mortgage

What a down payment on a home is, who it goes to and where it comes from

Mortgage » Basics »

Down payment on a home: The basics
Previous
1 of 6
Next
Down payment on a home: The basics | Indeed/Getty Images

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.
Previous
1 of 6
Next

advertisement

          Connect with us
advertisement
advertisement

Blog

Holden Lewis

What’s unexpectedly useful in a 1st home?

A redditor (that's a member of the freewheeling website Reddit) asks: "Homeowners of Reddit: when you purchased your first home, what item did you not think about that ended being very useful to you?" RATE SEARCH: Shop today for a mortgage. What a great question, and the answers are delightful. Some are profane and hilarious.  ... Read more

advertisement

Connect with us