A down payment is the upfront sum you pay at purchase closing that directly reduces the loan principal you borrow. In housing planning, it’s the clearest lever a buyer has to lower monthly mortgage payments and total interest cost: a larger down payment means borrowing less. It also often affects which loan products are available and whether a lender requires private mortgage insurance (PMI) or similar protections. When people say “I put 20% down,” they mean they paid 20% of the home’s purchase price out of pocket and financed the rest. Down payments are more than a numerical target — they shape liquidity, emergency buffers, and how soon you might start building equity. Choose a target that balances lower monthly cost with sufficient remaining emergency savings. If saving for a down payment will wipe out your cash cushion entirely, you may be exposed to repair or income shocks after closing. Another important planning angle: down payment timelines and methods. Decide whether to save via automatic monthly transfers to a dedicated account, use windfalls, or rebalance other savings. Track progress and adjust the target if home prices or personal incomes change.

Down payment strategy also interacts with other milestone choices. A larger down payment can eliminate PMI in many cases, which reduces recurring monthly costs and may offset the opportunity cost of using cash. Conversely, a smaller down payment preserves liquidity for immediate needs — moving costs, repairs, or other milestones such as starting a family. For some buyers, an intentional smaller down payment plus a plan to pay extra principal early can be a workable hybrid: get into the home sooner but aggressively pay down the mortgage principal in the first years if cash flow permits. From a behavioral standpoint, separating down-payment savings into a labeled account reduces temptation to spend the money elsewhere. Finally, account choice matters: use safe, liquid vehicles (high-yield savings or short-term CDs) for a near-term down-payment target to avoid market risk close to purchase; for multi-year targets you can consider a conservative mix of investments if you accept some volatility in exchange for higher expected returns.