DSCR Loan Down Payment: How Much Do You Really Need?

Everything you need to know about DSCR loan down payments including minimum requirements, how to reduce your down payment, and creative financing strategies.

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DSCR Loan Down Payment: How Much Do You Really Need?

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The down payment is the single biggest cash outlay in any DSCR Loan Financing transaction. It’s also the number investors ask about first, because it determines how many deals you can do with the capital you have.

The short answer: most DSCR loans require 20-25% down. The longer answer involves a dozen factors that can push that number up or down depending on your credit score, the property type, the DSCR ratio, and the loan amount. This guide breaks down every variable so you know exactly what to expect and how to minimize your cash at closing.

Standard DSCR Loan Down Payment Ranges

The typical DSCR loan requires 20-25% of the purchase price as a down payment. This translates to a loan-to-value (LTV) ratio of 75-80%.

Here’s what that looks like in real dollars:

Purchase Price	20% Down	25% Down
$200,000	$40,000	$50,000
$300,000	$60,000	$75,000
$400,000	$80,000	$100,000
$500,000	$100,000	$125,000
$750,000	$150,000	$187,500

Most borrowers land somewhere in this range. But the specific percentage you’ll need depends on several factors that the lender weighs during underwriting.

Factors That Determine Your Down Payment

1. Credit Score

Your credit score is the single most influential factor in your down payment requirement. Higher scores unlock lower down payments and better terms across the board.

740+: Eligible for minimum down payment (often 20% or even lower with some lenders)
700-739: Standard 20-25% down payment
680-699: 25% down payment typical, some lenders may require more
660-679: 25-30% down payment, fewer lender options
620-659: 30%+ down payment if approved at all, limited lender selection

The jump from a 720 to a 740 credit score can save you $10,000-$25,000 in down payment on a mid-priced property. If your score is close to a threshold, it may be worth improving it before applying.

2. DSCR Ratio

This is where DSCR loans get interesting. The property’s debt service coverage ratio directly affects your down payment requirement. A higher DSCR means the property has more income cushion above the mortgage payment, which reduces the lender’s risk—and they reward that with lower down payment requirements.

DSCR above 1.25: Best down payment options (may qualify for 20% or lower)
DSCR of 1.10-1.25: Standard 20-25% down
DSCR of 1.0-1.10: 25% down typical
DSCR below 1.0: 25-30%+ down, and many lenders won’t approve at all

A property that generates $2,500 in monthly rent with a $1,800 total mortgage payment has a DSCR of 1.39. That strong ratio could qualify for the minimum down payment. The same property in a lower-rent market generating $1,900 against the same $1,800 payment has a DSCR of 1.06—expect a higher down payment requirement.

Run your numbers through our DSCR Loan Calculator to see if your property qualifies.

This creates a direct incentive to buy properties with strong cash flow. The better the deal, the less cash you need upfront.

For complete qualification details, see our DSCR loan requirements guide.

3. Property Type

Not all properties carry the same risk in the lender’s eyes. The type of property you’re buying affects the down payment.

Property Type	Typical Down Payment
Single-family home (1 unit)	20-25%
Duplex (2 units)	20-25%
Triplex (3 units)	20-25%
Fourplex (4 units)	25%
Condo	25-30%
Non-warrantable condo	30%+
Rural property	25-30%
Mixed-use property	25-30%
Short-term rental (Airbnb/VRBO)	25-30%

Single-family homes and duplexes in suburban areas get the best terms because they’re the easiest to sell if the lender needs to foreclose. Condos, rural properties, and short-term rentals carry more perceived risk, so lenders require more skin in the game.

4. Loan Amount

Very small and very large loan amounts can both increase your down payment requirement.

Below $100,000: Some lenders won’t do DSCR loans this small. Those that do may require 25-30% down because the fixed costs of origination eat into their margins.
$100,000-$500,000: Sweet spot for standard terms and minimum down payments.
$500,000-$1,000,000: Standard terms generally apply.
Above $1,000,000: Jumbo DSCR territory. Down payment requirements often increase to 25-30%, and fewer lenders participate.
Above $2,000,000: Limited lender options, 30%+ down common.

