Down payment
A borrower pays this amount at the time a loan is closed.
The down payment is a percentage of the value of what a loan is going towards,
and this amount is deducted from the amount of the loan.
The amount of cash you must pay down initially for the purchase of your home.
For conventional loans, you should aim for a down payment that's at least 20%
of your home's value. The reason is
lenders generally do not require private mortgage insurance
with a down payment of at least 20% of your home's purchase price.
Example:
Judy is buying a new home for $400,000. The lender requires a minimum down payment
of 10 percent (i.e., $40,000). Based on her personal finances, Judy can afford a
maximum down payment of $80,000. She decides to test both options.
