How much down payment do I need for a DSCR loan?
The short answer
Most DSCR purchase loans need about 20% to 25% down. Strong credit and a ratio well above 1.0 get you toward the low end; a lower score, a ratio under 1.0, or a short-term rental can push it to 25% to 30% or more. The Mortgage Advisory shows you the down payment, rate, and reserves side by side so you can pick the trade-off that fits.
What's the typical range?
| Situation | Typical down payment |
|---|---|
| Strong credit, ratio of 1.0 or higher | About 20% |
| Average credit, or a 2 to 4 unit property | About 25% |
| Ratio under 1.0, lower credit, or short-term rental | 25% to 30% or more |
A few programs go to 15% down for very strong files, but they usually cost more in rate.
Can I use a gift or a HELOC for the down payment?
- Gifts: many DSCR programs don't allow gift money for the down payment, or limit it. Check with me first.
- Equity from your home: yes, many investors pull cash from their own home with a HELOC or cash-out refinance and use it for the down payment. The new payment on your home counts against your budget, so plan for it.
- Business funds: often allowed with access to the account.
What else do I need cash for?
- Closing costs: commonly 2% to 5% of the loan amount, plus any points you choose
- Reserves: usually 3 to 12 months of the property's payment, left in the bank after closing
Example (illustrative)
An investor in Colorado Springs buys a $400,000 rental. With 20% down ($80,000), his ratio is 1.05. With 25% down ($100,000), the payment drops and the ratio rises to 1.15, which gets him a better rate. He runs both numbers and picks 25% down because the monthly savings pay back the extra cash in under five years.
Our take
More down isn't always better. Sometimes keeping cash for your next property beats a slightly lower rate. I'll show you both so you can decide.
Ace Ausar, Mortgage Banker · NMLS #1143018
The Mortgage Advisory, Inc. · NMLS #1549739
Reviewed by Ace Ausar, NMLS #1143018 · Updated
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