Veterans United Survey: Credit, Rate & Down Payment Myths May Be Holding Buyers Back

Misconceptions about credit scores, down payments and mortgage rates are widespread among prospective buyers, adding confusion, cost and unnecessary barriers to the homebuying process.

A new Veterans United Home Loans survey of buyers planning to purchase within the next three years found that 57% believe you need at least a 660 credit score to qualify for a mortgage, while 46% think a conventional loan requires more than 5% down.

At the same time, 66% of would-be buyers said you need near-perfect credit to secure the best interest rates.

In reality, many buyers can qualify with lower credit scores, smaller down payments and far less-than-perfect credit.

“When buyers think they need perfect credit or a huge down payment, they can take themselves out of the game before they even get started,” said Chris Birk, vice president of Mortgage Insight at Veterans United. “The truth is there are flexible loan options designed to help people buy sooner, often with less upfront cash and more forgiving credit requirements than they expect.”

Setting the Bar Too High

The survey points to a consistent pattern: Prospective buyers often overestimate what it takes to land a home loan, even in today’s challenging affordability environment.

More than a third of buyers (34%) believe you need a score of 700 or higher to qualify for a mortgage. In practice, many buyers can secure financing with a credit score around 620, and some loan programs allow for even lower scores.

Down payment expectations show a similar gap.

Nearly half of would-be buyers (46%) think you need to put down more than 5% for a conventional loan, while 15% believe a 20% down payment is required.

In reality, 5% is a common minimum for conventional financing, and some first-time buyers may qualify for a conventional loan with as little as 3% down. FHA loans require just 3.5% down, and VA and USDA loans don’t require any down payment.

Overall awareness of low- and no-down payment mortgage options remains limited. Nearly one-third (31%) of prospective buyers said you can’t buy a home without a down payment.

Who Really Sets Mortgage Rates

Misconceptions extend beyond qualification requirements to how mortgage rates actually work.

Government-backed loans often offer some of the lowest average rates in the market, even for buyers without elite credit. VA loans, for example, are commonly available to borrowers with around a 620 score, and FHA loans can be made with scores as low as 580.

There’s also widespread confusion about who controls mortgage rates. About 61% of respondents say the government dictates what rates lenders can offer, and 66% believe the Federal Reserve directly sets mortgage rates.

In reality, lenders set their own rates, while the Fed’s policies influence broader economic conditions that can indirectly impact mortgage pricing.

Survey responses also suggest many prospective buyers lack context for how today’s mortgage rates compare historically. About 63% of respondents said they believe rates are at their highest point ever, even though averages were around 6% during the survey period.

Historically, borrowing costs have been significantly higher, with rates exceeding 10% for much of the late 1970s through early 1990s and peaking at 18.6% in October 1981, according to Freddie Mac.

This disconnect underscores how current perceptions may not align with longer-term market realities.

“Mortgage rates aren’t one-size-fits-all – they can vary significantly based on the lender, the loan program and the borrower’s overall profile,” Birk said. “That’s why it pays to shop around and compare rates, costs and fees among multiple lenders. And while the Federal Reserve plays an important role in the broader economy, markets are typically pricing in expected Fed moves well before any official decision is announced.”

Homeownership is Still King

Despite these widespread knowledge gaps, many buyers believe they have a strong handle on the process.

More than half (56%) say they are very or extremely knowledgeable about homebuying. That confidence stands in contrast to the number of buyers who misunderstand foundational concepts like credit requirements, down payments and how rates are determined.

At the same time, demand for homeownership remains strong.

Nearly 9-in-10 respondents (87%) said owning a home is one of the most important goals in life, underscoring how critical accurate information can be as buyers prepare to enter the market.

“Getting good information early can make a meaningful difference,” Birk said. “When buyers understand what’s actually possible, they’re in a much better position to make confident, informed decisions about when and how to move forward.”

Methodology

On behalf of Veterans United, research and data firm Sparketing conducted an online survey from March 13 to March 24, 2026 of 400 Veterans and civilians who intend to buy a home in the next three years.