Down payment on a house is the amount of cash you paid up front for purchasing the house. The remaining of the purchase will be paid through a mortgage loan. Down payment is normally calculated as the percentage of the home price. For example, 20% down payment on a house with purchase price of $500,000 will be $100,000.
Your down payment has a significant impact on the total cost of your home. For instance, your interest rate on the home is calculated, in large part, based on the amount of your down payment. The larger your down payment on a house, the lower your interest rate will be, and the less you'll wind up paying for your home.
Conventional wisdom usually says that you need 20% as a down payment to get the deal done. That's not so, as home buyers can buy a home with 3.5% down a U.S. Federal Housing Administration (FHA) loan on a 30-year fixed-rate home mortgage. However, making a down payment at least 20% will have a few benifits that will save you money significantly: