When Is a Down Payment Due on a House?

A down payment represents a portion of a home’s purchase price that a buyer pays directly, rather than financing through a mortgage loan. This upfront payment reduces the amount borrowed, which can lower monthly mortgage payments and potentially decrease interest costs over the loan’s life. It signifies a buyer’s financial commitment and capacity to undertake homeownership.

Initial Payment at Offer Acceptance

The first payment made in a home purchase is the earnest money deposit. This deposit demonstrates a buyer’s serious intent to proceed with the transaction, acting as a good-faith gesture to the seller. It is submitted shortly after the purchase offer is accepted, within one to three business days.

The amount of earnest money varies, ranging from 1% to 3% of the home’s purchase price, or sometimes a flat amount. For instance, on a $400,000 home, an earnest money deposit might be $4,000 to $12,000. This sum is held in a neutral third-party escrow account, managed by a title company or an attorney, and is not directly given to the seller.

If the home sale proceeds to closing, the earnest money deposit is credited towards the buyer’s total down payment or closing costs. If the deal falls through due to contingencies in the purchase agreement, the earnest money is returned to the buyer. However, if the buyer defaults on the contract without a valid reason, the seller may be entitled to keep the earnest money.

Final Payment at Closing

The largest portion of the down payment is due at the real estate closing, which is the final step in the home buying process. This payment covers the remaining balance of the agreed-upon down payment, after accounting for any earnest money already paid. The specific closing date is established in the purchase contract, and all funds must be cleared and available by this time.

For example, if a buyer is putting 20% down on a $400,000 home, the total down payment would be $80,000. If $8,000 was paid as earnest money, then $72,000 would be due at closing. This amount is integrated into the final settlement statement, often referred to as the Closing Disclosure, which details all financial aspects of the transaction. This document is provided to the buyer at least three business days before closing.

The funds needed for the down payment, along with other closing costs, must be transferred and recorded on the closing date for the transaction to finalize. Failing to have these funds available and cleared can cause delays or even termination of the purchase agreement. The closing process ensures that all financial obligations are met before the property title is transferred.

Factors Influencing Payment Timelines

The specific due dates for both the earnest money and the final down payment are established within the real estate purchase agreement. This contract outlines the agreed-upon timelines and conditions that govern the transaction. Adhering to these deadlines is important for both the buyer and the seller.

Loan type and lender requirements also influence down payment amounts and the financial timeline. Different mortgage programs, such as conventional loans, FHA loans, or VA loans, have varying minimum down payment percentages, from 0% for some VA loans to 3.5% for FHA loans and 3% to 20% for conventional loans. Lenders also have requirements for verifying the source and availability of funds before loan approval.

Negotiations between the buyer and seller can also adjust these timelines. Contingencies, such as those for home inspection or appraisal, can lead to delays in the closing date. Ultimately, the final down payment is directly tied to the scheduled closing date, which can be affected by various factors.

Methods for Remitting Payment

Wire transfer is a common and secure method for remitting large sums, such as the final down payment at closing. Buyers receive detailed wiring instructions from the escrow or title company, and it is important to verify these instructions through a separate, confirmed communication channel, such as a phone call, to prevent fraud. Funds sent via wire transfer are available immediately upon receipt.

Another acceptable method for payment is a certified or cashier’s check. These checks are drawn directly from the bank’s own funds or guaranteed by the bank, ensuring the funds are available and cleared. Personal checks are not accepted for the final down payment due to the time it takes for them to clear.

All down payment funds, including earnest money and the final balance, are sent to a neutral third-party escrow or title company. This entity holds the funds securely and disburses them at closing, rather than the buyer sending money directly to the seller. It is important that all funds are cleared and accessible by the specified due date to ensure a smooth closing.