Down Payment — Financial Glossary

Definition: The upfront cash you pay when purchasing a home, expressed as a percentage of the purchase price.

What is a down payment?

A down payment is the portion of a home's purchase price that you pay upfront, out of pocket. The rest is covered by your mortgage loan.

How much do you need?

Conventional loans typically require 5–20% down. FHA loans allow as little as 3.5%, and VA loans may require $0 down for eligible veterans.

If your down payment is less than 20%, you will likely need to pay Private Mortgage Insurance (PMI), which adds to your monthly payment.

Why a larger down payment helps

Lower monthly payments
Less interest paid over the life of the loan
No PMI requirement (at 20%+)
Better loan terms and interest rates