Investment properties typically require 15 to 25 percent down, depending on the loan type and lender

The down payment on an investment property is almost always larger than what you'd put down on a home you plan to live in. Most conventional lenders require 15 to 25 percent of the purchase price upfront for a rental property, second home, or commercial building. Some lenders go as low as 10 percent, and a few will accept 5 percent, but those come with higher interest rates and stricter borrower requirements. The exact amount depends on your credit score, the property type, how many investment properties you already own, and whether you're buying a single-unit or multi-unit building.

The reason investment properties cost more to finance is straightforward: lenders see them as riskier than owner-occupied homes. You're not living there, so a lender assumes you're more likely to walk away if the market turns or tenants stop paying rent. That risk gets priced into the down payment requirement and the interest rate you receive.

Key Takeaways

  • Conventional loans for investment properties require 15 to 25 percent down, while FHA loans are not available for investment purchases at all.
  • Your credit score, debt-to-income ratio, and cash reserves all affect whether a lender will accept 15 percent or demand 25 percent.
  • Multi-unit properties (duplexes, triplexes, fourplexes) sometimes have lower down payment requirements than single-family rentals, though rates are usually higher.
  • Portfolio loans from banks and credit unions may offer more flexibility on down payment size if you have an existing relationship with the lender.
  • Down payment assistance programs for owner-occupied homes do not cover investment properties.

How down payment changes by loan type

Conventional loans are the most common route for investment property financing. They require 15 to 25 percent down depending on the lender and your financial profile. A lender offering 15 percent down will typically want a credit score of 740 or higher, a debt-to-income ratio below 36 percent, and proof of cash reserves equal to six months of the property's mortgage payment, taxes, and insurance combined.

FHA loans, which allow as little as 3.5 percent down on owner-occupied homes, do not cover investment properties at all. VA loans are also limited to primary residences and second homes you intend to occupy. If you're a veteran buying a rental property, you'll need a conventional loan.

Portfolio loans come from individual banks or credit unions and are held in the lender's own portfolio rather than sold to Fannie Mae or Freddie Mac. These loans often have more flexible down payment terms—sometimes as low as 10 percent—but usually come with higher interest rates and require an existing relationship with the bank. You'll typically need to have a checking or savings account there, and the lender will review your full financial picture rather than relying on automated underwriting.

Down payment by property type

Single-family rental homes usually require 20 to 25 percent down from conventional lenders. The property must be a detached house or a townhouse where you own the land; condos are treated differently and often require 25 percent or more because lenders view condo associations as an additional risk layer.

Multi-unit properties—duplexes, triplexes, and fourplexes—sometimes have lower down payment requirements, starting at 15 percent with some lenders. The logic is that a duplex with two rental units generates income from two sources, making it less risky than a single-family home with one tenant. However, the interest rate on a multi-unit property is typically 0.25 to 0.5 percent higher than a single-family loan, so the lower down payment is offset by higher monthly costs.

Commercial properties and apartment buildings with five or more units fall outside conventional lending and require either portfolio loans, commercial mortgages, or cash. Down payments for these typically start at 20 to 30 percent and can go much higher depending on the property's income history and your experience as a landlord.

What lenders look at when setting your down payment

Your credit score is the first filter. A score of 740 or higher opens the door to 15 percent down; below 700, most lenders will demand 25 percent or decline you entirely. Lenders also pull your full credit report to check for late payments, collections, or recent bankruptcies. A bankruptcy discharged more than two years ago may be acceptable; one from the past year usually disqualifies you.

Debt-to-income ratio matters because lenders want to know you can cover the mortgage payment along with your other debts. They calculate this by adding up all your monthly debt payments—car loans, student loans, credit cards, existing mortgages—and dividing by your gross monthly income. Most lenders want this ratio below 43 percent for investment properties, though some will go to 50 percent if your credit score is strong and you have substantial cash reserves.

