The minimum down payment for an investment property under conventional financing is 15% for a single-family rental run through automated underwriting, 20% if the loan is manually underwritten, and 25% for a two- to four-unit building. Those floors come from Fannie Mae’s loan-to-value caps and apply before you factor in credit score adjustments, cash reserves, and closing costs, all of which can push your actual out-of-pocket well past the headline percentage.1Fannie Mae. Eligibility Matrix
Down Payment by Property Type
The Fannie Mae Eligibility Matrix sets the ceiling on how much a lender will finance. A single-family investment property approved through Desktop Underwriter (Fannie Mae’s automated system) tops out at 85% LTV, so 15% down. Manual underwriting caps the loan at 80% LTV, requiring 20% down. On a $300,000 rental, that difference is $15,000 in cash at the closing table.1Fannie Mae. Eligibility Matrix
Duplexes, triplexes, and fourplexes carry a flat 75% LTV cap regardless of underwriting method. That’s 25% down across the board. A $400,000 fourplex requires $100,000 in equity before closing costs and reserves enter the picture. More units mean more tenants, more vacancy exposure, and more maintenance, so the lender wants a thicker cushion.1Fannie Mae. Eligibility Matrix
One thing to rule out early: FHA and VA loans aren’t available for pure rentals. Both programs require owner occupancy. There is no 3.5% down government-backed option for an investment property. If you’re not going to live in the home, you’re financing it conventionally or through a non-agency product.
How Credit Score Moves the Number
Fannie Mae’s floor is a 620 FICO for fixed-rate investment property loans and 640 for adjustable-rate mortgages. Clearing that floor gets your file reviewed but doesn’t earn you the best terms. Fannie Mae applies loan-level price adjustments based on credit score and property type, and investment properties already carry steeper adjustments than primary residences. Those hit you as a higher rate or as points charged upfront.2Fannie Mae. Selling Guide B3-5.1-01 – General Requirements for Credit Scores
A borrower at 640 buying a multi-unit rental faces meaningfully worse pricing than one at 740. Some lenders manage that risk by asking for a bigger down payment. If your score sits in the low-to-mid 600s, expect either a punishing rate or a request for 25% to 30% down on a single-family property. Borrowers at 720 and above generally access the lowest down payment tiers. Investment property rates also run roughly one percentage point higher than primary residence rates on an otherwise identical loan.
DSCR Loans as an Alternative
If your tax returns don’t show enough personal income to qualify, a debt service coverage ratio loan looks at the property’s rent instead of your W-2 or 1099 income. These are popular with self-employed investors and with borrowers whose returns show low taxable income after write-offs.
The tradeoff is a larger down payment. Most DSCR programs start at 20% down, and borrowers with a DSCR below 1.0, meaning the rent doesn’t fully cover the mortgage, often need 25% to 35%. Credit score minimums typically start at 660 to 680, and rates run higher than conventional. Because these are portfolio and non-agency products, terms vary widely, so quote several lenders before committing.
Cash Reserves You Have to Keep on Hand
Your down payment isn’t the last piece of cash the lender wants to see. Fannie Mae requires investment property borrowers to hold at least six months of the new property’s total mortgage payment in liquid reserves after closing. That payment includes principal, interest, taxes, insurance, and any association dues. A $2,200 monthly payment means $13,200 sitting in reserves and unavailable for your down payment.3Fannie Mae. Selling Guide – Minimum Reserve Requirements
If you already own other financed properties, Fannie Mae adds reserves calculated as a percentage of the combined unpaid balances on those other mortgages (excluding your primary residence and the property you’re buying): 2% for one to four financed properties, 4% for five to six, and 6% for seven to ten. An investor with three existing rentals totaling $600,000 in outstanding balances needs an extra $12,000 on top of the six-month requirement for the new loan. Conventional financing caps out at ten financed properties per borrower.3Fannie Mae. Selling Guide – Minimum Reserve Requirements
Closing Costs and What the Seller Can Cover
Plan on 2% to 5% of the purchase price in closing costs: loan origination fee, appraisal, title search, title insurance, escrow fees, recording fees, and prepaid taxes and insurance. On a $350,000 property, that’s roughly $7,000 to $17,500 more cash at closing.