5. Loan Purpose

Whether you’re purchasing or refinancing affects the LTV and down payment dynamics.

Purchase: Standard 20-25% down payment applies.
Rate-and-term refinance: Up to 80% LTV is common, meaning 20% equity required.
Cash-out refinance: Typically limited to 70-75% LTV, requiring 25-30% equity in the property.

Cash-out refinances have the strictest LTV requirements because the lender is giving you money above what you owe—increasing their exposure.

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How to Reduce Your Down Payment

You can’t eliminate the down payment on a DSCR loan, but you can reduce it strategically.

Improve Your Credit Score Before Applying

Every credit tier jump can lower your down payment by 5 percentage points. If you’re at 700 and can reach 740 within a few months, that effort saves you real money. Pay down credit card balances below 30% utilization, don’t open new accounts, and dispute any errors on your credit report.

Buy Properties With Strong DSCR Ratios

Target properties where the rent significantly exceeds the projected mortgage payment. A DSCR above 1.25 puts you in the best pricing tier with most lenders. This means doing thorough rent analysis before making offers—know what the market rent is and what the total payment will be at current rates.

Choose the Right Property Type

Single-family homes and small multifamily properties (2-4 units) consistently get the best down payment terms. If you’re stretching your capital, avoid condos, rural properties, and mixed-use buildings until you have more cash reserves.

Shop Multiple Lenders

Down payment requirements vary between DSCR lenders. One lender may require 25% on a deal where another requires only 20%. Get quotes from at least three lenders to find the best terms. The rate matters, but so does the down payment—a lender offering a slightly higher rate with 5% less down payment might be the better deal when you factor in cash conservation.

For current rate comparisons, see our DSCR loan rates guide.

Negotiate Seller Concessions

Seller concessions don’t reduce your down payment directly, but they reduce your total cash at closing. If the seller agrees to cover 2-3% of closing costs, that’s $4,000-$9,000 on a $300,000 property that you don’t have to bring to the table. Some DSCR lenders allow seller concessions up to 2-6% of the purchase price—confirm with your lender before negotiating.

Sources of Down Payment Funds

Where the money comes from matters. DSCR lenders want to see legitimate, documented sources for your down payment.

Personal Savings

The most straightforward source. Bank statements from the last 2-3 months showing the funds sitting in your account satisfy most lenders. If you’ve recently received large deposits (cash from selling a vehicle, a bonus, a gift), be prepared to document the source with a paper trail.

Home Equity Line of Credit (HELOC)

If you have equity in your primary residence or another property, a HELOC can provide your down payment. Most DSCR lenders accept HELOC funds as a legitimate down payment source. The HELOC payment won’t affect your DSCR qualification since DSCR loans don’t factor in personal debt—only the subject property’s income and expenses.

This is one of the most popular strategies for scaling. You use the equity in properties you already own to fund down payments on new acquisitions.

Cash-Out Refinance From Existing Properties

Similar to a HELOC, a cash-out refinance on an existing property generates lump-sum cash for new down payments. The advantage over a HELOC is that the interest rate is typically fixed and the funds are available immediately at closing. The disadvantage is closing costs and the refinance process itself.

Retirement Accounts

Self-directed IRAs and solo 401(k)s can be used to invest in real estate, including providing down payment funds—but the rules are complex. The property must be owned by the retirement account, not by you personally. You can’t live in it, can’t manage it yourself, and can’t use personal funds for repairs. Consult a self-directed IRA custodian and a tax professional before going this route.

Some investors take loans from their 401(k) to fund down payments. You borrow from yourself and repay with interest back into your own account. The maximum loan is typically $50,000 or 50% of the vested balance. This preserves your retirement savings while providing investment capital.

Gift Funds

Gift fund policies vary by DSCR lender. Some accept gifts from immediate family members with proper documentation (gift letter and proof of transfer). Others require all down payment funds to be sourced from the borrower’s own accounts. Check your specific lender’s policy before counting on gift funds.

Business Profits

If you own a business, profits distributed to your personal account are acceptable down payment funds. Provide documentation showing the business income and the transfer to your personal or LLC account.

