Investment property down payments generally start higher than they do for a primary residence.
Under current Fannie Mae and Freddie Mac guidelines, a 1-unit conventional investment property can be financed up to 85% LTV, which means at least 15% down. A 2- to 4-unit investment property is limited to 75% LTV, or at least 25% down.
Those are maximum agency LTVs, not guaranteed approvals. Your lender, credit profile, property and loan structure can require more equity.
The down payment also is not the full amount of cash you may need. Investment property financing can require reserves in addition to closing costs and the money you put down.
Investment Property Down Payment Basics
| Loan or Property Type |
Down Payment |
What to Know |
| Conventional, 1-unit investment property |
At least 15% |
Based on an 85% maximum LTV under current Fannie Mae and Freddie Mac guidelines |
| Conventional, 2- to 4-unit investment property |
At least 25% |
Based on a 75% maximum LTV |
| DSCR |
Varies by program |
Equity requirements can depend on credit, DSCR, property type and other lender rules |
| Bank statement |
Varies by program |
Requirements are set by the lender or investor rather than Fannie Mae or Freddie Mac |
| Asset qualifier |
Varies by program |
Available assets and the lender's qualification method can affect maximum LTV |
Fannie Mae's eligibility matrix allows up to 85% LTV on a 1-unit investment-property purchase and 75% on a 2- to 4-unit purchase.
Freddie Mac publishes the same maximum purchase LTVs.
How Unit Count Changes the Down Payment
The biggest conventional down-payment jump happens when you move from a single-unit rental to a property with multiple units.
A 1-unit investment property can go as high as 85% LTV. That leaves a minimum 15% down payment.
A duplex, triplex or fourplex purchased strictly as an investment property is capped at 75% LTV. That pushes the minimum down payment to 25%.
| Purchase Price |
Property Type |
Minimum Down Payment |
Starting Loan Amount |
| $400,000 |
1-unit investment property |
$60,000 (15%) |
$340,000 |
| $400,000 |
2- to 4-unit investment property |
$100,000 (25%) |
$300,000 |
The rules are different if you plan to live in one of the units. An owner-occupied 2- to 4-unit property is treated as a principal residence rather than an investment property.
Under current Fannie Mae guidelines, eligible owner-occupied 2- to 4-unit purchases can reach 95% LTV, or 5% down.
That occupancy distinction is one of the biggest differences in financing a 2- to 4-unit property.
What 15%, 20% and 25% Down Look Like
The minimum down payment does not necessarily produce the lowest-cost loan.
On a $400,000 1-unit investment property, 15% down means putting $60,000 down and borrowing $340,000.
At 20% down, the down payment rises to $80,000 and the loan falls to $320,000.
At 25% down, you would put down $100,000 and borrow $300,000.
| Down Payment |
Cash Down |
Loan Amount |
LTV |
| 15% |
$60,000 |
$340,000 |
85% |
| 20% |
$80,000 |
$320,000 |
80% |
| 25% |
$100,000 |
$300,000 |
75% |
More money down lowers the balance used to calculate principal and interest.
It can also change conventional loan pricing. Fannie Mae applies investment-property loan-level price adjustments that vary by LTV, so a loan at 75% LTV can be priced differently from the same loan at 85% LTV.
There is another difference at 20% down. A 15%-down conventional investment property is above 80% LTV and can be subject to private mortgage insurance requirements.
Non-QM Down Payments Vary by Program
There is no single minimum down payment for non-QM investment property financing.
DSCR, bank statement and asset qualifier loans are not governed by one Fannie Mae or Freddie Mac eligibility matrix.
Instead, the maximum LTV can depend on the lender, property type, credit profile, loan amount and qualification method.
For a DSCR loan, the property's cash flow can also affect the terms available. Bank statement programs can put more emphasis on documented deposits, while asset qualifier programs evaluate eligible assets.
That flexibility is one reason non-QM investment property loans can work when conventional underwriting does not.
It also means a down-payment percentage advertised for one program should not be treated as a rule for the entire non-QM market.
Second Home vs. Investment Property Down Payments
Occupancy changes the financing rules.
Fannie Mae permits up to 90% LTV on an eligible 1-unit second-home purchase, equivalent to 10% down.
The same property purchased as an investment property is capped at 85% LTV, or 15% down.
That difference only applies when the property legitimately qualifies as a second home.
A property you intend to use primarily as a rental cannot simply be classified as a second home to obtain a smaller down payment or different pricing.
The amount needed for a second home therefore can be lower than the minimum for a property purchased strictly for investment use.
How Credit Can Affect the Amount You Need Down
The agency maximum LTV tells you the most leverage a conventional program can permit. It does not mean every borrower will qualify at that level.
Investment-property loans must still pass automated underwriting, and individual lenders can add their own requirements.
Credit also affects conventional pricing.
A borrower with weaker credit may decide to put more down to reduce LTV and improve the overall loan structure, even when automated underwriting would permit a smaller down payment.
Your credit profile and investment-property LTV therefore need to be considered together rather than as separate qualification issues.
Why FHA, VA and USDA Do Not Finance a Traditional Investment Property
Low-down-payment government-backed mortgages generally require you to occupy the home.
FHA requires at least one borrower to establish the property as a principal residence. FHA specifically prohibits using its insurance program as a way to acquire investment properties.
VA requires the home securing a VA-backed purchase loan to be for the eligible borrower's personal occupancy.
USDA's guaranteed program likewise requires the borrower to occupy the dwelling as a primary residence.
That means you cannot use an FHA, VA or USDA purchase loan to buy a home that will be a non-owner-occupied rental from the start.
Buying a Multi-Unit Property You Plan to Live In
A duplex, triplex or fourplex can produce rental income without necessarily being classified as an investment property.
