Many homebuyers held back by financing misconceptions 

While many potential homebuyers are confident about their knowledge of the transaction process, a new survey suggests quite a few are holding onto misconceptions that could be holding them back.

A March Veterans United Home Loans poll of 400 people who intend to buy a home within the next three years found that many believe the requirements to qualify for a mortgage are tougher than they actually are. This could delay — or even derail — the homebuying journey, according to Chris Birk, VP of mortgage insights at Veterans United.

"The reality is that loan programs are often more flexible than people realize, especially when it comes to credit scores, down payments and interest rates. Understanding what's actually possible can help buyers move forward with confidence," Birk said in a news release.

The survey's findings suggest that buyers agents should be addressing common misunderstandings — ideally in their first conversations with potential buyers, Birk said in an email to Real Estate News.

Agents "play such a vital role in educating homebuyers," Birk said. "One of the best things agents can do is normalize the conversation. It isn't uncommon for consumers to have outdated or incorrect information, even if they're repeat homebuyers."

Myth: You need a high credit score to qualify: More than one-third of respondents (34%) were under the impression that they needed a credit score of 700 or higher to qualify for a mortgage, while 57% believed a score of at least 660 was necessary. 

But buyers can qualify for government-backed mortgages and other conventional loan programs with credit scores around 620 — and in some situations, there is no set minimum. The higher the credit score, the more options a buyer has to get a lower interest rate.

"The unfortunate reality is that a lot of agents and loan officers won't even get the chance to help. Buyers who think they need a 700+ credit score or a sizable down payment may walk away before they ever start the process," Birk said. 

Myth: A 20% down payment is mandatory: The survey also found that 15% of respondents thought a 20% down payment would be required for a conventional mortgage, while 46% thought more than 5% would be mandatory.

Many loans can require as little as 3% down for first-time buyers, Birk said, while some VA and USDA loans don't have any down payment requirement.

Data from the National Association of Realtors indicates that incorrect assumptions about down payment amounts are widespread. For first-time buyers, the typical down payment has ranged from 6-9% since 2018 — and hasn't topped 10% in more than three decades — while the typical down payment for repeat buyers was 23% in 2024, according to NAR. 

Myth: Mortgage rates are the worst they've ever been: Many respondents didn't understand that mortgage rates are set by individual lenders and can vary widely — and a whopping 63% believed rates were higher at the time the poll was conducted than they've ever been. 

The peak was actually in October 1981, when 30-year rates hit 18.6%. Rates have bounced around the 7% range in recent years and are currently in the 6.4% range after dipping briefly below 6% in late February. 

Despite these mistaken beliefs, Birk said 56% of respondents described themselves as very or extremely knowledgeable. "The gap between perceived and actual knowledge is an important trend to watch," he said.

"Today's financial information environment might play a role, too," he added. "There's so much homebuying and real estate content online now, and it can be tough for consumers to separate fact from fiction. That makes trusted, expert guidance more important than ever."

Data indicating that the housing market is tipped in buyers' favor in many metro areas could help boost buyer confidence by easing pressure and giving them more control, Birk suggested. But that only goes so far.

A buyers market "probably doesn't correct the underlying misconceptions about credit, down payments and rates, which are the myths most likely to delay or derail a purchase decision," Birk said. "Accurate and timely information is what allows prospective buyers to take advantage of opportunities, regardless of the market cycle."