A down payment is an initial payment made when purchasing a large item, such as a home or a car. It represents a percentage of the total purchase price and is typically paid upfront. The purpose of a down payment is to reduce the amount of money borrowed, which can lower monthly payments and interest costs. In real estate, a common down payment is around 20% of the home's price, although it can vary. A larger down payment may also help buyers qualify for better loan terms. Many lenders require a down payment to ensure the buyer has a financial stake in the property.