Why Loan Myths Are So Costly
Misinformation about mortgages costs borrowers real money. When people act on incorrect beliefs — not shopping for better rates, making larger down payments than necessary, or avoiding perfectly good loan programs due to misconceptions — the financial consequences accumulate into thousands or tens of thousands of dollars in unnecessary costs. Coventry Enterprises Group exists to correct these myths with facts.
Myth #1: You Need 20% Down to Buy a Home
The truth: The 20% down payment threshold exists for one specific reason: to avoid Private Mortgage Insurance (PMI) on conventional loans. It is not a loan requirement. You can purchase a home with as little as 3% down (conventional HomeReady/Home Possible), 3.5% (FHA), or 0% (VA and USDA loans).
The real question is not "do I have 20%?" but "what is the most efficient use of my available capital?" For some borrowers, a larger down payment makes sense. For others — particularly those with competing high-interest debt or investment opportunities — a lower down payment with PMI is the better financial decision.
Myth #2: Shopping Multiple Lenders Destroys Your Credit Score
The truth: This is perhaps the most expensive myth in mortgage lending. FICO scoring models treat multiple mortgage inquiries within a 14-45 day window (depending on the model) as a single inquiry. Shopping three lenders in two weeks costs you the same credit score impact as a single inquiry — essentially nothing.
Meanwhile, the rate and fee differences between lenders can easily amount to $5,000-$15,000 over the life of a loan. Not shopping multiple lenders because you fear credit score impact is one of the most financially costly decisions a mortgage borrower can make.
Myth #3: The Best Rate Is Always the Best Loan
The truth: The interest rate is one component of a loan's total cost, but not the only one. A loan with a lower rate but higher origination fees, higher closing costs, or a prepayment penalty may cost more overall than a loan with a slightly higher rate and lower costs. Always compare the Annual Percentage Rate (APR), which incorporates fees, and the Loan Estimate, which itemizes all costs.
Myth #4: FHA Loans Are for Poor Credit Only
The truth: FHA loans serve borrowers at a wide range of credit scores. For some borrowers with very strong credit, FHA may actually offer a competitive option for low down payment scenarios. However, the mortgage insurance premium (which is higher and required for the life of most FHA loans) means that conventional programs are generally superior for borrowers with 680+ credit scores who can make slightly larger down payments.
Myth #5: Your Lender Is Looking Out for Your Best Interests
The truth: Mortgage loan officers are compensated on loan production — the more loans they close, and the higher the margin on those loans, the more they earn. This creates incentives that may not align perfectly with your financial interests. This does not mean every loan officer is acting against you, but it does mean that you should educate yourself, compare options, and not assume the recommended loan product is the only or best option for your situation. This is precisely why organizations like Coventry Enterprises Group exist.
Myth #6: Refinancing Is Always Worth It When Rates Drop
The truth: Refinancing has costs — typically 2-5% of the loan amount. Whether refinancing makes financial sense depends on the break-even analysis: how long it takes for the monthly savings to recoup the closing costs. If you plan to sell before the break-even, refinancing destroys value. See our complete refinancing strategies guide for the full analysis.