Definition
The part of a home or car price you pay up front in cash; the rest is usually financed with a loan.
What it means
A down payment is the cash you put toward a purchase at closing. For homes, a larger down payment lowers the loan amount and monthly payment and can help you get a better rate. Conventional loans can allow as little as 3% down for some buyers, but less than 20% down usually requires private mortgage insurance. FHA loans allow 3.5% down with a credit score of at least 580, and VA and USDA loans may require no down payment for eligible borrowers. Many states and cities run down payment assistance programs for first-time or moderate-income buyers. Lenders will ask where the money came from; gifts from relatives are often allowed with a signed gift letter. The down payment is separate from closing costs, which you also need to plan for.
Example
On a $350,000 home, 3.5% down is $12,250, 10% is $35,000 and 20% is $70,000. Putting 20% down avoids private mortgage insurance on a conventional loan.
Illustrative numbers only. Your situation will differ.