A down payment is the initial cash portion you pay when buying a home, car, or other large purchase. The remainder is financed through a loan.
Common Down Payment Amounts
- Home: 3–20% of purchase price (20% avoids PMI)
- Car: 10–20% recommended
- FHA loans: As low as 3.5%
- VA loans: 0% down for eligible veterans
Why a Larger Down Payment Helps
A bigger down payment means a smaller loan, lower monthly payments, less total interest paid, and often a better interest rate. Putting 20% down on a home eliminates Private Mortgage Insurance (PMI).