DSCR LOANS
DSCR Loan Down Payment: How Much Do You Actually Need?
The Real Answer on DSCR Loan Down Payments
The short version: most DSCR lenders require 20% to 25% down. That is the standard across the industry in 2026. Some lenders will go as low as 15% if your credit score is 740+ and the property has a DSCR above 1.25. But 20% down is where most deals land.
What catches people off guard is that the down payment is only part of the cash you need. There are closing costs, prepaid items, and reserve requirements on top of that. On a $400,000 property with 20% down, you are not writing a check for $80,000. You are writing a check closer to $102,000 when you add everything up.
This post breaks down exactly how much cash you need for a DSCR loan, what affects that number, and how to reduce it if you are trying to stretch your capital across multiple deals.
Standard Down Payment Tiers by LTV
DSCR lenders do not offer mortgage insurance. Your down payment is their protection against loss. That is why the minimums are higher than conventional loans. Here is what each tier looks like in practice.
25% Down (75% LTV) - The Sweet Spot
This is where you get the best rates. On a $400,000 property, that is $100,000 down with a $300,000 loan. At 75% LTV with a 740+ credit score and a DSCR above 1.25, you are looking at rates in the low-to-mid 7s. Every DSCR lender offers this tier. No exceptions, no restrictions. If you can afford 25% down, this is the better move because the rate savings over the life of the loan far outweigh the extra 5% you put up front.
20% Down (80% LTV) - Available With Strong Profile
Most lenders offer 80% LTV, but it comes with conditions. You typically need a credit score of 720+, a DSCR of 1.25 or higher, and the property must be a standard residential type (SFR, duplex, triplex, fourplex, or warrantable condo). The rate bump for 80% versus 75% LTV is usually 25 to 50 basis points. On a $300,000 loan, that is roughly $45 to $90 more per month. You save $20,000 on the down payment but pay more over time. For investors who want to preserve cash for another deal, the tradeoff is often worth it.
15% Down (85% LTV) - Rare but Possible
A handful of lenders in 2026 offer 85% LTV DSCR programs. The requirements are strict: 740+ credit score, DSCR of 1.25 or higher, single-family properties only, and rate premiums of 75 to 125 basis points above the 75% LTV pricing. On a $400,000 property, you are putting down $60,000 instead of $100,000. That frees up $40,000, which could be your down payment on a second property. But the higher monthly payment means the DSCR needs to be strong enough to absorb the increased debt service.
Down Payment on a $400,000 Property
75% LTV (25% down)
$100,000
80% LTV (20% down)
$80,000
85% LTV (15% down)
$60,000
The Down Payment vs. Rate Tradeoff
More money down means a lower rate. This is not a small difference. Here is a real comparison on a $400,000 purchase with a 740 credit score and a 1.30 DSCR.
Rate Comparison: Same Borrower, Different LTV
The difference between 25% down and 15% down is $510 per month. That is $6,120 per year in additional debt service. Over 5 years (a typical hold period for a rental), that is $30,600 in extra interest. You saved $40,000 on the down payment but paid back $30,600 of it in higher interest costs. The math only works in your favor if you deploy that $40,000 into another property that generates returns exceeding the added interest cost.
For most investors buying one or two properties, 25% down is the better move. For investors actively scaling a portfolio who need to spread capital across multiple deals, 20% down hits the right balance between rate and capital efficiency.
Cash-Out Refinance: How Much Equity Stays in the Deal
If you already own a property and want to pull cash out with a DSCR cash-out refinance, the rules are slightly different. Most lenders cap cash-out refinances at 75% LTV. Some go to 70%. Very few go higher.
That means 25% of your property's appraised value stays in the deal as equity. On a property appraised at $400,000, the maximum loan amount is $300,000. If you owe $150,000 on the existing mortgage, you can pull out up to $150,000 in cash (minus closing costs of roughly $6,000 to $10,000).
Seasoning matters here too. Most DSCR lenders require you to own the property for at least 6 months before doing a cash-out refi. Some require 12 months. If you bought the property, renovated it, and it appraised significantly higher, a few lenders will use the new appraised value after just 3 months of ownership. But those programs are not common.
What Counts as a Down Payment Source
DSCR lenders care that the money is real and verifiable. They are less strict about the source than conventional lenders, but there are still rules. Here is what qualifies.
Always Accepted
- Personal savings and checking accounts: The most straightforward source. Lenders want to see 2 months of bank statements showing the funds are seasoned (sitting in the account, not a recent large deposit).
- Investment and brokerage accounts: Stocks, bonds, mutual funds, and ETFs all work. Lenders typically value these at 100% of current market value for down payment purposes. You will need a recent statement showing the balance.
- Proceeds from another property sale: If you sold a property and have cash from the closing, a copy of the settlement statement (HUD-1 or closing disclosure) is all you need. This is common for investors doing a 1031 exchange or recycling capital from a flip.
- 1031 exchange funds: Funds held by a qualified intermediary for a 1031 exchange are a valid down payment source. The lender will coordinate with your QI to verify the funds and ensure proper disbursement at closing.
- Business accounts: If you are buying in an LLC, funds from business bank accounts are fine. Some lenders want 2 months of business bank statements in addition to personal statements.
Accepted by Some Lenders
- Gift funds: Some DSCR lenders accept gift funds from a family member, but not all do. If the lender allows gifts, they typically require a gift letter stating the funds do not need to be repaid. A few lenders require that gift funds make up no more than 50% of the total down payment.
