Home Buying & Ownership

The initial amount you pay upfront when buying a home, expressed as a percentage of the purchase price and subtracted from the total you need to borrow. For example, a 20% down payment on a $300,000 home is $60,000, leaving $240,000 financed. A larger down payment lowers your loan-to-value ratio, which can secure better interest rates and help you avoid private mortgage insurance.

A percentage comparing how much of your gross monthly income goes toward monthly debt payments, calculated as total monthly debt divided by gross monthly income times 100. Lenders use it to judge how stretched your income already is when reviewing mortgages and other loans. It doesn’t appear on your credit report, and a lower ratio signals more room in your budget, making you a lower-risk borrower.

A measure of how much house you can realistically buy based not just on the down payment but on the total cash and monthly budget the purchase requires. Beyond the down payment, it accounts for closing costs, prepaid costs, moving, mortgage insurance, and post-move emergency savings, often making a practical target around 10% to 15% of the price. A common budgeting guide is the 28/36 rule, keeping housing near 28% of gross monthly income and total debt below 36%.