Investment property mortgages typically require 20 to 25 percent down, sometimes higher
A lender will ask for more money upfront when you buy an investment property than when you buy a home to live in. Most investment property loans require a minimum down payment of 20 percent of the purchase price. Some lenders ask for 25 percent. A few specialized lenders go lower—as low as 15 percent—but those loans carry higher interest rates and stricter income requirements to offset the lender's risk.
The reason is straightforward: lenders see investment properties as riskier than owner-occupied homes. If you stop paying on a home you live in, you have strong incentive to keep it. If you stop paying on a rental, you can walk away more easily. Lenders price that risk by requiring you to put more of your own money at stake from the start.
The exact percentage depends on the property type, your credit score, your debt-to-income ratio, and the lender's own rules. A single-family rental might sit at 20 percent. A multi-unit building or a commercial property might require 25 or 30 percent. If your credit is below 740 or your debt-to-income ratio is above 43 percent, expect the higher end of the range or rejection.
Key Takeaways
- Investment property down payments start at 20 percent and often reach 25 to 30 percent, depending on property type and your financial profile.
- Owner-occupied homes typically require 3 to 20 percent down, so buying a rental costs significantly more upfront than buying a primary residence.
- Your credit score, debt-to-income ratio, and cash reserves all affect whether a lender will accept 20 percent or demand 25 or 30 percent.
- Some lenders offer 15 percent down on investment properties, but the interest rate will be higher and income documentation more rigorous.
- Down payment alone does not determine approval—lenders also verify you have cash reserves equal to 6 to 12 months of the mortgage payment after closing.
How down payment percentage changes by property type
Single-family rentals usually sit at the lower end. Most conventional lenders will accept 20 percent down on a single-family house you plan to rent out, provided your credit and income meet their standards. The property has to be in decent condition, and you need a signed lease or proof of tenant interest.
Multi-unit properties—duplexes, triplexes, four-plexes—often require 25 percent. The more units, the more the lender treats it like a small business rather than a simple rental. A four-unit building might demand 25 to 30 percent down. Commercial properties (office, retail, industrial) typically require 25 to 35 percent down and have stricter appraisal and income-documentation rules.
Condos and townhomes in HOA communities sometimes carry higher down payment requirements than single-family homes, even at 25 percent, because lenders worry about HOA instability or special assessments. Ask the lender upfront whether the specific property type affects their minimum.
What happens if you put down less than 20 percent
Some lenders will go as low as 15 percent down on an investment property, but the cost is real. Your interest rate will be 0.5 to 1 percent higher than a borrower putting 20 percent down. On a $300,000 loan, that difference adds $150 to $300 per month for the life of the loan. You will also pay mortgage insurance (called PMI on conventional loans), which protects the lender if you default. That insurance premium gets added to your monthly payment and does not build equity.
Lenders offering 15 percent down also impose stricter conditions: they may require a higher credit score (760 or above), a lower debt-to-income ratio (below 40 percent), and proof of larger cash reserves. Some will not lend on 15 percent down for anything other than a single-family rental in good condition.
The math often does not work in your favor. Paying 5 percent less down ($15,000 on a $300,000 purchase) but adding $150 to $300 monthly in insurance and interest means you break even in 4 to 8 years—and you are still paying the higher rate. If you plan to hold the property longer than that, 20 percent down is usually the smarter choice.
Down payment versus cash reserves: both matter
Lenders do not just look at your down payment. They also require proof that you have cash left over after closing. This is called cash reserves or liquid reserves. Most lenders want to see 6 to 12 months of the total monthly mortgage payment (principal, interest, taxes, insurance, and HOA fees if any) sitting in a bank account after you close.
On a $300,000 property with a $60,000 down payment, your loan is $240,000. If your monthly payment is $1,600, the lender wants to see $9,600 to $19,200 in reserves after closing. That means your total cash outlay is the down payment plus the reserves you must keep liquid. If you have $80,000 saved, $60,000 goes to down payment and $20,000 must stay in the bank—you cannot use it to furnish the rental or cover repairs.
Some lenders are stricter than others. Portfolio lenders (banks that keep loans on their own books rather than selling them) sometimes require 12 months of reserves. Fannie Mae and Freddie Mac loans typically require 6 months. Ask the lender what their reserve requirement is before you commit to a down payment amount.
