How Much Down Payment for a 500k House?

A down payment represents the initial portion of a home’s purchase price that a buyer pays upfront at closing. This payment reduces the total amount borrowed from a lender through a mortgage. The amount of this upfront payment directly influences the overall loan amount, monthly payments, and total interest paid over the loan’s duration.

Calculating Down Payment Amounts

A 3% down payment on a $500,000 home is $15,000. A 5% down payment is $25,000, 10% is $50,000, and 20% is $100,000.

A larger down payment generally leads to a lower loan amount, which can result in reduced monthly mortgage payments and less interest paid over the life of the loan. Conversely, a smaller down payment increases the amount borrowed, potentially leading to higher monthly payments and more interest accrual. When a down payment is less than 20% of the home’s purchase price for a conventional loan, lenders typically require private mortgage insurance (PMI). PMI is an additional monthly cost, usually ranging from 0.46% to 1.5% of the loan amount annually, which protects the lender in case of borrower default. This insurance can often be removed once the homeowner reaches 20% equity in the property.

Minimum Down Payments by Loan Type

Conventional Loans

Conventional loans, which are not government-insured, typically require a minimum down payment of 3% for first-time homebuyers and 5% for repeat buyers. For a $500,000 home, a 3% down payment would be $15,000, and a 5% down payment would be $25,000. A 20% down payment is generally recommended to avoid private mortgage insurance (PMI), which is typically required for conventional loans with less than 20% down.

FHA Loans

Federal Housing Administration (FHA) loans are government-backed and offer more flexible requirements. For a $500,000 house, the minimum FHA down payment is 3.5% if the borrower has a credit score of 580 or higher, amounting to $17,500. If the credit score is between 500 and 579, a 10% down payment is required, which would be $50,000 for a $500,000 home. FHA loans also involve mortgage insurance premiums (MIPs), consisting of both an upfront premium and annual premiums, regardless of the down payment amount.

VA Loans

VA loans are a benefit for eligible military service members, veterans, and surviving spouses, as they typically do not require a down payment. This means an eligible borrower could purchase a $500,000 home with $0 down. The U.S. Department of Veterans Affairs guarantees a portion of the loan, which reduces the risk for private lenders. While a down payment is not usually required, making one can reduce the VA funding fee, a one-time cost associated with these loans.

USDA Loans

USDA loans, backed by the U.S. Department of Agriculture, are designed for low-to-moderate income borrowers purchasing homes in eligible rural or suburban areas. These loans typically require no down payment, enabling 100% financing for a $500,000 house if the property and borrower meet all eligibility criteria. Borrowers must meet specific income limits, and the property must be in a qualifying USDA area. While no down payment is required, borrowers are still responsible for closing costs, which can sometimes be rolled into the loan or covered by gift funds.

Approaches to Funding Your Down Payment

A disciplined savings plan is a fundamental approach to accumulating down payment funds. This involves setting specific savings goals, creating a budget to track income and expenses, and automating regular transfers to a dedicated savings account.

Down payment assistance (DPA) programs offer support by providing funds that can reduce the out-of-pocket down payment. These programs are typically offered at state, county, and city levels, and sometimes through banks or lenders. DPA can come in various forms, such as grants that do not need to be repaid, second mortgages with low or deferred interest, or forgivable loans that are forgiven after a set period if certain conditions are met. Eligibility for these programs often depends on factors like income limits, credit score, and whether the buyer is a first-time homebuyer.

Gift funds from family members or close friends are another common way to fund a down payment. For tax purposes, as of 2025, an individual can gift up to $19,000 per recipient annually without triggering gift tax reporting requirements for the donor. Married couples can collectively gift up to $38,000 per recipient without immediate tax implications. Amounts exceeding this annual exclusion require the donor to file a gift tax return (Form 709), though the donor typically will not owe taxes unless their lifetime gift tax exemption is exceeded. Lenders require specific documentation for gift funds, including a gift letter from the donor stating the amount, their relationship to the borrower, and confirming no repayment is expected.