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But fear is often based on ignorance, and there are many misconceptions when it comes to mortgages. To help you sort it out, we dispel seven of the top mortgage myths.

Myth 1: A preapproval is like money in the bank

Many people think once they've been preapproved by a lender for a mortgage, they're home free. But that isn't necessarily the case.

"It's still not the last word," says Helen Hancey, a mortgage specialist with The Mortgage Centre in Orangeville, Ont. More than anything else, a preapproval is a rate guarantee. There's plenty of financial paperwork still to be done as lenders examine more closely your sources of income and letters of employment. And if they find something they don't like, or that you weren't upfront about, you could lose the deal.

For example, if you reported that you earned $60,000 the past year and a portion of that included overtime or a bonus -- both of which can vary year to year -- the lender will find out and may change the terms of the deal since they calculate what you can afford based on your base salary only. So, always be upfront with your lender. In the case of high-ratio mortgages, the insurer -- whether it's the Canada Mortgage and Housing Corporation (CMHC) or GE Mortgage Insurance Canada -- has final approval. Chances are, if the lender has given you the green light, your income is not in question and your credit is good, you have nothing to worry about.

But, "there's always some risk," says Hancey. That's why she says it's prudent to add a mortgage contingency to your real estate offer, so if your mortgage does happen to fall through, "you aren't stuck with a house".

Myth 2: Self-employed people can't get mortgages

The days of the self-employed being treated like second-class citizens by most lending institutions are over.

"There are a lot of products now for self-employed individuals," says Hancey. Lenders are now willing to look at self-employed people on a case-by-case basis instead of tarring them all as potential liabilities.

In most cases, "they are looking for good credit, a three-year history of being self-employed and no income taxes outstanding," she says. For more information, see Bankrate's article about mortgage tips for the self-employed.

Myth 3: You need a down payment of 25 percent

With housing prices on the rise and high rents eating up a potential buyer's savings, lenders no longer see 25 as the magic number. In fact, with a high-ratio mortgage, you can put down as little as 5 percent.

The key is securing an insured mortgage through the CMHC or GE. To do so, you incur added costs, including an underwriting fee and a one-time insurance premium that can either be paid as part of the loan or in a lump sum. But as long as you have at least a 5-percent down payment, you should have no trouble.

For more information, see Bankrate's article about high-ratio mortgages.

Myth 4: You can't borrow your down payment

There are restrictions, but lenders are far more flexible than they used to be. Large monetary gifts are perfectly acceptable as long as they're from a close relative. What your lender wants to make sure of is that what you're getting is actually a gift and that you aren't incurring more personal debt that needs to be repaid.

Even borrowing a 5-percent down payment from a line of credit is OK, although you will pay a slightly higher insurance premium. "The B lenders are even more flexible" than the major banks, says Hancey, but you'll pay for that flexibility in the form of higher fees and interest rates.

Myth 5: A poor credit history scars you for life

Lenders recognize that people and circumstances change. A student who maxed out his first credit card in university and defaulted on payments will not pay for his mistakes forever. "A lot of lenders want at least a year and a half of good credit," says Hancey. For those who discover that bad credit stands in the way of building good credit, apply for an RRSP loan, which is easier to get than, say, a car loan.

Not only will you establish a history of installment payments, but you can later borrow from that RRSP to buy your house.

Myth 6: If you've ever been bankrupt, securing a mortgage is impossible

Bankruptcy does not put an end to an individual's dream of homeownership. "If they've got 25 percent down, there's financing available as soon as they're discharged," says Hancey.

High-ratio mortgages are also an option: the CMHC will consider those who have been discharged for two to three years and have since established a good credit rating.

Myth 7: Private lenders are akin to loan sharks

"They're not loan sharks, they're just offering something the banks can't," says Chris Wyse, an independent mortgage specialist with First Choice Financial in Vancouver.

While he doesn't recommend private financing for those who are habitually bad at managing money, it's a viable alternative for those establishing or re-establishing a good credit rating. "The interest rates are higher, but there's a value in those higher rates," he says, adding that private financers are usually flexible; they know their role is short-term and often happily move aside once a borrower qualifies for lower interest financing from a major lender.

When you're looking for a mortgage, don't assume anything -- ask questions and ensure you know the meaning of the terms being bandied around. Knowledge is power, or in the very least, it will make the process less intimidating.

Michelle Warren is a writer in Toronto, Ontario.

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Top 7 Mortgage Myths

By Michelle Warren - Bankrate.com

Asking for a mortgage can be daunting. OK, at times it's downright scary: "Hello, large faceless financial institution, please help my dream of owning a home come true. And please don't find out about that time I missed my credit card payment or that the money for my down payment was a gift, otherwise I'd never be able to afford to buy a house."