If you legitimately occupy one unit as your principal residence, the property can qualify under owner-occupied rules.
Fannie Mae currently allows up to 95% LTV on eligible 2- to 4-unit principal-residence purchases.
FHA can also finance eligible 2- to 4-unit properties with a minimum required investment of 3.5%, subject to FHA occupancy and other underwriting requirements.
This is commonly called house hacking: you live in one unit while renting the others.
The occupancy requirement is real. You cannot use owner-occupied financing if you do not actually intend to occupy the property as required by the loan.
Your Down Payment Is Not Your Total Cash Requirement
A common mistake is to save enough for the down payment and assume the transaction is fully funded.
You may also need money for closing costs and reserves.
For Fannie Mae investment-property transactions underwritten through Desktop Underwriter, the borrower generally needs six months of reserves for the subject property. Additional reserve requirements can apply if you own other financed properties.
Those investment property reserves are separate from the down payment.
Consider a purely illustrative $400,000 purchase with 20% down:
| Cash Need |
Illustrative Amount |
| 20% down payment |
$80,000 |
| Assumed closing costs |
$12,000 |
| Six months of reserves at an assumed $2,500 PITIA |
$15,000 |
| Total cash and reserves represented in example |
$107,000 |
The $12,000 closing-cost figure and $2,500 monthly payment are examples only, not standard requirements.
The point is that a $80,000 down payment does not necessarily mean $80,000 is all you need available.
Where an Investment Property Down Payment Can Come From
Verified checking, savings and other eligible assets can generally be used toward a conventional investment-property purchase.
Fannie Mae also permits eligible business assets, proceeds from the sale of personal assets and certain borrowed funds secured by another asset, subject to documentation and underwriting requirements.
The lender must be able to verify where the money came from.
Large deposits used for the transaction can require documentation showing an acceptable source.
Can You Use Gift Funds for an Investment Property?
Not for a Fannie Mae investment-property mortgage.
Fannie Mae's current policy permits personal gift funds on principal residences and second homes but expressly excludes investment properties.
That is an important difference from many owner-occupied purchases, where gifts can sometimes cover part or all of the down payment.
Can You Use Business Funds?
Business assets can be an acceptable source of funds under Fannie Mae rules.
The lender must still determine that you have access to the money and evaluate whether removing it from the business could negatively affect the business.
The funds also have to be documented.
Can You Sell Another Asset for the Down Payment?
Yes, eligible proceeds from selling a personal asset can be used for the down payment, closing costs or reserves if the transaction is properly documented.
That could include an eligible asset such as a vehicle, provided the lender can document ownership, the sale and receipt of the proceeds when required.
Using Home Equity for an Investment Property Down Payment
Equity in another property can also be a source of purchase funds.
For example, a homeowner may borrow against an existing home through a HELOC or cash-out refinance and use the proceeds toward another purchase.
Fannie Mae permits borrowed funds secured by an asset to be used for a down payment, closing costs or reserves, subject to its documentation requirements.
The new debt can still affect qualification. A HELOC or other secured loan may add another monthly obligation that has to be considered when calculating your DTI.
It can also increase the combined leverage against the property securing the new debt, which is why CLTV matters when borrowing against existing equity.
Whether a cash-out refinance or HELOC fits better depends on how much equity you need, the terms of the existing mortgage and the structure of the new borrowing.
Saving for an Investment Property Down Payment
Start with the full cash target rather than only the minimum down payment.
That means estimating the down payment, closing costs and required reserves separately.
If you expect to put 20% down on a $400,000 property, for example, the down-payment target alone is $80,000.
Saving $2,000 per month would take 40 months to reach that amount if you started from zero and ignored interest or investment returns.
A down payment savings calculation can help translate the target into a monthly amount and timeline.
Bottom Line
A conventional investment property can require as little as 15% down when it has one unit.
For a 2- to 4-unit property that you will not occupy, the conventional minimum rises to 25% based on current Fannie Mae and Freddie Mac maximum LTV rules.
The minimum is only the starting point.
Putting more down can reduce the loan balance and may improve pricing, while reserves and closing costs can add substantially to the cash needed for the transaction.
Non-QM down-payment requirements vary by program, so their maximum LTV should be verified for the specific loan rather than treated as a marketwide rule.
FAQ
Can You Buy an Investment Property With 10% Down?
Not with a standard conforming conventional loan on a property purchased strictly as an investment.
Current Fannie Mae and Freddie Mac guidelines cap a 1-unit investment-property purchase at 85% LTV, which means at least 15% down. Non-QM programs set their own LTV requirements.
Can You Put 15% Down on an Investment Property?
Yes. Current Fannie Mae and Freddie Mac guidelines permit up to 85% LTV on an eligible 1-unit investment-property purchase, making 15% down possible.
A 2- to 4-unit investment property is capped at 75% LTV and therefore requires at least 25% down.
Can You Use Gift Funds for an Investment Property Down Payment?
Fannie Mae does not permit personal gift funds on an investment-property mortgage.
Its current policy allows gifts on eligible principal residences and second homes but specifically excludes investment properties. Requirements can differ outside Fannie Mae financing, so other programs must be checked individually.
Can You Use a HELOC for an Investment Property Down Payment?
Borrowed funds secured by an asset can be an acceptable source of down-payment funds under Fannie Mae rules.
A HELOC can therefore provide funds in some transactions, but the lender must document the borrowing and account for the additional debt when required.
Do You Need 25% Down on a Duplex?
You need at least 25% down on a conventional duplex purchased as a non-owner-occupied investment property under current Fannie Mae and Freddie Mac LTV limits.
If you will occupy one unit as your principal residence, owner-occupied financing can allow a substantially smaller down payment.
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