Minimum down payment,

Definition of Minimum down payment:

1. The minimum down payment is the cash contribution that a borrower must provide from their own funds when they purchase a home. The actual amount required varies by the loan program, but the standard minimum down payment required for a conventional loan is 20% and 3.5% for an FHA loan.

2. Minimum down payment amounts are required to offset the potential risk to a lender. The theory is that a borrower will be less likely to default on a loan when they have made a large cash contribution to the mortgage themselves.

3. An initial amount paid by a borrower in order to continue securing a loan. This amount generally varies in the range of 5%-25% of the total loan amount, depending on the selected loan program and the borrowers FICO score. A higher amount paid at the beginning will result in lower interest rate paid on the remaining amount of the loan. For example, if the minimum down payment for a housing loan to be approved is 10%, then a person requiring the loan needs to make an initial payment of $25,000 on a $250,000 loan amount.

How to use Minimum down payment in a sentence?

1. The down payment is designed to offset the risk to the lender.
2. The minimum down payment is the cash that a buyer is required to provide to qualify for a mortgage loan.
3. For a conventional loan, the down payment is typically 20%, while for an FHA loan, it is typically 3.5%.
4. FHA loans are government-backed loans. These loans require payment of a tax-deductible monthly mortgage premium known as mortgage insurance to offset the low down payment.