you favorable terms, but many lenders offer loan products for those with less-than-perfect credit. Furthermore, factors like employment history, down payment size, and debt-to-income ratio can also influence a lender’s decision. It’s always a good idea to understand your credit score and work on improving it, but it’s not the sole determinant.

3. Renting is Always Cheaper than Buying

The Myth: It’s more cost-effective to rent a home than to buy one.

The Reality: While renting might offer flexibility, especially in the short-term, homeownership allows you to build equity over time. Depending on the market conditions and the area you’re considering, monthly mortgage payments can even be comparable to or less than rental costs. Over time, owning a home can prove to be a good investment, as property values tend to appreciate.

4.  The Lowest Interest Rate is the Best Deal

The Myth: The mortgage with the lowest interest rate is always the best choice.

The Reality: While a low interest rate is an attractive feature, it’s essential to consider other factors. Closing costs, points, loan type, and the flexibility of the loan (like the ability to refinance) can impact the overall cost of the mortgage. Sometimes, a slightly higher rate without additional fees can be the better financial choice in the long run.

5. Fixed-Rate Mortgages are the Only Good Option

The Myth: Adjustable-rate mortgages (ARMs) are risky, and fixed-rate mortgages are the only safe bet.

The Reality: ARMs can offer lower initial rates compared to fixed-rate mortgages, which can be beneficial for those who don’t plan on staying in their home for more than a few years. While it’s true that the interest rate can increase, many ARMs come with caps that limit how much the rate can rise. It’s crucial to understand the terms and evaluate if an ARM is right for your financial situation.

6. Pre-Qualified Means You’re Pre-Approved

The Myth: Being pre-qualified for a mortgage means you’re guaranteed to get the loan.

The Reality: Pre-qualification is an initial assessment of how much you might be eligible to borrow based on self-reported financial information. On the other hand, pre-approval involves a more thorough check, including verification of your financial documentation, and it provides a more accurate estimate of how much the lender is willing to lend you. If you’re serious about buying, aim for pre-approval.

Navigating the mortgage terrain can be daunting, especially with the myriad of myths that cloud the process. By arming yourself with accurate knowledge and seeking guidance from professionals, you can confidently make the best decisions for your financial future.

If you’re looking to explore mortgage options tailored to your needs, or if you have more questions that need answers, our expert team at is ready to help. Reach out to us today, and let’s make your homeownership dreams a reality.

Questions about the numbers you see or would like to get started on your purchase?

Contact us today and let one of our mortgage experts guide you with your specific situation!

Next Step

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Getting pre-approved is the first step in buying a home. By getting pre-approved, you can:

  • Focus on your home search, knowing your financing is in Poli’s expert hands.
  • Find out exactly what home price you qualify for and shop with comfort
  • Improve your chances for homebuying success, since sellers heavily favor offers with pre-approvals from reputable lenders.

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* This radius Pre-Approval/Credit Commitment Promise Contract ("Promise") is made and entered into, as of the date of the last signature below, by and between radius financial group inc. ("radius" or "Lender"), and the below-named Buyer and Seller. In consideration of Seller's reliance on this Promise in entering into a real estate purchase transaction with Buyer, the Parties agree as follows:

PROMISE TO SELLER. In the event that a Seller is induced to accept an offer from, and enter into a purchase and sale agreement with, a radius borrower on account of this Promise in connection either with (a) a radius Pre-Approval or (b) a radius Credit Commitment and the Buyer is unable to close on such Eligible Transaction due to a mistake made by radius (with accurate and up-to-date information) on such Pre-Approval/Credit Commitment (a "Bad Pre-Approval"), then radius shall pay Seller ten thousand dollars ($10,000), subject to the terms and conditions herein as Seller's sole remedy.

PROMISE TO BUYER. In the event that radius issues a Bad Pre-Approval to Buyer on an Eligible Transaction, radius will reimburse Buyer reliance expenses up to one thousand dollars ($1,000) for a home inspection, appraisal, or legal expenses actually paid out-of-pocket by Buyer, subject to the terms and conditions herein. This payment shall be Buyer's sole remedy.

ELIGIBLE TRANSACTION. For purposes of this Promise, an "Eligible Transaction" is a purchase money mortgage transaction for a primary residence (made on or after April 1, 2018) (not made to a radius employee or immediate family member), provided that the loan is a Conventional, USDA, VA, or FHA loan product for either (i) an existing home resale or (ii) a newly constructed home that is to be delivered and closed within ninety (90) days of the P&S.

CONDITIONS. The applicable radius Pre-Approval must not have expired prior to the date of the P&S. Offers/P&Ss cancelled due to home inspection issues or title defects are not covered under this Promise, and this Promise is void if a Bad Pre­Approval is the result of: (i) a change in Buyer's financial position, (ii) property specific requirements or expenses (e.g. homeowner's association dues/fees, flood insurance, or property taxes), or (iii) loan product availability or underwriting requirements, or third-party actions outside of radius' control.

FUNDS DISBURSEMENT. Any funds due and payable under this Promise will be paid if requested by Buyer or Seller in writing within 90 days of the date of an applicable Adverse Action Notice and accompanied by a fully-executed copy of this Promise. Any payments made under this Promise will be reported to the Internal Revenue Service by radius on a Form 1099-MISC or as otherwise required by then-applicable law. Please consult your tax advisor for any tax implications.