1. The term "down payment" refers to an initial upfront payment made when purchasing something expensive, like a house or a car. 2. It is usually a percentage of the total price and is paid at the beginning of the purchase process. 3. The down payment reduces the amount of money you need to borrow or finance. 4. For example, if a house costs $200000 and the down payment is 20%, then the down payment amount is calculated as: $$\text{Down Payment} = 200000 \times 0.20 = 40000$$ 5. This means you pay $40000 upfront, and the remaining $160000 can be financed through a loan. 6. The down payment is important because it shows the buyer's commitment and can affect loan terms and interest rates.