What is a down payment?
A down payment is the part that a purchaser pays up front when purchasing something. For example, you want to buy a new car. The car costs $20,000. You want to finance the car by taking a loan from the dealership (say a Ford Motor credit loan). You give the dealership $2,000. down payment, and then your loan amount is only $18000 instead of $20000. Its just the part you pay up front. It serves to show that you are serious about wanting the purchase the item.
The difference between sales price and loan amount. The down payment is the initial upfront portion of the payment, usually given in cash. The amount of money the purchaser pays to the seller upon the signing of the agreement of sale. The amount of money provided by the Purchaser toward the total price of the property (not including legal fees or other acquisition costs). In general, down payment plus mortgage equals purchase price. The amount of payment required to secure the purchase of a property. Lenders typically require a 20% down payment, although with mortgage insurance down payments of 5, 10, and 15% are common. The amount of your home’s purchase price you need to supply up front in cash to get your loan.
