Down Payment
The portion of a home's purchase price the buyer pays out of pocket up front, with the mortgage covering the rest.
Down payment requirements vary by loan program. VA loans permit 0% down for eligible service members and veterans. USDA loans also allow 0% in qualifying rural areas. FHA requires 3.5% down for borrowers with credit scores of 580 or higher. Conventional loans accept as little as 3% down through specific first-time buyer programs.
A larger down payment reduces the loan amount, eliminates or shrinks mortgage insurance, and generally unlocks better pricing. The classic 20% down target exists because it lets a borrower skip private mortgage insurance entirely on a conventional loan.
Down payment funds need to be documented and sourced. Most lenders require two months of statements for any account the money is coming from, and gift funds from family members require a signed gift letter with bank statements showing the donor's ability to give and the transfer trail.
Related terms
Other terms you'll see alongside Down Payment
A signed statement from a donor confirming that funds provided toward a home purchase are a gift, not a loan.
The loan amount expressed as a percentage of the property's appraised value or purchase price (whichever is lower).
An insurance policy that protects the lender if a borrower defaults on a conventional loan with less than 20% down.
The total amount of money the borrower must bring to the closing table in certified funds.
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