A survey conducted by the research firm Sparketing released this month asked 400 prospective homebuyers about what they know about mortgage qualifications. More than half described themselves as very or extremely knowledgeable about the process. 

While 56% of respondents described themselves as very or extremely knowledgeable about the homebuying process, the study exposed significant baseline misconceptions regarding how mortgages work and how these myths can impact a homebuyer’s decision to buy a home.

Here are the top three misconceptions those surveyed   had about mortgage loans:

  Rate Determination: A striking 66% falsely believed the Federal Reserve directly sets mortgage rates, and 61% thought the government dictates them.

There are many factors that go into setting a mortgage rate. Ultimately, the lender sets the base market rate and then they customize it based on how much risk a specific borrower presents. It is worth shopping around to get the best interest rate from a reputable lender you can work with and trust. Listen to the professionals who work with lenders every day to find one best suited for your situation.

  Credit Score Demands: Many buyers unnecessarily bench themselves because they overestimate the minimum credit scores needed for approval.

Fifty-seven percent believe you need at least a 660 to qualify for a mortgage. A third think the bar is 700 or higher. In reality, FHA loans go to 580. VA and many conventional programs qualify buyers at 620. There's no universal floor —   lenders set their own thresholds and weigh your full financial picture. 

  Down Payment Myths: Respondents widely believed they need more than a 5% down payment and near-perfect credit to secure a competitive interest rate. Nearly half believe a conventional loan requires more than 5% down. Fifteen percent think 20% is mandatory. Thirty-one percent believe you cannot buy a home without a down payment. 

In today’s mortgage finance world, conventional loans go as low as 3% down for first-time buyers, FHA requires 3.5%, and VA and USDA loans require nothing.

In addition, the survey confirmed that most people believe we are seeing the highest interest rates ever. Sixty-three percent of respondents believe current rates are the highest in history. They are not. Rates peaked at 18.6% in October 1981 and spent most of the 1970s through early 1990s above 10%. Today's rate is hovering around 6.5% and buydowns are being offered by sellers at 4.99% as of today. 

What does this mean to you if you are currently on the fence about purchasing a new home? Make a phone call BEFORE you make any final decisions.  Make sure you have all the facts about mortgage rates, loan programs, builder incentives, and what is actually possible.  You may be   pleasantly surprised by what you don’t know!