⏱️ 15 min read
Last Updated: March 24, 2026
Next Update: March 1, 2027
A surprising number of families discover that building a new home is more within reach than they ever imagined. The bigger obstacle is rarely the finances themselves. It’s the secondhand information picked up along the way that shapes expectations before a single real conversation takes place.
Getting the facts straight on mortgage myths early can open doors that many families assumed were closed. Here are eight of the most persistent misconceptions new home buyers encounter, and the truth behind each one.
Table of Contents
Myth #1: You Need a 20% Down Payment
This is probably one of the most widespread mortgage myths, and it stops a lot of families from even starting the conversation.
The 20% figure comes from conventional wisdom about avoiding private mortgage insurance (PMI). Now, it’s true that putting 20% down does eliminate PMI, which lowers your monthly payment.
But it is not a requirement to buy a home.
FHA loans, backed by the Federal Housing Administration, allow qualified buyers to put down as little as 3.5%. Conventional loan programs from Fannie Mae and Freddie Mac offer options starting at 3% down. Down payment assistance programs are also available through state and local agencies for buyers who qualify.
For move-up buyers who already have equity in their current home, the situation looks even more favorable. Proceeds from selling your existing home can contribute substantially to a down payment, sometimes eliminating the need for assistance programs entirely.
The bottom line is that the down payment required depends on your loan type, credit profile, and financial situation. Twenty percent is one option, not the threshold.
While the down payment is usually the first number families fixate on, it’s not the only one that trips people up before the conversation even starts.
Myth #2: Building a New Home Requires a Construction Loan
This myth keeps many families from exploring new construction as an option. Construction loans are complicated, and they apply to a lot of builders in this region.
Just not Jagoe.
A construction loan is a short-term financing product used when a buyer hires an independent contractor to build on land they own. It typically requires separate approval, higher interest rates, and, in many cases, monthly interest payments during the build. Most families hear “new construction” and assume that the complicated process automatically applies to them.
But Jagoe Homes handles construction financing internally, which means buyers use a traditional mortgage rather than a construction loan. There’s no separate approval process, no draw schedule to manage, and no payments due while the home is being built. Buyers close on a traditional mortgage when the home is complete and ready for move-in.
Most builders in the region do require construction financing. Jagoe’s approach is a meaningful difference, and one worth understanding before ruling out new construction based on financing concerns.
The financing process is one piece of the picture. But for a lot of families, the credit score concern shows up first.
Myth #3: You Need a Perfect Credit Score
This is one of the mortgage myths that discourages a lot of families who’ve had a bump in the road, such as a period of high debt, a late payment, or a job change that temporarily affected their finances.
The reality is that different loan programs carry different credit score requirements. FHA loans are accessible to buyers with scores as low as 580 for the standard 3.5% down option, and even buyers with scores between 500 and 579 may qualify with a 10% down payment.
As noted by the Consumer Financial Protection Bureau, credit is one piece of the picture lenders evaluate. Income, employment history, debt-to-income ratio, and the size of the down payment all factor into the final decision. A lower credit score doesn’t automatically mean a denial; it may mean a different loan product or a slightly higher interest rate.
For families who aren’t quite where they want to be on credit, lenders can also help map out a short-term plan to improve their score before applying. Starting that conversation early (even if it feels premature) is almost always worthwhile.
One thing that stops families from even starting that conversation is the worry that checking on financing will hurt their credit standing. It won’t. Here’s why.
Myth #4: Getting Pre-Approved Will Hurt Your Credit Score
This one causes real hesitation. Families are sometimes reluctant to start the pre-approval process because they’re worried a lender inquiry will lower their credit score and complicate future applications.
The concern has a kernel of truth because a hard credit inquiry does register on your report. But the impact is much smaller than most people expect.
According to the Consumer Financial Protection Bureau, multiple mortgage credit checks within a 45-day window are recorded as a single inquiry. MyFICO confirms that for most people, a single mortgage inquiry takes fewer than five points off their score, and that impact fades within a year.
In practical terms, rate shopping with two or three lenders in a focused window costs you almost nothing on your credit score, and the comparison is often worth doing. Getting pre-approved gives families a realistic sense of their budget and signals to builders and agents that they’re serious buyers.
Once families get past the credit question, the next thing that tends to stall the process is the current home. Specifically, what to do with it.
Myth #5: You Have to Sell Your Current Home Before You Can Build
This is a real concern for move-up buyers, and the logistics can feel daunting. But the assumption that you must sell first isn’t accurate, and waiting could mean missing the right community or floor plan.
The overlap between selling a current home and closing on a new one is a common part of the move-up buyer experience. Practical options exist for navigating this overlap, including bridge financing, contingency offers, and thoughtful sequencing of the sale and purchase process. The right approach depends on your specific financial picture, which is exactly why talking to a mortgage professional early, rather than waiting until everything feels “ready,” makes such a difference.
For families building with Jagoe, there’s a meaningful timing advantage built into the process. Jagoe’s typical build time runs three to five months, which is significantly faster than the regional average. That shorter window gives families a much more manageable target for coordinating their current home sale.
Jagoe also offers the SureTrade program, which takes the biggest unknown off the table entirely. Jagoe arranges a third-party appraisal, a full home inspection, and a termite inspection of your current home at no cost to you. If your home doesn’t sell during construction, Jagoe will purchase it outright. You’re never obligated to accept the offer, but knowing it’s there removes the pressure of carrying two homes at once with no clear exit.