Cash reserves are the amount of liquid money you have after closing. Lenders typically want to see six to twelve months of the property's total housing payment (mortgage, taxes, insurance, HOA fees if applicable) sitting in a bank account. This shows you can cover the mortgage if the property sits vacant or tenants don't pay. If you're buying multiple investment properties in a short time, you'll need reserves for each one.

Your experience as a landlord also influences the decision. First-time investors often face stricter requirements than someone who already owns and manages rental properties. Some lenders will ask for a lease agreement or rent history to verify that the property will actually generate income.

How to reduce your down payment requirement

The most direct way is to improve your credit score before applying. Even a 20-point increase can move you from a 25 percent requirement to 15 percent, saving tens of thousands of dollars on a $300,000 property. If you have late payments or collections on your report, paying them off or settling them can help, though the improvement won't be immediate.

Building cash reserves also works. If a lender is hesitant about 15 percent down because your reserves are thin, showing an extra $20,000 or $30,000 in savings can tip the decision. This is especially true if you're buying a second or third investment property and the lender is concerned about your ability to manage multiple mortgages.

Buying a multi-unit property instead of a single-family home can lower the down payment requirement from 20 to 15 percent, though you'll pay a higher interest rate. The math works out if you plan to hold the property long-term and the rental income covers the higher payment.

Working with a portfolio lender—a local bank or credit union—sometimes offers more flexibility than a national conventional lender. These lenders know the local market and may be willing to accept 10 to 15 percent down if you have an existing relationship and strong financials. The tradeoff is a higher interest rate and a longer application process.

Down payment and closing costs are separate expenses

Your down payment is only part of the cash you need at closing. You'll also pay closing costs, which typically run 2 to 5 percent of the purchase price. These include the appraisal, title search, title insurance, loan origination fee, attorney fees, and property taxes. On a $300,000 property with 20 percent down, you'd put $60,000 down plus another $6,000 to $15,000 in closing costs—total cash needed at closing is $66,000 to $75,000.

Some lenders allow you to roll closing costs into the loan, which means you borrow the money instead of paying it upfront. This increases your loan amount and your monthly payment, but it reduces the cash you need at closing. Not all lenders offer this for investment properties, and those that do usually charge a higher interest rate to compensate.

Frequently Asked Questions

Can I use a gift or loan from family to cover the down payment?

Yes, but lenders have strict rules about it. A gift must come from a blood relative and the lender will require a signed gift letter stating the money does not need to be repaid. A loan from family is treated as debt and counts against your debt-to-income ratio, which may disqualify you or force you to put more down. Most lenders will not accept a family loan for investment property down payments.

What if I'm buying an investment property with a partner or spouse?

Both of your incomes and credit scores can be used to may have access to, which may help you meet the lender's requirements. However, both of you will be responsible for the loan, and both names typically appear on the deed. If you separate later, the property becomes part of the divorce settlement or requires a refinance to remove one person's name.

Do I have to put down 20 percent to avoid PMI on an investment property?

Yes. Unlike owner-occupied homes, investment properties do not have mortgage insurance as an option. If you put down less than 20 percent, the lender will charge a higher interest rate instead—typically 0.5 to 1 percent higher. This makes the monthly payment more expensive over the life of the loan, so 20 percent down is usually the break-even point.

Can I use the rental income from one property to may have access to for a loan on a second?

Yes, but only if you've owned the first property for at least two years and can show a history of collecting rent. Lenders will ask for two years of tax returns and a lease agreement. They typically count 75 percent of the rental income toward your may have access to income, assuming 25 percent vacancy or maintenance costs. If the first property generates $1,200 a month in rent, the lender counts $900 toward your income for the second loan.

What happens if I can't save 15 percent down?

Most conventional lenders will not work with you below 15 percent for investment properties. Your options are to save longer, improve your credit score and finances to may have access to for a portfolio loan, or partner with someone who has stronger financials. Some investors also buy their first property as an owner-occupied home (putting down 3 to 5 percent), live there for a year, then convert it to a rental and buy a second property.