What is the term for the money that a buyer pays towards the purchase price of a home that is not financed?

The term for the money that a buyer pays towards the purchase price of a home that is not financed is known as a down payment. This amount represents a portion of the home's purchase price that the buyer contributes from their own funds at the time of closing or purchase.

A down payment typically serves several important purposes. First, it demonstrates the buyer's commitment to the transaction to the seller and other stakeholders involved in the process. Second, it reduces the amount to be financed, which can lower monthly mortgage payments and may reduce the overall interest paid over the life of the loan. Additionally, a larger down payment may help the buyer avoid private mortgage insurance (PMI), which is often required when the down payment is less than 20% of the purchase price.

The other terms—closing costs, earnest money, and security deposit—represent different financial aspects of a home purchase. Closing costs refer to the various fees and expenses that must be paid when finalizing a mortgage, and earnest money is a deposit made to demonstrate a buyer's good faith when making an offer on a property. A security deposit is typically associated with rental agreements, not home purchases.