How Much Down Payment Needed For A $500,000 House?

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How Much Down Payment Needed For A $500,000 House?

What is the minimum down payment on a $500K house? The amount could range from 0 to $100,000. There's nothing to worry about with the vagueness. You'll know how much you'll need after reading these steps.


What is a Down Payment?

The down payment on a home is the amount of money you contribute from your savings or other sources.

In most cases, it is expressed as a percentage of the purchase price. If you have to put down 3% of the purchase price on a $500K home, you would have to put down $500,000 x 3% = $15,000. For a 20% down payment, you would need $100,000 ($500,000 x 20% = $100,000).

You can calculate those numbers in your head or with our mortgage calculator. Nevertheless, if you need assistance with math, Alexa, Siri, or a similar cloud-based voice service are always there to help.


Other Sources

A down payment is "money you contribute from your savings or other sources." What might those sources be?

An example could be a family member, friend, or partner gift. The lender must know where the money came from and that it is truly a gift, not a disguised loan, so such gifts must be documented appropriately.

Suppose you're eligible for one of Freddie Mac's mortgage loans. In that case, you may also be able to use funds given as wedding gifts, but you'll need to document the sources. Down payment assistance programs (DPAs) can be an even more significant source of down payment funds.


A Down Payment is a Must for Most People

Only two types of mortgages do not require a down payment. We'll cover those in a moment.

Your mortgage lender will require a down payment unless you qualify for one of those programs. Why is that?

In the mortgage industry, experience has shown that those with a financial stake in the house are more likely to pay down their loans. Mortgage borrowers are less likely to walk away from their loans if their financial interest is more significant.

The lender can also avoid a loss if the loan goes wrong and needs to be foreclosed. Mortgage lenders benefit from your large down payment.

Therefore, lenders tend to reward those who make higher down payments. The more you put down, the lower your mortgage rate may be.

According to the National Association of Realtors®, the typical down payment for first-time home buyers in 2022 was 6%. Despite this, mortgages with minimum down payments as low as half are easy to find.


Down Payment Needed for a $500K House 

You will need a different down payment depending on your financial situation and the type of mortgage you choose. Unfortunately, it's a bit more complicated than that.

You can choose only mortgages that are eligible for you. Many don't qualify for mortgages with a 0% down payment because of eligibility hurdles.

We'll now discuss eligibility hurdles for homeownership and the minimum down payment for each type of loan.


What's the Minimum Down Payment?   

The following are the different types of mortgages, along with their down payments:

VA Loan

VA loans are available only to veterans, service members, and closely related groups. However, if you can find one, you'll have a very competitive mortgage with these benefits:

  • Zero down payment
  • Rates are typically very competitive compared to other 30-year mortgages
  • No mortgage insurance. Only a single funding fee on closing
  • Closing costs included in the home loan
  • Most mortgage lenders will require credit scores of 620 or 640 as a minimum

You can put $0 down on a $500K house with a VA loan.


The U.S. Department of Agriculture (USDA) offers USDA loans, which partially guarantees them. A moderate or low-income person who buys in a rural area is eligible for these loans.

However, the USDA classifies 98% of the landmass of the United States as rural. Look up the address of the home you want to buy on the USDA's website to see if it's eligible. Remember those income limits.

USDA loans offer the following benefits:

  • Zero down payment
  • Below-market mortgage rates
  • Mortgage insurance premiums at a reduced rate
  • There is no pre-set credit score, but expect lenders to require at least 620

A USDA loan requires no down payment for a $500K house.

Conforming Loan

Conventional loans include conforming loans. However, they have very different down payment (and other) requirements, so we must treat them separately.

Why are conforming loans called conforming loans? They comply with Fannie Mae and Freddie Mac's rules and regulations.

You can expect:

  • 3% minimum down payment
  • Rates that are competitive rather than very low
  • Mortgage insurance is a requirement. If your home value exceeds your mortgage balance by 20%, you can stop paying this
  • 620 minimum credit score

A conforming loan requires a minimum down payment of $15,000 on a $500K house.

FHA Loan

The Federal Housing Administration (FHA) partially guarantees FHA loans.

You can expect:

  • 3.5% minimum down payment
  • Mortgage rates are lower than some other loans
  • Nevertheless, high mortgage insurance premiums can increase their overall cost.
  • The worst part is that you'll have to pay private mortgage insurance for the entire life of your loan. For you to escape it, you must pay off your mortgage, sell your home, or refinance it
  • 580 minimum credit score. With a 10% down payment, that can be as low as 500

An FHA loan requires a minimum down payment of $17,500 on a $500K house.

Conventional Mortgage

The government does not back conventional loans. A conforming loan is considered a conventional loan but has different requirements for borrowers. It's a subset of them. As a result, we discussed those separately earlier.

Conventional mortgages have the following characteristics:

  • 20% minimum down payment
  • Mortgage rates are lower than many others
  • Mortgage insurance is not required
  • 620+ minimum credit score

The minimum down payment for a $500K house should be $100,000. You can sometimes get a conventional loan for half that amount with piggyback loans.


The Bottom Line

A typical down payment is 20%, depending on several factors. Consult a mortgage broker. A borrower's creditworthiness, the type of property, and the lending bank's requirements determine the amount of down payment they must make.

Consider getting a loan quote online and speaking with a local lender. VA loans and first-time home buyer loans allow lower down payments. PMI (Private Mortgage Insurance) may be required on many loans with low down payments.

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