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Glossary term

Down Payment

Definition

A down payment is the portion of a purchase price you pay upfront out of your own funds, with the loan covering the rest.

Technical definition

A down payment is the borrower's initial equity contribution toward an asset's purchase price, reducing the financed amount.

Why it matters

A larger down payment lowers the amount you borrow and the lender's risk. Required amounts vary by lender, loan type, and program.

Example

On a farmland purchase, the cash you bring to closing toward the price is your down payment; the remainder is financed.

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