For generations, owning a home has been considered a core part of the American Dream. But as prices rise and housing inventory tightens, that dream is starting to feel more like a long shot for many would-be buyers. According to KB Home’s second annual survey for National Homeownership Month, 89% of Americans feel anxious about affording a home. Yet despite their concerns, a striking 83% still say that owning a home is a major life milestone.
So what’s holding people back? While high mortgage rates and limited supply are certainly major obstacles, there’s another key factor that often gets overlooked — a widespread lack of understanding about the homebuying process. From misconceptions about mortgage rates to confusion over financing terms, many Americans simply don’t know what it actually takes to purchase a home. And that lack of knowledge is keeping far too many on the sidelines.
Mortgage Myths Are Clouding Buyer Judgment
One of the most persistent myths out there is that mortgage rates are at all-time highs. Roughly 69% of U.S. adults believe this, according to KB Home’s survey. But while today’s rates are certainly higher than the historic lows seen during the pandemic, they’re still well below the record highs of the early 1980s, when rates soared as high as 18.6%.
In fact, the historical average for a 30-year fixed-rate mortgage is around 7.7%, meaning today’s rates—hovering around 6.7%—are relatively normal in the broader context of real estate history.
This misunderstanding can have a real impact. Buyers may delay entering the market, holding out for rates that may never return. Experts agree that the 3% rates seen during 2020 and 2021 were an anomaly, not a baseline. Waiting indefinitely for their return could mean missing out on years of home equity and appreciation.
Financial Terms Too Few Understand
The financial jargon that comes with homebuying isn’t just intimidating — it’s often misunderstood. According to the same KB Home survey, nearly half of prospective buyers couldn’t define APR (Annual Percentage Rate) or PMI (Private Mortgage Insurance). These aren’t obscure concepts. APR tells you the true cost of borrowing once you factor in interest and fees. PMI, on the other hand, is an added monthly cost usually required when buyers put down less than 20% — and it doesn’t benefit the borrower at all. It protects the lender.
That’s not all. Only 37% of people surveyed knew that a 20% down payment is not required to buy a home. Even fewer — just 25% — were aware that borrowers with credit scores in the 500s may still qualify for loans, especially through government-backed programs like FHA.
This lack of understanding fuels a dangerous assumption: that homeownership is out of reach for those without perfect finances. The truth is, buyers may have more options than they realize — but only if they know what to look for.
Gen Z and Millennials Lack Trusted Guidance
For younger buyers, confusion is even more pronounced. A quarter of Gen Z and 23% of millennials said they felt anxious about where to even begin the homebuying process. Nearly as many admitted they don’t have a trustworthy source of advice to guide them.
This lack of direction isn’t just a source of stress. It can lead to missed opportunities, bad financial decisions, or giving up altogether. And with government-backed agencies like the CFPB facing ongoing political and legal challenges, unbiased guidance is only getting harder to find — just when it’s needed most.
What Buyers Need to Know Now
Homeownership may be harder to achieve than it was in previous generations, but it’s far from impossible. The biggest game-changer? Information. A better understanding of what buying a home really entails can shift the equation from impossible to achievable. Here’s what to keep in mind:
1. Mortgage rates aren’t the enemy.
Yes, they’re higher than they were a few years ago, but they’re not historically high. Rates are still below average when viewed across the decades, and waiting for ultra-low rates to return could be a long and costly delay.
2. You don’t need a 20% down payment.
Plenty of financing options require far less. FHA loans allow as little as 3.5% down, and other programs — including those for first-time buyers and veterans — offer similar flexibility. Waiting until you’ve saved 20% may not be necessary.
3. Lower credit scores can still get you in the door.
Perfect credit helps, but it’s not required. Some lenders approve borrowers with scores in the 500s, especially with FHA, VA, or USDA loans. Don’t self-disqualify without exploring your options.
4. APR and PMI matter more than you think.
APR helps you understand the true cost of borrowing. PMI is an added monthly expense that may disappear once you’ve built enough equity. Knowing how they work could save you thousands — and help you compare offers more wisely.
5. Seek guidance from reliable, unbiased sources.
Avoid relying solely on social media or influencers for real estate advice. Instead, turn to HUD-approved housing counselors, nonprofit credit agencies, or trusted financial advisors who can walk you through the process without an agenda.
Closing the Gap
The desire to own a home hasn’t faded — but the path to get there has grown more confusing. While economic forces and housing supply are largely out of your hands, knowledge is not. The more you know about what it takes to buy a home, the better equipped you’ll be to find the right one for your budget, your lifestyle, and your long-term goals.
In today’s market, the greatest asset buyers can bring to the table isn’t just a big down payment — it’s clarity. Understanding the process and your own financial picture can take you from stressed to confident, from sidelined to prepared. And when that opportunity comes, you’ll be ready to step through the door.