**Master the Essentials of Down Payments
A down payment is the amount of cash that a buyer has on hand to pay to the seller at the time of closing in a real estate transaction. Ranging from 3% to 25% of the purchase price, the required down payment depends on the type of loan the buyer secures to finance the rest of the purchase. Typically, larger down payments yield more favorable financing rates and terms.
Originally, the down payment often came from the buyer’s savings. Nowadays, it may also originate from other sources such as gifts from family or friends, mortgages on other properties, or proceeds from the sale of an existing home. In essence, the down payment signifies the personal equity the buyer invests in the property purchase.
When aiming for better loan conditions, consider the advantages of a substantial down payment. It reduces the loan principal and frequently results in lower interest rates and monthly payments, making it an essential component of financially sound real estate deals.
Related Terms: mortgage, equity, real estate, financing, home loan
