What is the primary purpose of a down payment?

The primary purpose of a down payment is to indicate the borrower's commitment to the property purchase. When a buyer makes a down payment, it demonstrates their investment and seriousness in acquiring the property. This initial financial commitment can also signal to lenders that the borrower is financially stable and responsible, increasing their confidence in approving the loan.

In addition to showcasing commitment, a down payment serves other functions, such as reducing the overall loan amount and potentially influencing the terms of the mortgage. However, the core idea of the down payment is that it reflects the borrower's dedication to following through with the purchase, making it a crucial component in the home buying process.