Down Payment
Definition
The upfront cash you pay when buying a home, expressed as a percentage of the purchase price. The standard is 20%, but many programs allow 3-5% down. A larger down payment means a smaller mortgage, lower monthly payments, and no private mortgage insurance (PMI).
Why It Matters
Your down payment size affects everything — monthly payment, interest rate, whether you need PMI, and your equity position from day one. Putting less than 20% down usually means paying PMI ($100-300/month extra) until you reach 20% equity.
Example
Buying a $350,000 home: 20% down = $70,000 cash, $280,000 mortgage. 5% down = $17,500 cash, $332,500 mortgage. The smaller down payment saves $52,500 upfront but adds ~$250/month in PMI plus higher monthly payments.