How your credit score and debt-to-income ratio affect the down payment you can offer
A credit score above 740 and a debt-to-income ratio below 40 percent unlock the lowest down payment options and the best interest rates. If your score is 700 to 739 or your ratio is 40 to 43 percent, expect to put 25 percent down instead of 20 percent. Below 700 or above 43 percent, most conventional lenders will decline the loan entirely.
Your debt-to-income ratio includes all monthly debt payments—car loans, student loans, credit cards, existing mortgages, and the new investment property payment—divided by your gross monthly income. A lender adds the new rental payment to your existing debt and recalculates. If you already carry $3,000 in monthly debt and earn $7,000 gross per month, your ratio is 43 percent. Adding a $1,600 rental payment pushes you to 66 percent, which no conventional lender will touch.
If your ratio is too high, you have two options: increase your income (through a co-borrower or documented rental income from the new property) or reduce existing debt before applying. Paying off a car loan or credit card can lower your ratio enough to may have access to.
Down payment sources and what lenders will and will not accept
Lenders require proof that your down payment money is yours and has been in your account for a set period—usually 60 days. They want to see bank statements showing the funds, not a sudden deposit that looks like a loan you forgot to disclose.
Acceptable sources include your savings account, money market account, stocks or bonds you sell, or a gift from a family member. If the money is a gift, the lender requires a signed letter from the gift-giver stating it is a gift, not a loan you have to repay. The gift-giver does not have to co-sign the mortgage, but the letter must be notarized or witnessed.
Unacceptable sources include loans from friends or family (even if undocumented), credit card cash advances, or borrowed funds from a retirement account. Some lenders will not accept down payment money from a home equity line of credit on another property, because it increases your total debt load. Ask your lender upfront what documentation they need for your specific down payment source.
Comparing down payment costs across different loan types
| Loan Type | Typical Down Payment | Interest Rate Premium | Mortgage Insurance | Best For |
|---|---|---|---|---|
| Conventional (Fannie Mae/Freddie Mac) | 20–25% | None at 20%+ | None at 20%+ | Single-family rentals, good credit |
| Conventional (15% down) | 15% | +0.5–1% | Yes, 0.5–1% annually | Strong income, limited capital |
| Portfolio/Bank Loan | 20–30% | Varies by bank | Varies | Multi-unit, unique properties |
| FHA (owner-occupied only) | 3.5% | N/A | N/A | Not available for investment |
Conventional loans sold to Fannie Mae or Freddie Mac are the most common route for investment properties. They offer the lowest rates if you put 20 percent down and have good credit. Portfolio lenders—regional banks and credit unions that keep loans on their books—sometimes offer more flexibility on property type or credit score, but they usually require 25 to 30 percent down and charge higher rates.
FHA loans, which allow 3.5 percent down on owner-occupied homes, are not available for investment properties. VA loans are not available for investment properties either. If you are a veteran or active-duty service member buying a rental, you must use a conventional loan.
Frequently Asked Questions
Can I use a gift from a family member for my down payment?
Yes. The lender requires a signed letter from the gift-giver stating the money is a gift and not a loan you must repay. The letter should include the gift-giver's name, relationship to you, the amount, and their signature. Some lenders require it to be notarized. The money must appear in your bank account and stay there for at least 60 days before closing.
What if I only have 10 percent saved for a down payment?
Most conventional lenders will not approve a loan with 10 percent down on an investment property. Your options are to save more, find a co-borrower with additional funds, or look for a portfolio lender willing to go lower—though they will charge a higher interest rate and may require 12 months of cash reserves instead of 6.
Do I have to put down 20 percent if I am buying a multi-unit property?
Multi-unit properties typically require 25 percent down, sometimes 30 percent. The more units, the higher the down payment. A duplex might be 25 percent; a four-unit building often requires 30 percent. Ask the lender about their specific requirement for the property you are considering.
Can my rental income from the new property count toward my debt-to-income ratio?
Yes, but only if the lender can document it. Most lenders use 75 percent of the projected rental income (based on a lease or market analysis) and subtract it from your total monthly debt. This can lower your ratio enough to may have access to. You will need a signed lease or a rent analysis from a property manager to prove the income amount.
What if my credit score is 680—can I still get an investment property loan?
Most conventional lenders require a credit score of at least 700 for investment properties, and 740 or higher for the best rates and lowest down payment options. A score of 680 will likely be declined by conventional lenders. You may find a portfolio lender or hard money lender willing to work with you, but expect to pay 2 to 4 percent higher interest and put 30 to 40 percent down.