What is a down payment?

A mortgage down payment is the amount of money that a homebuyer is required to pay upfront in order to secure a mortgage loan. The down payment is applied towards the purchase price of the home and is typically a percentage of the total cost. The remaining balance is then financed through the mortgage loan.

The size of a down payment can vary depending on the type of loan and the lender's requirements. For conventional loans, the down payment is usually at least 5% of the purchase price, but it can be as high as 20% or more. For government-backed loans, such as FHA or VA loans, the down payment can be as low as 3.5% or 0% respectively.

The larger the down payment, the lower the loan amount and the lower the monthly mortgage payments will be. It also helps in lowering the interest rate on the loan. It is also important to note that down payments are not the only out of pocket expense when buying a house, there are other closing costs and fees that need to be taken into account.

Although down payment is a cost that occurs during closing, CapCenter does not consider down payment a closing cost because these costs are not associated with processing the application. The down payment goes into the equity of your home and can vary based on loan product requirements and the borrower's or borrowers' discretion.