A down payment, in simple words, is an upfront payment made when purchasing an expensive item, like a home or car. It’s a percentage of the total purchase price and is often required by lenders to reduce their risk. A larger down payment usually results in lower monthly payments and may even secure a better interest rate. For home loans, down payments typically range from 3% to 20% of the property’s value. It also shows the lender that the buyer is financially invested in the purchase.