The 5 Biggest Myths About Buying a Home That Are Keeping You from Closing

Five persistent myths about buying your first home are keeping renters stuck. Here is the truth, backed by current data, so you can move forward with confidence.

Most first-time buyers have absorbed years of conventional wisdom about homeownership. Some of it is accurate. Much of it is outdated, oversimplified, or just plain wrong.

Here are the five myths most likely to be keeping you on the sidelines.

Myth 1: You Need 20% Down

We've covered this before, but it bears repeating because it's the most damaging myth in the homebuying universe.

The 20% threshold eliminates private mortgage insurance. It is not a requirement for buying a home. Conventional loans can be obtained with as little as 3% down. FHA loans require 3.5% for borrowers with credit scores above 580. USDA and VA loans can require nothing down.

With down payment assistance programs layered on top, many first-time buyers are purchasing homes with out-of-pocket contributions that are significantly lower than even these minimums.

Myth 2: You Need Perfect Credit

Your credit score matters. A higher score typically means a better interest rate. But "perfect" credit is not required.

FHA loans are available to borrowers with credit scores as low as 580 (with 3.5% down) or 500 (with 10% down). Conventional loans are available to borrowers with scores of 620 and above, though rates are better above 700.

More importantly, credit scores can be improved deliberately and relatively quickly if you know what's driving them. A HUD-approved housing counselor can give you a specific roadmap for improving your score in 3 to 6 months.

Myth 3: Renting Is Throwing Money Away

This one is actually nuanced. Renting is not always wrong. In some markets and life circumstances, renting makes more financial sense than buying. The rent vs. buy calculation depends on how long you plan to stay, the local price-to-rent ratio, and your alternative investment options for the capital you'd put into a down payment.

But "throwing money away" misses the full picture for buyers too. A mortgage payment includes principal, interest, taxes, and insurance. Only the interest and taxes go to someone else. The principal builds equity.

For most buyers planning to stay in a home for 5 or more years, buying builds more wealth than renting over that time horizon.

Myth 4: The Housing Market Is Too Hot (or Too Cold) to Buy Right Now

Market timing is a game most buyers cannot win.

First-time buyers rarely have the luxury of sitting out a hot market and waiting for a correction. Rent keeps rising in the meantime. The down payment target keeps moving up as home prices appreciate. And the emotional cost of indefinite waiting is real.

The right time to buy is when you're financially ready: you have a down payment, you qualify for a mortgage, you have a clear sense of where you want to live, and you can afford the monthly payment without stretching your budget dangerously.

That's not a market call. It's a personal readiness assessment.

Myth 5: The Mortgage Is the Hardest Part

For most first-time buyers, the mortgage is not where the process breaks down. The down payment is.

Once you're in the mortgage process with a completed application, a lender, and a property under contract, the system largely works. It's getting to that point, specifically accumulating the down payment, that stops more buyers than any other single factor.

This is why down payment strategies, community-based savings, DPA programs, employer benefits, and structured contribution platforms matter so much. Remove the down payment barrier and you remove the single biggest obstacle between a renter and a homeowner.

Dreamfund is not a bank. Upon launch, customer funds will be held in custodial accounts at an FDIC-member institution; FDIC insurance applies to deposits at the member bank subject to applicable limits. Dreamfund itself is not FDIC-insured. This article is for informational purposes only and does not constitute financial, mortgage, or legal advice. Consult a HUD-approved housing counselor or licensed mortgage professional for guidance specific to your situation. Loan program requirements and down payment assistance programs vary by lender, state, and eligibility criteria and are subject to change.