Definition
A down payment is the initial upfront cash payment you make when purchasing a large item like a home or vehicle. It represents a percentage of the total purchase price and reduces the amount you need to borrow. The remaining balance is financed through a loan.
Formula
The down payment is expressed as a percentage of the purchase price. For example, a 20% down payment on a $400,000 home equals $80,000, leaving a $320,000 loan amount.
Example
Home Down Payment Examples
For a $350,000 home: A 3.5% down payment (FHA minimum) is $12,250, leaving a $337,750 loan. A 20% down payment (to avoid PMI) is $70,000, leaving a $280,000 loan. A larger down payment means lower monthly payments, less total interest paid, and potentially avoiding PMI altogether.
Related Terms
Related Calculators
Down Payment Calculator
Calculate how much you need to save for a down payment.
Mortgage Calculator
See how down payment affects your monthly payment.
Car Affordability Calculator
Determine how much car you can afford with your down payment.
FHA vs Conventional
Compare down payment requirements between loan types.