As we enter homebuying season, there are many things to consider about the homebuying process. This includes down payments, credit scores, the best type of lender to work with and what type of mortgage to apply for. When you’re interested in purchasing a home – especially as a first-time buyer – everyone seems to have an opinion.

But what is valid information that should be factored into the decision-making process, and what is just noise? It can be hard to tell the difference, but it’s important to learn to do so, especially if certain judgments may prevent you from accomplishing your dream of owning a home.

To assist you in separating the helpful advice from the not-so-helpful, we turned to three of our Sunrise Banks mortgage lenders for their homebuying expertise. Below, they debunk five of the most common myths about buying a home to help guide you on your path toward homeownership.

Homebuying myth #1: You need to have a 20% down payment for a mortgage.

A down payment is a portion of the purchase price of a home that is paid upfront. Putting 20% down has been seen as a traditional standard when it comes to buying a home – but is it necessary?

Our mortgage lenders say that the 20% down payment requirement is a homebuying myth that’s easy to debunk thanks to the variety of down payment assistance programs available in today’s market.

“While having 20% down may keep you from paying private mortgage insurance, it is not a requirement when purchasing a home,” says Jill Rothenberger, a Sunrise Banks mortgage lender.

First-time homebuyers may be able to purchase a home with a conventional mortgage with as little as 3% down, she explains, or a Federal Housing Administration (FDA) loan with as little as 3.5% down. The United States Department of Agriculture (USDA) offers zero-down mortgages or grants to help low-income households buy or repair homes to revitalize rural areas. There are also certain VA loans – mortgages that help veterans, service members, and their surviving spouses buy, build, or refinance homes – that do not require a down payment.

While most down payment assistance programs are intended for first-time homebuyers, repeat buyers may also be eligible for certain programs.

Our mortgage lenders say the bottom line is that you shouldn’t let this myth scare you into believing you won’t qualify for a mortgage. Your lender can walk you through the down payment process and offer options for down payment assistance.

Homebuying myth #2: Mortgage rates are tied to federal funds and federal rate cuts.

You might hear from friends or the media that the federal interest rate – also known as the federal funds rate – is too high to buy a home. The truth is that while a high interest rate isn’t ideal, it also shouldn’t be viewed as the end of the world.

Our experts say that buyers who want to and can afford to purchase a home should not limit themselves by waiting for interest rates to drop. They explain that while mortgage rates are influenced by the federal funds rate, they are not directly tied to it.

Mortgage Loan Officer Roland Henning says, “Mortgage rates are an element of long-term financing, not short-term.”

Long-term financing refers to the duration of the loan, which is how long the borrower has to pay back the loan. Most mortgages are paid over a long period of time, usually spanning 15 to 30 years.

Chuck Meier, Senior Vice President and Director of Mortgage Sales, explains how federal interest rates impact consumers.

“A good portion of the public assumes that when the Fed drops rates, this directly correlates with a drop in mortgage rates,” Meier says. “This is not the case. Fed rate cuts affect short-term rates such as credit cards and car loans. Mortgage rates are made up of many different items, including inflation, the 10-year Treasury Note, oil prices, debt available for sale through bonds, and more.”

The 10-Year Treasury Note is the interest rate the United States government pays to borrow money for a period of 10 years. This figure is widely considered a benchmark for other interest rates and a key indicator of the state of the economy.

While it’s easy to feel overwhelmed – especially as a first-time buyer – Sunrise Banks offers this guide to understand the important terms and topics associated with mortgages and mortgage rates.

Homebuying myth #3: Your credit score needs to be perfect to qualify for a mortgage.

Perhaps you have a history of making late payments to your credit card company and recently discovered that your credit score now hovers around 620. Does that mean you won’t qualify for a home loan and are meant to be a tenant for the rest of your life?

Our mortgage lenders say no! They all agree it is still possible to achieve your dream of homeownership even with a less-than-perfect credit score.

“Mortgage products are available for a range of most credit scores in today’s market,” Henning says – referring to options such as FHA and VA loans, which cater specifically to customers with low credit scores.

