A 500k$ house may seem to require a huge amount as a down payment. However, the entire amount depends on the particular mortgage system one chooses for their payment. A down payment is nothing but the one time amount that is a part payment of the entire sum, paid to the lender at the beginning of the transaction.
Types of Loans and their Down Payment Requirements
Hereafter listed are various types of loans available. The down payment you have to pay for your house will depend on the loan you choose. So, let us explore the different types of loans.
I. CONVENTIONAL LOANS
One of the most common types of mortgage loan with the down payments ranging between 1% to 20%
1. Fannie Mae and Freddie Mac
- Federal National Mortgage Association (FNMA), is commonly known as Fannie Mae.
- Federal Home Loan Mortgage Corporation (FHLMC), is better known as Freddie Mac.
- They are both sponsored by the US government.
- They require a high credit score (620+ & 660+) from its investors.
2. Individual lender programs (1% to 3% down)
- Some individual lenders, may give higher respite to the Fannie Mae & Freddie Mac loans.
- The down payment requirement can be as low as 1 %. However, they require higher credit ratings to qualify.
3. Jumbo loans (10% to 20% down)
- They are the most common non-confirming loans.
- Different lenders have different requirements like credit score etc. But most lenders put the credit score requirements in excess of 600.
- They require lesser compliance and are available relatively easily for a variety of properties. This is why they also present higher risk for lenders and thus require higher down payments in the range of 10-20%
II. Government Issued Loans
1. FEDERAL HOUSING ADMINISTRATION LOANS – FHA LOANS
- The FHA loans are federally backed mortgage loans that have a down payment requirement of 3.5 %
- FHA loans are government-backed loans that require fewer financial as well as credit requirements as compared to conventional loans.
- However, the applicant must have a credit score of at least 580 and also the property must comply with set standards by U.S. Department of Housing and Urban Development
2. USDA LOANS
- The USDA loans are backed by the U.S Department of Agriculture’s Rural Development program.
- The USDA loans are a zero percent mortgage loan system for eligible buyers.
- Check the eligibility requirements to qualify for this loan.
3. VA LOANS
- The VA loans are backed by the U.S Department of Veteran Affairs.
- The VA loans do not require any form of down payment for eligible buyers.
- Only U.S. military service personnel, veterans, and their families are eligible for this loan.
- They also come with a host of other benefits such as no broker fees,, no funding fee etc.
DOCUMENTS REQUIRED FOR MORTGAGE
- A Mortgage application form– with a mortgage preapproval as well as filling up a Uniform residential loan application.
2. Income Verification– with all detailed verification on income tax returns, necessary documents to support your income as well as pay stubs of the past.
3. Assets and Debts- with all necessary information on bank statements, investment accounts, and if any gift funds are eligible.
4. Credit Verification– with a background check on the buyer’s credit score needed to qualify for the mortgage.
5. Other records such as
- Any divorce details
- Previous bankruptcy
- Credit files
HOW MUCH DOWN PAYMENT YOU PAY FOR A 500K HOUSE?
% Down Payment
Amount of Down Payment
Fannie Mae and Freddie Mac
Individual lender programs
1% to 3%
$5,000 to $15,000
10% to 20%
$50,000 to $100,000
To sum up, a down payment for a 500k$ house in the U.S may vary under different mortgage plans, depending upon the interest rates, different qualifications needed, and documents required for it. A buyer may consider the above information before adopting any one mortgage policy.