Partnership Capital

If you’re investing with partners, each partner can contribute to the down payment through the LLC. This is one of the biggest advantages of partnership investing—splitting a $100,000 down payment between two partners means each brings $50,000.

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Down Payment Plus Reserves: Your Total Cash Requirement

Your down payment isn’t the only cash you need at closing. DSCR lenders also require reserves—liquid funds that remain in your accounts after the transaction closes.

Typical Reserve Requirements

Most DSCR lenders require 6-12 months of PITIA (principal, interest, taxes, insurance, and association dues) as reserves. On a property with a $2,000 monthly total payment, that’s $12,000-$24,000 in reserves on top of your down payment.

Total Cash Example

Here’s the full cash picture for a $350,000 single-family rental:

Item	Amount
Down payment (20%)	$70,000
Closing costs (3%)	$10,500
Reserves (6 months at $2,100/month)	$12,600
Total cash needed	$93,100

That’s significantly more than the down payment alone. Plan your capital allocation accordingly, and make sure you’re not just looking at the down payment number in isolation.

What Counts as Reserves

Reserves can be held in:

Checking and savings accounts
Money market accounts
Investment accounts (stocks, bonds—typically valued at 60-70% of market value)
Retirement accounts (typically valued at 60% of vested balance)
Other real estate equity (varies by lender)

Cash in the LLC bank account counts toward reserves if the property is purchased through an LLC. This is another advantage of maintaining well-funded entity accounts.

Common Down Payment Mistakes

Mistake 1: Not Accounting for Closing Costs and Reserves

The down payment is 20-25%, but your total cash outlay is 26-35% of the purchase price when you include closing costs and reserves. Investors who budget only for the down payment find themselves scrambling for additional funds at the last minute—or losing deals entirely.

Mistake 2: Large Undocumented Deposits

Moving money between accounts or receiving cash from selling personal items right before applying creates documentation headaches. Lenders need to trace every significant deposit in your bank accounts for the past 60-90 days. Make down payment transfers early and keep documentation for every transaction.

Mistake 3: Draining All Liquid Cash

Using every available dollar for the down payment and reserves leaves you with no safety net. Properties need repairs. Tenants leave. Vacancies happen. Keep an emergency fund outside of your lender-required reserves for unexpected property expenses. A good rule of thumb is an additional $5,000-$10,000 per property beyond what the lender requires.

Mistake 4: Assuming All Lenders Want the Same Down Payment

Down payment requirements vary significantly between DSCR lenders. One lender’s 25% minimum might be another lender’s 20% minimum for the same deal. Shopping around is not optional—it’s how you conserve capital for more acquisitions.

Mistake 5: Ignoring the DSCR Ratio’s Impact

Many investors focus on credit score and property type but don’t realize that improving the DSCR ratio can lower their down payment. Buying a property with $2,200 in rent versus $1,900 in rent might be the difference between 20% and 25% down on the same purchase price. Run the DSCR calculation before making offers, not after.

Mistake 6: Waiting Too Long to Start

Analysis paralysis around down payments keeps investors on the sidelines. While you’re saving for a 25% down payment on a $400,000 property, someone else is buying it with 20% down from a different lender. Every month you wait, prices can shift, rates can change, and opportunities disappear. Start the process and let the numbers guide your decisions.

If you’re a first-time DSCR borrower, our guide on DSCR loans for first-time investors covers the full picture of getting started.

Structuring Your Deal for the Lowest Down Payment

Here’s a practical framework for minimizing your cash outlay on a DSCR loan:

Step 1: Get your credit score to 740 or above. This is the single highest-leverage action you can take.

Step 2: Target properties with a projected DSCR of 1.25 or higher. This means running numbers on every potential acquisition before making offers. Focus on markets where rent-to-price ratios are favorable.

Step 3: Stick to single-family homes and small multifamily (2-4 units). These property types consistently get the best LTV terms.

Step 4: Keep your loan amount in the $150,000-$750,000 range where lender competition is strongest and terms are most favorable.

Step 5: Get quotes from at least three DSCR lenders. Compare not just rates but down payment requirements, reserve requirements, and closing costs. The total cash outlay varies more than you’d expect.