Seller concessions help but are tightly capped. Fannie Mae limits interested-party contributions on investment properties to 2% of the lesser of the sale price or the appraised value. On a $350,000 purchase, the seller can chip in up to $7,000 toward closing costs. Anything above your actual closing costs gets deducted from the sale price for appraisal purposes, so you can’t use seller credits to shrink the down payment. Fees customarily paid by sellers in your market, like transfer taxes in some states, don’t count against this cap.4Fannie Mae. Selling Guide – Interested Party Contributions
Where the Down Payment Can Come From
One rule surprises first-time investors: gift funds from family members are flatly prohibited on investment property purchases, even though they’re allowed for primary residences. The lender wants your own capital at risk.5Fannie Mae. Selling Guide – Personal Gifts
Common sources that do work:
- Personal savings in checking, savings, or money market accounts. Easiest to verify and by far the most common source.
- Home equity pulled from your primary residence through a HELOC or cash-out refinance. The new payment will count against your debt-to-income ratio.
- Brokerage account proceeds. You’ll document the liquidation and the deposit.
- 1031 exchange proceeds from selling another investment property. Section 1031 of the Internal Revenue Code lets you defer capital gains by rolling the proceeds into a like-kind replacement, but the timing is strict: identify the replacement within 45 days and close within 180 days.6Office of the Law Revision Counsel. 26 USC 1031 – Exchange of Property Held for Productive Use or Investment
- A 401(k) loan of up to $50,000 or 50% of your vested balance, whichever is less. Repayment runs over five years, and leaving your employer with a balance outstanding can convert it to a taxable distribution with a 10% penalty if you’re under 59½. Not every plan permits loans, so check first.7Internal Revenue Service. Retirement Plans FAQs Regarding Loans8Office of the Law Revision Counsel. 26 USC 72 – Annuities, Certain Proceeds of Endowment and Life Insurance Contracts
How Rental Income Helps You Qualify
You don’t have to qualify for the mortgage on your day-job income alone. Fannie Mae lets you count 75% of the gross monthly rent shown on a signed lease or on a comparable rent schedule prepared by the appraiser. The 25% haircut covers vacancy and maintenance.9Fannie Mae. Selling Guide – Rental Income
If the appraiser pegs market rent at $2,000 a month, the lender credits you with $1,500 of qualifying income against the new mortgage payment. On multi-unit properties, every unit’s rent gets the same treatment, which is one reason a fourplex can pencil out better than the 25% down payment suggests.
Documenting Your Funds
Every dollar of your down payment and reserves has to be traced. Underwriters want the most recent two months of statements (at least 60 days of activity) for every account holding those funds. If your latest statement is more than 45 days old at application, expect a request for a supplemental balance printout.10Fannie Mae. Selling Guide – Verification of Deposits and Assets
Any single deposit larger than 50% of your total monthly qualifying income gets flagged as a large deposit and needs a paper trail. Sold a car? Bill of sale. Liquidated stock? Trade confirmation and transfer receipt. Moved money between your own accounts? Statements from both accounts covering the transfer. The lender is confirming that no piece of your down payment is a disguised loan from a third party.11Fannie Mae. Selling Guide – Depository Accounts
Retirement withdrawals or loans need documentation of both the disbursement and the deposit into your bank account. For 1031 proceeds, the qualified intermediary’s records serve as the paper trail. Between the down payment itself, six months of reserves, and 2% to 5% in closing costs, the total cash commitment on an investment property often lands between 30% and 35% of the purchase price. Working from that number rather than from the down payment alone is the difference between closing on time and scrambling in the final week.