- Retirement accounts (401k, IRA): Accepted as proof of reserves but rarely used for the actual down payment since withdrawals trigger penalties and taxes. If you do plan to withdraw from a retirement account, the lender counts only the net amount after estimated taxes and penalties.
- Cryptocurrency: A growing number of lenders will accept crypto holdings, but they require you to convert to fiat currency before closing. The lender needs to see the funds hit a bank account and season for at least one statement cycle.
Not Accepted
- Borrowed funds (personal loans, credit card cash advances, HELOCs on other properties used specifically for the down payment)
- Unseasoned large deposits without a clear paper trail
- Cash that cannot be documented or traced to a bank account
Reserve Requirements: The Cash You Need After Closing
Reserves are separate from your down payment and closing costs. This is cash that stays in your accounts after the deal closes. The lender verifies you have it, but they do not take it. It is your financial cushion in case the property goes vacant or needs a repair.
Most DSCR lenders require 3 to 6 months of PITI (principal, interest, taxes, and insurance) in reserves. The exact amount depends on your credit score and DSCR ratio. Here is how it typically breaks down:
Reserve Requirements by Profile
740+ credit, 1.25+ DSCR
3 months PITI
700-739 credit, 1.00+ DSCR
6 months PITI
660-699 credit
6-9 months PITI
620-659 credit
9-12 months PITI
DSCR below 1.00
9-12 months PITI
Cash-out refi
6 months PITI
What counts as reserves? Checking and savings accounts, money market funds, stocks and bonds (valued at 70% of market value), and retirement accounts (valued at 60% to 70%). Cash value of life insurance qualifies with some lenders. What does not count: equity in other properties, pending loan proceeds, or funds you cannot access within 60 days.
Total Cash Needed: A Real Example
Here is what the full picture looks like on a $400,000 purchase with 20% down. This is a single-family rental with a credit score of 720 and a DSCR of 1.20.
Total Cash to Close and Post-Close
Post-Closing Reserves (6 months PITI)
That is the number nobody talks about. The down payment is $80,000, but the total cash requirement is closer to $106,000. Plan for the full number, not just the down payment. Running out of reserves after closing puts you in a vulnerable position if you hit a vacancy or a surprise repair in the first few months.
How to Reduce Your Down Payment
If 20% to 25% down is stretching your capital too thin, there are a few strategies that can reduce how much cash you need out of pocket.
Improve Your Credit Score
A higher credit score directly unlocks lower down payment tiers. The jump from 719 to 740 is not just about rate. It can be the difference between 80% max LTV and 85% max LTV. If you are within 20 to 30 points of a higher tier, spend 60 to 90 days cleaning up your credit before applying. Pay down revolving balances below 30% utilization, dispute any inaccurate items, and avoid opening new credit lines.
Target Properties With Higher DSCR
A DSCR above 1.25 opens up 80% LTV with most lenders, even if your credit is only 720. Strong cash flow on the property compensates for lower equity in the deal. Look for properties where the rent-to-price ratio is 0.8% or higher per month. Markets like Indianapolis, Memphis, Cleveland, and Birmingham consistently produce DSCR ratios above 1.25 at 80% LTV.
Cross-Collateralize With Other Properties
If you own other investment properties with significant equity, some lenders will use that equity as additional collateral. This is called cross-collateralization. It does not eliminate the down payment, but it can reduce reserve requirements and sometimes improve your LTV on the new purchase. A portfolio loan structure is the most common vehicle for this.
Use a Portfolio Loan Structure
If you are buying multiple properties at once, a portfolio loan (blanket mortgage) can be more capital-efficient than individual DSCR loans on each property. The combined DSCR across all properties is what matters, so a strong performer in the portfolio can offset a weaker one. Some portfolio lenders also offer slightly higher LTV when the overall portfolio DSCR is above 1.30.
Negotiate Seller Credits
Seller credits do not reduce your down payment directly, but they reduce your closing costs. If the seller agrees to a 2% credit toward closing costs, that is $8,000 less cash you need on a $400,000 deal. Most DSCR lenders allow seller credits up to 2% to 3% of the purchase price. The credit cannot be applied to the down payment itself, only to closing costs and prepaids.
The Bottom Line
Plan for 20% to 25% down on any DSCR loan. Then add 2% for closing costs and 3 to 6 months of PITI for reserves. That is your real number. On a $400,000 property, you are looking at roughly $100,000 to $110,000 in total liquid assets needed. On a $250,000 property, it is closer to $65,000 to $70,000.
If that feels like a lot, it is. DSCR loans are not zero-down products. They are built for investors who have capital to deploy. The advantage is that you do not need to prove income, show tax returns, or jump through the documentation hoops of conventional financing. You bring the cash, the property brings the income, and the lender funds the deal.
Want to see exactly what you would need for a specific property? Use our loan calculators to run the numbers, or get pre-qualified in 2 minutes to find out your exact LTV, rate, and cash-to-close. Sinai Capital works with 50+ DSCR lenders, and we will match you with the one that offers the best terms for your deal.
About the Author
Georgey Tishin
Founder, Sinai Capital, LLC | NMLS #2825327
Georgey Tishin is the founder of Sinai Capital, a commercial real estate lending brokerage that connects investors with 50+ lender partners for DSCR loans, bridge loans, fix-and-flip financing, and other investment property loan products. He specializes in helping real estate investors navigate the lending landscape to find the best rates and terms for their deals across all 50 states.
Learn more about Sinai Capital →Disclaimer: This content is for informational purposes only and does not constitute financial advice or a commitment to lend. Rates, terms, and market conditions are subject to change. Contact Sinai Capital for a personalized quote.
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