A downpayment is an initial payment made towards the purchase of a home or other property. It is typically expressed as a percentage of the total purchase price and is required in order to secure a loan from a lender. The downpayment is usually paid at the time of the closing, and is meant to show the lender that the borrower is financially committed to the purchase. The amount of the downpayment will vary depending on the type of loan, but it is usually between 3 and 20 percent of the purchase price. For example, a borrower taking out a conventional loan may be required to make a downpayment of 5 percent, while one taking out an FHA loan may be required to make a downpayment of 3.5 percent.
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Daniel H. Weberman, The Kabinet Founder
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