Down Payment

Definition

A down payment is the initial upfront portion of the total purchase price paid in cash when buying an expensive asset, most commonly a home. For conventional mortgages, the standard down payment is 20% of the home's purchase price, though many programs allow as little as 3-5%. FHA loans require a minimum of 3.5%, and VA loans may require no down payment at all. A larger down payment reduces the loan amount, resulting in lower monthly payments and less total interest paid. Putting down less than 20% on a conventional mortgage typically requires private mortgage insurance (PMI), adding to monthly costs. The down payment also affects the loan-to-value (LTV) ratio, which influences interest rates.