“Your credit score does not need to be perfect to obtain a mortgage,” Rothenberger explains. “However, the higher the score the better the interest rate and terms.”

Meier agrees that while a high credit score is beneficial, several mortgage programs are available for prospective buyers with lower scores.

“These scores can be as low as 620, as long as the borrower doesn’t have current outstanding collections or judgments and has not recently filed bankruptcy,” he says.

Our mortgage team suggests inquiring about options for individuals with lower credit scores, and to consider taking advantage of the Sunrise Banks Credit Builder Program to help improve your credit while establishing a strong payment history.

Homebuying myth #4: A 30-year fixed mortgage is the best option.

As the name suggests, a 30-year mortgage spreads out the repayments over the duration of 30 years – and a fixed-rate means that the interest rate stays the same over the life of the loan. The benefit of this type of loan is that the monthly payments are smaller, making it a more affordable option for homeowners. Also, the payment amount of a fixed-rate mortgage is the same month-to-month, as opposed to an adjustable-rate mortgage (ARM), which can fluctuate based on the rise and fall of interest rates.

“A 30-year fixed mortgage is a great option, but it may not work for everyone,” explains Rothenberger. “Some people may have a goal of paying off their mortgage more quickly to rid that payment and pay less interest. However, doing so does provide higher monthly payments, so they need to make sure that the payment can fit within their budget.”

Rothenberger adds that a loan with a shorter duration – such as 15 years – might be a better option for some homeowners. It could save them a significant amount in interest payments, depending on interest rates at the time of purchase.

Meier agrees that, in cases where borrowers can afford the higher monthly payments, it might be better to take a 15-year mortgage in order to secure a lower interest rate and quicker payoff.

He adds that for some people, “It might be better to take an ARM product for five, seven, or 10 years, especially if you plan on owning the home for a shorter time or if interest rates are higher.”

The bottom line is that mortgages are not a one-size-fits-all tool for homeownership. The best mortgage option for each person depends on their specific financial circumstances and goals.

As Henning says, “Mortgage duration depends on each and every individual!”

Homebuying myth #5: All lenders are the same.

As a premier mortgage lender and refinancer in Minnesota and South Dakota, we know that all lenders are not the same. The different types of mortgage lenders – including banks, credit unions, brokers, and private lenders – can vary in several ways, from differing costs and profit thresholds to distinctions in the products and services offered.

“While there will be a lot of similarities in rates and programs, there will also be differences,” Meier explains. “For example, some lenders won’t offer government programs like FHA or VA loans, portfolio products, or ARM products. It is worthwhile to explore your options.”

Rothenberger agrees that there will be differences in what a borrower can expect to pay between different lenders – such as with varying mortgage rates and closing costs.

“Some lenders will service the loans while others will sell off the servicing rights,” she adds. “Some may have stricter guidelines, and some may take longer to process loans.”

Henning narrowed in on the idea that a distinguishing factor between lenders is who services the loan.

“Lenders who service their mortgages tend to find better products for their customers,” he explains.

Our mortgage lenders agree that what may work for one customer may not work for another and that doing your homework on your mortgage lending options is an important step in the home-buying process.

“Customers should pick a lender that best aligns with their wants and needs,” Rothenberger advises.

Let us help make homeownership an option for you

We say it all the time at Sunrise Banks – homeownership should be an option for everyone. We also believe that although every person’s journey to owning a home is different. Everyone wants to save as much as possible on mortgage rates and homebuying costs.

Sunrise Banks offer a variety of assistance options, from finding the lowest mortgage rates to helping with down payments and closing costs. Our mortgage lenders – several of whom are bilingual in Spanish – want to make purchasing and refinancing mortgages accessible and affordable for you. We will work with you to meet your specific needs and goals for achieving homeownership.

Visit sunrisebanks.com/mortgage to meet our team of mortgage lenders and learn more about our mortgage loan options.

Sunrise Banks – Member FDIC and Equal Housing Lender

Nicole Rothstein is a freelance writer based in Cleveland, Ohio.