A home is purchased for $250,000 with a 20% down payment. What is the loan amount?

Down payment: 20% × $250,000 = $50,000. Loan amount = purchase price − down payment = $250,000 − $50,000 = $200,000. The 20% down payment is significant in residential financing because it is typically the threshold at which private mortgage insurance (PMI) is no longer required on conventional loans. Borrowers with less than 20% down can still get conventional loans but pay PMI premiums until they reach 20% equity, or they use FHA, VA, or USDA loan programs with different rules. A higher down payment also reduces the monthly payment (smaller loan amount, less interest over time) and improves the borrower's debt-to-income ratio for qualification.