An upfront cash payment when purchasing a home or vehicle, reducing the loan amount.
A down payment is an upfront sum of money you pay toward the purchase price of a home or vehicle, with the remainder financed through a loan. For mortgages, down payments typically range from 3% to 20% of the purchase price. A larger down payment reduces the loan amount, results in a lower monthly payment, and may eliminate the need for PMI (mortgage insurance). For auto loans, down payments typically range from 10% to 30%. Down payments matter because they represent your "skin in the game"—lenders view larger down payments favorably and offer better terms. Saving a larger down payment takes time but can save tens of thousands in interest over the life of a loan. First-time homebuyers often struggle to save the traditional 20%, making down payment assistance programs and lower-down-payment mortgages increasingly common.