Real Estate Myths That Trip Up First-Time Buyers

The 20% figure persists because it's the threshold at which lenders typically waive private mortgage insurance (PMI) — a monthly premium that protects the lender if you default. But PMI is not a permanent cost: it can be canceled once you reach sufficient equity. Conventional loans, FHA loans, VA loans, and USDA loans each have different down payment minimums. First-time buyer programs administered through state housing finance agencies may offer additional assistance. The real question isn't whether you can put down 20% — it's what down payment amount fits your financial picture and which loan type you qualify for. A licensed mortgage professional can walk through the trade-offs specific to your situation.

Pre-qualification typically involves self-reported income, assets, and debt — no documents are verified. Pre-approval means a lender has reviewed your pay stubs, tax returns, bank statements, and credit report, and has conditionally committed to lending up to a specific amount. In competitive markets, sellers routinely reject offers that come with only a pre-qualification letter. Securing a full pre-approval before you start touring homes sets a realistic budget and signals seriousness to sellers. See our step-by-step homebuying guide for more on how the mortgage process unfolds.

In a sellers' market with low inventory, homes frequently sell above asking price, sometimes with multiple competing offers. In a cooler market, buyers may successfully negotiate below asking. Factors like days on market, comparable recent sales (called 'comps'), and property condition all influence what a reasonable offer looks like. Understanding how to read a listing accurately helps you assess whether a price reflects real value or wishful thinking.

Closing costs — which cover lender fees, title insurance, escrow services, prepaid property taxes, and more — typically range from 2% to 5% of the loan amount. On a $300,000 home, that's $6,000 to $15,000 due at closing, separate from your down payment. Beyond that, budget for moving costs, immediate repairs or updates, and an emergency fund for unexpected home issues. Our breakdown of closing costs explains each fee category and which party typically pays it.

Construction quality varies by builder, subcontractor, and local code enforcement. New homes have been found to have issues including improper grading, inadequate insulation, HVAC misconfiguration, and structural omissions. Many buyers of new construction also benefit from a third-party inspection before the builder's warranty expires. Don't assume a certificate of occupancy equals a defect-free home.

Homeownership builds equity over time, but it also comes with transaction costs, maintenance obligations, property taxes, and insurance. When buyers purchase and then sell within a short period, those costs can exceed any equity gained. A general rule of thumb among housing analysts is that buying makes more financial sense when you expect to stay in a home for at least five years — though this varies by market. If you're weighing the question, understanding renter rights and responsibilities is a useful starting point for comparing your options clearly.