Common Mortgage Myths Debunked for Minnesota Buyers

A buyer called me last year after waiting almost three years to make a move. She had money saved. A steady job. Decent credit. She just didn’t think she could qualify. She believed something that wasn’t true, and it cost her three years of building equity she’ll never get back.

Most of what people think they know about mortgages is outdated, and it’s keeping good buyers on the sidelines. You don’t need 20% down. You don’t need perfect credit. And shopping around won’t wreck your score the way you’ve heard. Here’s what’s actually true.

What You Need to Know

• Conventional loans can go as low as 3% down. FHA starts at 3.5%. VA is zero down for eligible veterans.
• FHA loans are available starting at a 580 credit score. Conventional starts at 620.
• A mortgage credit pull causes a small, temporary dip, and FICO counts all mortgage-related pulls within a 45-day window as one inquiry.
• Independent brokers shop multiple wholesale lenders. Banks only offer their own products.
• Nobody knows when rates will drop or by how much. The math on waiting rarely works the way buyers expect.

Want to see where you actually stand? We’re happy to look at your numbers together, no pressure.

What Are the Most Common Mortgage Myths Buyers Believe?

The biggest ones we hear at our desk in Bloomington: you need 20% down, you need great credit, shopping lenders hurts your score, and your bank automatically gives you the best deal. None of that is true, and believing it costs buyers real time.

Do You Really Need 20% Down to Buy a Home?

You don’t. Not even close.

Conventional loans are available with as little as 3% down. FHA loans require 3.5%. VA loans, for eligible veterans, require zero down.

The 20% number comes from an older era when it was the standard way to avoid mortgage insurance. That’s not the world you’re buying in now. There are programs built specifically for buyers who don’t have 20% saved, and some come with real advantages.

This myth alone keeps good buyers on the sidelines for years longer than they need to be. If 20% is the only thing holding you back, it’s worth a real conversation before you wait another year.

Do You Need Perfect Credit to Qualify?

You don’t need perfect credit. You need the right program for where you are.

FHA loans are available starting at a 580 credit score. Conventional loans start at 620. The real question isn’t whether you qualify, it’s which program fits your credit profile and what your rate looks like.

Most buyers I sit down with are closer than they thought. Sometimes a score that feels like a problem works fine with the right loan type. Sometimes two or three small moves could push it up 20 or 30 points with a little time.

The worst thing a buyer can do is assume they don’t qualify without ever asking.

Will Getting Pre-Approved Hurt Your Credit Score?

Here’s the deal: it’s partially true and mostly misunderstood.

A pre-approval involves a hard credit pull, and that can cause a small, temporary dip, usually just a few points. It’s real, but it’s not dramatic, and it bounces back.

Here’s the part most buyers don’t know. FICO counts all mortgage-related hard pulls within a 45-day window as a single inquiry. So if you’re comparing a few lenders in that window, you’re not taking five hits. You’re taking one.

The fear of a small dip is keeping people from taking the first step, and that’s a bigger problem than the dip itself.

Will Your Bank Give You the Best Rate?

I get why people feel this way. But there’s a catch.

A bank loan officer can only offer that bank’s products. Their rate sheet, their programs, their guidelines. If their pricing isn’t sharp on a given day, you have no way of knowing, because you’re not seeing anything else.

Working with an independent broker means access to multiple wholesale lenders at once. On any given day, we may have a lower rate, a better program, or more flexible underwriting than your bank can offer. That’s not a pitch. That’s just how the math works.

We’ve sat with buyers who came to us after their bank pre-approved them, showed them a side-by-side, and saved them real money over the life of the loan.

Should You Wait for Rates to Drop Before Buying?

I hear this one in every market. Waiting feels safe. But the math usually doesn’t back it up.

Why does this matter? Nobody knows when rates will drop or how far, and nobody knows what home prices will do while you wait. A buyer who waits a year for a lower rate can end up with home values that erased the savings, plus another year of rent paid in the meantime.

Note for Ken: the original post cited specific Twin Cities inventory and pricing conditions. That data is over a year old now. Swap in a current market read before this goes live so the claim holds up.

There’s also this: if rates drop significantly later, you can refinance. The home you lock in today is still your home. The one you’re watching now might be out of reach by the time rates move.

I’m not saying buy in the wrong situation. But if the situation is right and a rate you’re hoping will fall is the only thing stopping you, that’s worth talking through. Here’s how rates affect your actual payment so you can run your own numbers.

Is the Interest Rate the Only Number That Matters?

Rate matters. But APR tells the fuller story.

Two lenders can offer the exact same interest rate with very different fees underneath it: origination fees, discount points, closing costs. The real cost of the loan lives in the APR and what you actually pay over time.

Here’s a simple example. Lender A offers 6.75% with $4,000 in origination fees. Lender B offers 6.75% with $1,200 in fees. Same rate. Very different loan.

This is an estimate for illustration only. Actual rates, fees, and eligibility vary based on your credit score, loan type, down payment, and current market conditions.

We show buyers both numbers every time, rate and APR side by side. That’s the only real way to compare offers. A Loan Estimate from every lender you’re considering gives you what you need to do it right.

Questions We Hear a Lot

Do I have to put 20% down to avoid PMI?
No, you can put less down and still buy. If you put less than 20% down on a conventional loan, you’ll carry private mortgage insurance, but it’s not permanent. It cancels automatically at 78% loan-to-value, or you can request removal at 80% with an appraisal, 12 months of on-time payments, and at least 12 months in the home. FHA mortgage insurance works differently, and that’s worth its own conversation based on your situation.

Can I get a mortgage if I’m self-employed?
Yes, though the paperwork looks different. Self-employed buyers typically need two years of tax returns and a few extra steps to verify income. It’s not a dealbreaker, just a different path.

What’s the minimum credit score I need to buy a home in Minnesota?
FHA starts at 580. Conventional starts at 620. Below 680, it’s worth comparing FHA and conventional side by side, since the costs and benefits shift depending on your credit profile.

Does talking to a lender mean I’m committed to buying?
Not at all. A conversation is just a conversation. We look at your situation, tell you what we see, and you decide what makes sense. No pressure, no obligation. That’s the whole point of what we do.

The Myth Was Never Your Fault

If any of these sound familiar, good. That means you’ve got the real answer now.

Most buyers we meet believe at least one of these when they first call. Some believe three or four. It doesn’t mean they weren’t paying attention. It means the mortgage industry has done a poor job making this easy to understand.

That’s what Stephanie and I are here for. No pressure. No jargon. Just the real picture so you can make a confident decision.

When you’re ready, book a call and we’ll walk through your numbers together. Or if you’re ready to move forward, start your application here.

Written by Ken Graczak, NMLS #184394 | CFR Mortgage | Bloomington, MN