What term is used for the cash portion a buyer pays when acquiring a property?

The cash portion that a buyer pays when acquiring a property is referred to as the down payment. This term is specifically used to describe the initial amount of money that the buyer contributes towards the purchase price of the property, which is typically a percentage of the total price.

A down payment is essential because it reduces the amount the buyer needs to finance through a mortgage loan, demonstrating the buyer’s commitment to the purchase and acting as a form of security for the lender. The larger the down payment, the less the buyer needs to borrow, which can lead to more favorable loan terms such as lower interest rates and reduced monthly payments.

Understanding the concept of down payment is crucial for buyers, as it directly impacts their overall financial investment in the property and their equity position. It’s distinct from other terms: the loan amount refers to the total borrowed from a lender after the down payment is made, deposits can refer to various fees or initial payments throughout the transaction process, and earnest money typically serves as a good faith deposit to show the seller the buyer’s serious intent to purchase, but it is not the amount put towards the purchase price directly.