Down Payment
Initial sum paid upfront to reduce the overall financed amount on a purchase.
Detailed Description
Down Payment
What is a down payment?
A down payment is an initial payment made when purchasing a property, usually expressed as a percentage of the total purchase price.
Why is a down payment important?
It reduces the loan amount, potentially lowers monthly payments, enhances buyer credibility with lenders, and signifies financial stability.
What are typical down payment percentages?
Traditional down payments are around 20%, but some loans allow as low as 3% to 5%, like FHA loans which require a minimum of 3.5%.
What impact does the down payment have on mortgage terms?
A larger down payment can lead to lower monthly payments and reduced interest rates, while a smaller down payment may increase payments and require private mortgage insurance.
Are there assistance programs for down payments?
Yes, various down payment assistance programs exist, often targeting low-to-moderate-income buyers, veterans, or teachers to help with home purchases.