Down Payment

[Eugine]

A down payment is a portion of available money given at the outset of a loan to demonstrate commitment to the purchase. A down payment is often given in cash, though in some cases it may be attached to an alternate line of credit. A down payment is usually only used in sales which involve a large amount of money. Loans to purchase houses and land are the most common loans to require a down payment, though loans for cars, boats and other luxury goods purchased on credit may also ask for a portion of the total cost up front.

[Vettori]

A down payment for a home is one the major influencing factors that associates risk or loss to the lender. The down payment serves as a cushion for the lender if a foreclosure were to occur. To illustrate, a borrower who puts down only 10 percent, this would only yield partial protection for the lender, if foreclosure costs were to exceed the 10 percent down payment.