Down payment on a home: The basics
What is a down payment on a home?
The down payment is money you give to the home's seller. The rest of the payment to the seller comes from your mortgage. Down payments are expressed as percentages. A down payment of at least 20% lets you avoid mortgage insurance.
To explain how bankers and real estate agents talk about down payments, let's say you buy a house for $100,000:
- A 3% down payment means that you pay the seller $3,000 and you borrow $97,000. RATE SEARCH: Find a low down-payment mortgage today.
- With a 20% down payment, you would pay the seller $20,000 and you would borrow $80,000.
Sometimes you'll hear a phrase like, "Alex put 20% down on the house." That means that Alex made a 20% down payment.
The money for a down payment can come from:
- Your own savings.
- The money you get when you sell a house.
- Gifts and grants from family, employers and nonprofits.