What Americans Get Wrong About Buying a Home

By Melissa Dittmann Tracey

Many would-be home buyers appear to be ruling themselves out of homeownership before they ever explore their options. They assume they need a substantially higher income, a higher credit score or a 20% down payment.

But many of these assumptions don’t match reality.  

A new survey of about 1,000 middle-income renters by Neighbors Bank reveals just how wide that perception gap can be.

“The credit score finding hit hardest when I saw the answers,” says Ashley Harris, director of homebuyer education at Neighbors Bank. Nearly half of renters surveyed—45%—believed theyneed a credit score of 700 or higher to buy a home. “The gap between that number and a 580 minimum for [Federal Housing Administration] loans is pretty big and pretty eye opening,” Harris adds. “I see that number as people sitting on the sidelines for years because they’re measuring themselves against a metric that isn’t relevant.”

Overall, renters surveyed by Neighbors Bank believed they also needed a 20% down payment and at least $88,000 in household income to purchase a starter home. The income they estimated was about 40% higher than their current earnings.

Wrong Assumptions Could Cost Buyers in the Long Run

More than half—55%—of those surveyed believe they need 20% or more for a down payment. Another 29% believe they need between 10 to 19%, while 16% say they need less than 10%.

The reality? The median down payment for first-time buyers was 10% last year, according to NAR. And depending on the loan program and the buyer’s financial circumstances, borrowers may qualify with substantially less.

The survey points to a potential lack of awareness around popular first-time home buyer programs, like FHA loans, which can require as little as 3.5% down for qualified borrowers. In fact, 94% of respondents said they didn’t know a down payment could be as low as 3% to 3.5%.

That misunderstanding can have a real cost.

A June analysis from Realtor^®.com found that following the 20% down payment rule could take the typical household nearly 38 years to save up, based on today’s median home price, median income and typical savings rate.

Waiting can carry an opportunity cost. A separate Realtor^®.com analysis earlier this year found that buying a first home by age 30 was associated with a 22.5% higher net worth by age 50—about $119,000 more—than waiting to buy at age 40.

Who Is Providing the Real Answers?

The information gap becomes even more interesting when looking at where renters turn for home buying advice.

Among those surveyed by Neighbors Bank, 36% said Google or a general Internet search was their first stop for home-buying questions, followed by friends or family at 15% and AI tools, such as ChatGPT, at 9%. Only 8% said they would turn first to a real estate agent, while 6% would start with a mortgage lender or loan officer.

That presents an opportunity for real estate professionals to become a more visible source of information—not by promising that homeownership is within everyone’s reach, but by helping consumers understand the range of options available and what may realistically work for their circumstances.

Harris believes agents can help close the information gap by educating and pointing buyers to resources on loan programs that they may otherwise miss on a typical online search. Agents can partner with lenders on homebuyer seminars and webinars, create educational content that addresses common misconceptions, and encourage prospective buyers to explore their options before deciding they can’t afford to buy.

“I think it’s time for a new playbook with borrowers that starts with education first,” she says.

For Harris, that means shifting the conversation from “can you afford to buy” to questions such as: What do you know about the home buying process? What payment feels comfortable? And what options might fit your situation?

Agents can help consumers get those questions in front of the right professionals, including lenders who can evaluate their individual financial circumstances—something a Google search or AI tool can’t do.

“Agents and housing experts who are educating on different loan options and highlighting resources for assistance in their local community are going to help this generation of home buyers and start to change some of these misconceptions people have,” Harris says. “A buyer who keeps landing on ‘20% down’ every time they search isn’t going to walk into an open house and ask about USDA loans. An agent who mentions it unprompted can completely change someone’s timeline.”

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