The down payment is the portion of the purchase price not financed by the first mortgage.
Simple Example
A $400,000 purchase with a $380,000 first mortgage has a $20,000 down payment, or 5%.
There Is No Universal Minimum
Requirements depend on the mortgage program. Certain conventional programs may permit 3% down, while eligible VA (U.S. Department of Veterans Affairs) borrowers may qualify for no-down-payment financing under program rules.
Bigger Is Not Always Better
- Lower loan amount
- Lower monthly principal and interest
- Lower LTV
- Potentially lower mortgage insurance
- More initial equity
- But less cash remaining for reserves and repairs
Homebuyer takeaway: Choose a down payment that supports both the mortgage structure and your post-closing liquidity.
Sources
Fannie Mae: Homebuyer Down Payment
VA Home Loan Types