A Down Payment is the amount of money that a home buyer contributes in cash towards the purchase of a home. Down payment is usually described as a percentage of the total sale price.
Mortgage lenders offer more attractive loan terms for borrowers with large down payments. Putting down 20% or more of a home’s purchase price will avoid mortgage insurance and offer the most attractive interest rates. As the down payment percentage goes down, the lender is at greater risk if they have to foreclose on the property, so they offer less attractive loan terms and higher interest rates.