Visit our Home Loan Learning Center for more on how the process comes together.
Knowing the logistics can work in your favor is one thing. Understanding how to read the actual numbers on your mortgage is another.
Myth #6: The Interest Rate is the Only Number That Matters
Interest rate is important. It affects your monthly payment and the total cost of borrowing over time. But focusing exclusively on the rate can cause buyers to miss other factors that meaningfully affect their overall financial picture.
Annual percentage rate (APR) includes the interest rate along with lender fees and closing costs, giving a more complete picture of what a loan actually costs. Two loans with the same interest rate can have notably different APRs depending on the origination fees and discount points involved.
Loan term also matters. A 15-year mortgage carries a lower interest rate than a 30-year loan, but comes with higher monthly payments. Depending on your cash flow and long-term goals, one may serve your family better than the other.
Other factors worth evaluating alongside the rate:
- the size of your down payment
- private mortgage insurance requirements
- prepayment penalties
- and whether the rate is fixed or adjustable
A lender who helps you look at the full picture (not just the headline number) is worth their weight in the transaction.
All of that research is worth doing. The question is where to do it, and when to bring in someone who knows the specifics of new construction financing.
Myth #7: You Can Figure Out the Mortgage Process on Your Own
The internet has made it easier than ever to research home financing, and that’s genuinely useful. Starting with your own research is a smart move. But self-research has real limits, especially when it comes to new construction.
General mortgage content online is written for the broadest possible audience. It rarely addresses the nuances of builder community financing, regional lending programs, or the specific documentation requirements a new construction lender will look for. Outdated information is also common, as program requirements, loan limits, and assistance programs change regularly.
That’s where working with a knowledgeable lending partner makes a concrete difference. Jagoe’s financing team has worked with hundreds of families. They understand contracts, timelines, and communities, which means less back-and-forth for buyers and a smoother process overall. For busy families already managing school schedules, work demands, and everything else, that kind of specialized support is worth a lot.
The last myth is the one that probably keeps the most families from getting to this conversation at all.
Myth #8: Financing a New Construction Home is More Complicated Than Buying a Used Home
This myth pushes families toward the used home market before they’ve given new construction a fair look. And it’s understandable. “New construction financing” sounds more involved. But the experience of most buyers who build within a Jagoe community tells a different story.
Used home purchases come with their own complications: inspection negotiations, repair requests, competing offers, and questions about a property’s condition and history. New construction within an established community eliminates most of those variables. The home is built to current code, everything is new, and there’s no negotiating over what a previous owner left behind.
When you add Jagoe’s in-house financing, the process becomes even more streamlined. You’re working with a team that does this regularly, with a builder they know.
The families who feel most confident going into the home financing conversation are the ones who found out the facts early, rather than operating on assumptions. Most of the time, the reality is far more manageable than the myth.
Walking into that first lender conversation with the facts already sorted means moving forward with the least friction and the most clarity about what comes next.
Frequently Asked Questions About Mortgages for New Home Buyers
Even after reading through the mortgage myths, a few questions tend to come up in almost every financing conversation. Here are straightforward answers to the ones we hear most often.
Is PMI always a bad thing?
What’s the difference between pre-qualification and pre-approval?
Can gifted funds be used toward a down payment?
Does it make sense to wait for interest rates to drop before building?
What happens to my mortgage rate if rates change during construction?
Can I still qualify if I have student loan or car debt?
An energy efficient Jagoe Home begins with intelligent design, quality construction, and generations of working to exceed our own standards of excellence. Jagoe Homes committed to all the practices it takes to build truly energy efficient homes, and we work closely with RESNET (Residential Energy Services Network) to achieve great ratings from that organization.
HERS® (Home Energy Rating System) INDEX
*Based on the US Department of Energy definition of HERS index of 130. This information presented for educational purposes only. Savings are average estimates based on Jagoe Homes’ top five selling plans. Savings will vary based on house type, orientation, house size, utility rates, climate and operations of the home.
The lower a home scores on RESNET’S HERS (Home Energy Rating) Index, the more energy efficient it is. A standard new home that’s built to meet the 2006 IECC will score a HERS Index of 100. New Jagoe homes score an average of 62, making them at least 38% more efficient than a standard new home and at least 68% more efficient than a used home.
Financing Your New Home Build, Simplified
Need answers fast? Our Jagoe Acrisure Financing Team is located in Owensboro, Kentucky, and has the resources and staff to get you into your new Jagoe Home. We work closely with you, combining expertise and advanced tools to make navigating your home loan process simple and seamless. Whether you’re ready to build a house on your land now or just exploring financing options, we are committed to helping you achieve your goals quickly and effectively. Our team is committed to getting you started with a stress-free experience from start to finish.
For Financing please call an Acrisure Mortgage Team Member
Bambi L. Winstead
Branch Manager
Mortgage Loan Originator
NMLS# 369809
Call or Text
502-389-0088
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Kevin Young
Mortgage Loan Originator
NMLS# 1577520
Call or Text
904-673-3173
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Kyle Chubboy
Mortgage Loan Originator
NMLS# 1763549
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352-978-1811
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