Down payment
The part of a home's purchase price paid from the buyer's own funds rather than borrowed on the mortgage.
What it means
The down payment is what the buyer brings to the purchase. The mortgage covers the rest, and the size of the down payment affects the loan amount, the rate offered and whether mortgage insurance is required.
Where some or all of it comes from family, the lender treats the source as a question of fact: gifted money and borrowed money are underwritten differently, and the difference has to be documented.
Why it matters
It is the single largest reason families move money between generations, and the point at which a vague offer has to become a specific arrangement.
Money that lands in a buyer's account shortly before an application draws questions that money already sitting there does not.
When you are likely to meet it
- When a first purchase is being planned.
- When a parent offers help and nobody has said whether it is a gift.
- When an underwriter asks for statements.