Home Buying Down Payments: How They Work, How Much to Pay

Down Payments: How They Work, How Much to Pay

When you buy expensive items with a loan, you often need to make a down payment to cover a portion of the purchase price. That initial payment is often critical for getting approved, and it can affect your borrowing costs throughout the life of your loan. As a result, it’s wise to understand how down payments work so you can choose the right down payment amount.

What Is a Down Payment?

A down payment is an upfront payment you make to purchase a home, vehicle, or another asset. The down payment is the portion of the purchase price that you pay out-of-pocket (as opposed to borrowing). That money typically comes from your personal savings, and in most cases, you pay with a check, a credit card, or an electronic payment.

Down payments are often, but not always, part of obtaining a loan. For example, when you see “zero down” offers on vehicles, no down payment is required. Some home loans don't require a down payment either.1


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