Minimum Down Payment

Filed Under:
Dictionary Says

Definition of 'Minimum Down Payment'


The minimum cash contribution that must be made by a borrower toward the purchase of a home in order to qualify for a mortgage. The minimum down payment requirements vary by loan program and from lender to lender.

Typically, a minimum down payment of 20% of the total loan balance is required to qualify for a loan without having to pay private mortgage insurance.

Investopedia Says

Investopedia explains 'Minimum Down Payment'


When a borrower has cash in excess of the minimum down payment requirement for a loan, he or she should make a risk-based decision on whether the excess cash should also be put toward the down payment or used elsewhere. All sides should be considered, including the probability of expected returns and the risks of "downside" outcomes in investments.

The bottom line is, making less than a total possible down payment adds leverage, which adds to the overall risk: the more leverage employed, the more extreme both positive and negative returns will be.

comments powered by Disqus
Hot Definitions
  1. Valuation

    The process of determining the current worth of an asset or company. There are many techniques that can be used to determine value, some are subjective and others are objective.
  2. Tech Street

    A term used in the financial markets and the press to refer to the technology sector. Companies like Intel, Microsoft, Apple and Dell are all considered to be part of Tech Street.
  3. Tech Street

    A term used in the financial markets and the press to refer to the technology sector. Companies like Intel, Microsoft, Apple and Dell are all considered to be part of Tech Street.
  4. Momentum Investing

    An investment strategy that aims to capitalize on the continuance of existing trends in the market. The momentum investor believes that large increases in the price of a security will be followed by additional gains and vice versa for declining values.
  5. Momentum Investing

    An investment strategy that aims to capitalize on the continuance of existing trends in the market. The momentum investor believes that large increases in the price of a security will be followed by additional gains and vice versa for declining values.
  6. IPO ETF

    An exchange-traded fund that focuses on stocks that have recently held an initial public offering (IPO). The underlying indexes tracked by IPO ETFs vary from one fund manager to another, but index IPO ETFs are usually passively managed and contain equities that have recently been offered to the public.
Trading Center