Which term describes the initial percentage of the home’s value that a borrower must pay upfront?

The term that describes the initial percentage of the home's value that a borrower must pay upfront is known as the down payment. This is a crucial component of purchasing a property, as it represents the portion of the home's purchase price that the buyer is responsible for paying out of pocket before any financing is applied.

Making a down payment is significant for several reasons. It not only demonstrates the buyer's commitment to the purchase but also reduces the amount of money that needs to be borrowed through a mortgage, which can lead to lower monthly payments and a decreased reliance on financing. Additionally, a larger down payment may help borrowers avoid private mortgage insurance (PMI), which protects the lender in case of default.

Other terms, while related to real estate financing, do not define the initial upfront payment directly. The loan-to-value ratio is a financial term that compares the loan amount to the appraised value of the property, reflecting how much of the home is financed versus owned. Closing costs refer to the fees and expenses associated with the transaction that are paid at closing, such as appraisal fees, title insurance, and lender fees. Equity represents the value of the homeowner's interest in the property after subtracting any liens or debts, which is built over time as the mortgage