Step 6: Negotiate seller concessions for closing costs, which preserves your cash for the down payment and reserves.

Step 7: Use equity from existing properties (HELOC or cash-out refinance) to fund down payments on new acquisitions, creating a self-funding growth cycle.

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Frequently Asked Questions

Can I get a DSCR loan with less than 20% down?

A few lenders offer DSCR loans with 15% down, but these programs are rare and come with conditions—typically a 740+ credit score, a DSCR above 1.25, and a single-family property in a strong market. The standard minimum across most DSCR lenders is 20%. If you find a 15% down program, compare the rate and fees carefully against a 20% down option to see which is actually cheaper overall.

Can I use a HELOC on my primary residence for the down payment?

Yes. Most DSCR lenders accept HELOC funds as a valid down payment source. Since DSCR loans don't factor in your personal debt-to-income ratio, the HELOC payment doesn't affect your qualification. You'll need to show the HELOC statement and possibly the HELOC agreement. This is one of the most popular strategies investors use to scale their portfolios.

Do I need the down payment seasoned in my account?

Most DSCR lenders require 60 days of bank statements showing the funds. Large deposits within that period need to be sourced and documented. If you're planning to move money from investments, retirement accounts, or other sources, do it at least 60-90 days before applying. Some lenders are more flexible if you can provide a clear paper trail for recent transfers.

Is the down payment different for a cash-out refinance?

Cash-out refinances don't have a "down payment" per se, but they have stricter equity requirements. Most DSCR lenders limit cash-out refinances to 70-75% LTV, meaning you need 25-30% equity in the property. For a rate-and-term refinance (no cash out), the limit is typically 75-80% LTV. Purchase transactions offer the most favorable LTV at 75-80%.

Can my business partner contribute part of the down payment?

Yes, if you're purchasing through an LLC with multiple members. Each member can contribute capital to the LLC, and those funds are used for the down payment. The operating agreement should specify each member's capital contribution. The lender will need bank statements from all contributing members showing the source of funds.

Does a larger down payment get me a better interest rate?

Yes. DSCR loan pricing is tiered by LTV. A 25% down payment (75% LTV) typically gets a rate 0.25-0.50% lower than a 20% down payment (80% LTV). A 30% down payment may save another 0.125-0.25%. Whether the extra cash is worth the rate savings depends on your alternative use for that capital—if you could buy another property with the extra down payment money, the rate savings may not justify it.

Can I use seller financing for part of the down payment?

Generally no. Most DSCR lenders do not allow the down payment to come from seller-held second liens or seller financing. The down payment must come from the borrower's own funds or acceptable sources like HELOCs, gifts (where permitted), or business accounts. Some lenders may allow seller seconds in specific programs, but it's uncommon. Always disclose your full financing structure to the lender upfront.

What happens if the appraisal comes in low and I need more down payment?

If the property appraises below the purchase price, the lender bases the LTV on the lower appraised value. This means you need to bring more cash to maintain the required LTV ratio. For example, if you're buying at $300,000 with 20% down ($60,000) but it appraises at $280,000, the lender will loan 80% of $280,000 ($224,000)—leaving you to cover the remaining $76,000. You can renegotiate the purchase price, bring additional funds, or walk away if your contract allows.

Your Next Step

The down payment on a DSCR loan is significant, but it’s also manageable when you understand the variables and plan strategically. Focus on credit score optimization, target cash-flowing properties, shop multiple lenders, and use existing equity to fuel new acquisitions.

Every property you add to your portfolio builds equity that can fund future down payments. The first deal requires the most cash relative to your resources. Each subsequent deal gets easier as your portfolio generates the capital for growth.

Disclaimer: LendCity Mortgages is a licensed mortgage brokerage, and our team includes experienced real estate investors. While we are qualified to provide mortgage-related guidance, the broader financial, tax, and legal information in this article is provided for educational purposes only and does not constitute financial planning, tax, or legal advice. For matters outside mortgage financing, we recommend consulting a Chartered Professional Accountant (CPA), licensed financial planner, or qualified legal advisor.

Written by

LendCity

Published

February 15, 2026

Reading Time

13 min read

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