Purchasing and owning a home is considered a big part of the American dream. Unfortunately, there are many myths surrounding mortgages that can make it much harder to understand what goes into getting one.

Here, we will dispel four of the most common mortgage myths:

mortgage qualificationYou have to put 20% down

While putting 20% down on a home may have been the case in the past and is recommended to avoid private mortgage insurance (PMI), it is often not required. Smart Mortgage and Guild Mortgage offers many mortgage programs where you may be qualified to put as little as 3% down in some instances.

If you are qualified for a VA or USDA loan, your down payment can be as little as zero down.

Your down payment covers closing costs

Among some new homeowners, there can be the belief that the down payment covers closing costs. While both down payment and closing costs are paid at closing, they are two separate things. Down payment is how much you pay on the home upfront, while closing costs are costs associated with the loan, such as:

  • Origination fees
  • Home appraisal
  • Home inspection
  • Title search
  • Homeowner’s insurance

When you get your closing disclosure, you will see a section called “cash due at closing” or “cash to close.” This section bundles closing costs and the down payment together.

Applying for a mortgage will hurt your credit

While applying for a mortgage does initiate what is known as a hard inquiry on your credit report, the point or two shouldn’t hurt your chances of getting approved. However, too many hard inquiries can give lenders the impression that you are a high-risk borrower.

You can’t get a mortgage if you have student debt

This myth is certainly not true! Thousands of people with student debt purchase homes. One of the first things your lender will look at when you apply for a home loan will be your debt-to-income ratio (DTI). This percentage represents your total monthly income that goes towards monthly debts and recurring expenses. The higher your DTI, the riskier you are as a mortgage candidate.

Even with student loans, you could afford a mortgage! Good credit, applying for the right program, and a good DTI can help qualify you.

When applying for a mortgage, work closely with your lender to find the best mortgage program for you.

Call now to speak with one of our experienced loan officers

and get approved for a mortgage today!


The above information is for educational purposes only. All information, loan programs and interest rates are subject to change without notice. All loans subject to underwriter approval. Terms and conditions apply. Always consult an accountant or tax advisor for full eligibility requirements on tax deduction.