Common Mortgage Myths Debunked | Ken Graczak

March 12, 2025
Ken Graczak
Mortgage News

Common Mortgage Myths Debunked — What Ken Hears From Real Buyers in Minnesota

I had a buyer call me last year who had been waiting to buy for almost three years. She had money saved. She had a steady job. She had 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.

That conversation happens more than you’d think.

Some of the most common mortgage myths debunked in this post are things I’ve heard at my desk in Bloomington dozens of times. A wrong belief doesn’t mean a buyer is uninformed. It means they picked up something along the way that nobody corrected. My job is to correct it — clearly and without making you feel bad for believing it in the first place.

Here’s what we hear most often, and 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 is available at 620 and above.
A mortgage hard 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 how far. The math on waiting usually doesn’t work the way buyers expect.

Ready to see where you actually stand? We’re happy to take a look together.

The Most Common Mortgage Myths Debunked — Starting With the One That Costs Buyers the Most Time

Myth: You 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% down. VA loans — for eligible veterans — require zero down payment.

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

I hear this myth constantly. It keeps good buyers on the sidelines for years longer than they need to be. If you’ve been waiting because you’re not at 20%, it’s worth having a real conversation before you wait another year.

Want to see what your down payment options actually look like? Check out the loan options page here.

Myth — You Need Perfect Credit to Get a Mortgage

Myth: If your credit isn’t perfect, you don’t qualify.

That’s not how it works.

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

Most buyers I sit down with are closer than they thought. Sometimes a credit score that feels like a problem is actually in a range that works fine with the right loan type. Sometimes there are two or three things that could move the score 20 or 30 points with a little time and a plan.

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

If you want to know where your credit sits and what it means for your options, start here.

Myth — Getting Pre-Approved Will Hurt Your Credit Score

Myth: A pre-approval will wreck my credit score.

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

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

But 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 shopping multiple lenders in that window, you’re not taking five separate hits. You’re taking one.

The fear of a credit dip is keeping buyers from taking the first step. That’s a bigger problem than the dip itself.

For a full breakdown of what a pre-approval involves and how long it lasts, read this post.

Myth — Your Bank Will Give You the Best Rate

Myth: My bank already knows me, so they’ll take care of me.

I understand why buyers feel this way. But there’s a catch.

A bank loan officer can only offer you that bank’s products. That’s it. Their rate sheet, their programs, their underwriting guidelines. If their pricing isn’t competitive on a given day, you don’t know it — because you’re not seeing anything else.

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

I’ve sat with buyers who came to me after their bank pre-approved them, showed them a side-by-side, and saved them real money over the life of the loan. The difference between one option and many options matters.

Want to understand how broker access works compared to going straight to a bank? This post explains it in detail.

Myth — You Should Wait for Rates to Drop Before Buying

Myth: I’ll wait for rates to come down, then buy.

I hear this one in every market condition. And I get it — waiting feels safe. But the math usually doesn’t support it.

Here’s why. Nobody knows when rates will drop. Nobody knows how far they’ll drop. And nobody knows what home prices will do while you’re waiting. In the Twin Cities right now, inventory is limited and prices have held steady. A buyer who waits a year for a lower rate may find that home values have moved enough to erase the savings — and they’ve paid another year of rent in the meantime.

There’s also this: if rates do drop significantly, you can refinance. The home you lock in today at today’s price is still your home. The one you were watching 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 the only thing stopping you is a rate you’re hoping will fall — that’s worth talking through. Here’s how rates affect your actual payment so you can run the numbers yourself.

Myth — The Interest Rate Is the Only Number That Matters

Myth: I just need the lowest rate.

Rate matters. But APR tells a more complete story.

Two lenders can offer you the exact same interest rate with very different fee structures underneath it — origination fees, discount points, closing costs. The true 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 way to compare options correctly. A Loan Estimate from every lender you’re considering gives you what you need to make a real comparison.

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 have private mortgage insurance. But PMI isn’t 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. With FHA, the mortgage insurance works differently. That’s worth a separate conversation based on your situation.

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

What’s the minimum credit score I need to buy a home in Minnesota? FHA loans start at 580. Conventional loans are available at 620 and above. Below 680, it’s worth comparing FHA and conventional side by side — the costs and benefits shift depending on your credit profile. This post on credit score and homebuying goes deeper on that.

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. There’s no pressure and 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 now have the real answer.

Most buyers I 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 of 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 to take the first step, book a call and we’ll walk through your numbers together. Or if you’re ready to move, apply online here.

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