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

The down payment for an investment property is almost always larger than what you'd put down on a primary residence. Where a conventional mortgage on a home you'll live in might accept 3 to 5 percent down, investment properties start at 15 percent and often climb to 25 percent or higher. The exact amount depends on three things: the type of loan you're using, whether the property is a single unit or multi-unit building, and the lender's own rules.

Lenders treat investment properties as higher risk because you're not living there—you're counting on rental income to cover the mortgage. That means they want to see more of your own money in the deal before they'll lend. A larger down payment also protects the lender if property values drop or tenants stop paying rent.

Key Takeaways

  • Conventional loans for investment properties require a minimum of 15 percent down, though many lenders ask for 20 to 25 percent.
  • FHA loans do not cover investment properties, but portfolio lenders and some credit unions may offer alternatives with different down payment rules.
  • Multi-unit buildings (duplexes, triplexes, four-plexes) often require higher down payments than single-family rentals.
  • Your down payment amount also affects your interest rate—larger down payments usually mean lower rates and no mortgage insurance requirement.
  • Cash reserves and debt-to-income ratio matter as much as the down payment itself; lenders want proof you can cover the mortgage if a unit sits vacant.

How down payment requirements differ by loan type

Conventional loans are the most common route for investment properties. Most conventional lenders require 20 to 25 percent down on a single-family rental and 25 percent or more on multi-unit buildings. Some will go as low as 15 percent, but you'll pay mortgage insurance (called PMI) on anything below 20 percent, which adds to your monthly cost. The interest rate is also typically higher on investment properties than on primary residences, even with the same down payment.

Portfolio lenders are banks that keep loans on their own books rather than selling them to investors. They have more flexibility and may accept 10 to 15 percent down on investment properties, though their interest rates are usually higher to offset the lower down payment. Portfolio lenders are less common than conventional lenders, but they exist at some regional and community banks.

Credit union loans vary widely. Some credit unions will lend on investment properties with 15 percent down if you're a member in good standing. Others don't touch investment properties at all. Call your credit union directly—their rules are not standardized the way conventional loans are.

FHA loans do not cover investment properties. FHA is for primary residences only. If you're looking at an FHA-type program for an investment property, you're looking at the wrong tool.

Single-family rentals versus multi-unit buildings

A single-family rental house usually requires 20 to 25 percent down on a conventional loan. The lender treats it like a rental business, but the underwriting is relatively straightforward because there's one tenant and one lease.

A duplex, triplex, or four-plex (a building with two to four units) typically requires 25 percent down, sometimes more. The lender sees multi-unit properties as more complex—more tenants, more leases, more moving parts. Some lenders won't touch anything above four units unless you have significant experience as a landlord or the property is already stabilized with a long history of rent collection.

If you're buying a multi-unit building and one unit is owner-occupied (you live in one unit and rent the others), some lenders will treat it more like a primary residence with a rental component. Down payment requirements may drop to 15 to 20 percent in that case, though the interest rate will still be higher than a true primary residence mortgage.

What lenders look at beyond the down payment

The down payment is only part of the picture. Lenders also examine your debt-to-income ratio, which is the total of all your monthly debt payments divided by your gross monthly income. For investment properties, lenders typically want this ratio at 43 percent or lower, sometimes stricter. They count the mortgage payment on the investment property, plus any rental income you'll receive (usually at 75 percent of the lease amount to be conservative), plus all your other debts.

You'll also need to show cash reserves—money in the bank after closing. Most lenders want to see six to twelve months of the mortgage payment (principal, interest, taxes, insurance) sitting in reserves. Some want reserves equal to the down payment itself. This is separate from the down payment; it's proof you can cover the mortgage if the property sits vacant or a tenant doesn't pay.

Your credit score matters more on investment properties than on primary residences. Most lenders want 680 or higher, though some ask for 700 or above. A lower score can push your interest rate up significantly or disqualify you entirely.

Finally, lenders want to see your experience as a landlord or proof that you've hired a property manager. If you've never owned a rental before, some lenders will still work with you, but others may require a higher down payment or charge a higher rate. Having a property manager under contract before you close can help offset this concern.

How down payment size affects your interest rate and costs

A larger down payment does more than reduce the loan amount—it typically lowers your interest rate. The difference between 15 percent and 25 percent down might be 0.25 to 0.5 percent on your rate, which translates to hundreds of dollars per month over the life of the loan.

Down payments below 20 percent trigger mortgage insurance (PMI), which is an additional monthly cost. On a $300,000 investment property with 15 percent down, PMI might run $150 to $250 per month. That cost stays until you reach 20 percent equity, which takes years. With 20 percent down, you avoid PMI entirely.

The math often favors putting down 20 to 25 percent if you have the cash available. You avoid PMI, you get a better rate, and your monthly payment is lower. However, if putting down 25 percent means you have no cash reserves left, that's a problem—lenders won't approve the loan, and you'd be vulnerable to any unexpected repair or vacancy.

Timing and closing costs you'll owe on top of the down payment

The down payment is not the only money you need at closing. You'll also owe closing costs, which typically run 2 to 5 percent of the purchase price. On a $300,000 property, that's $6,000 to $15,000. Closing costs include the appraisal, title search, title insurance, loan origination fees, and attorney fees (in some states).

Some lenders allow you to roll closing costs into the loan, but that increases your total debt and may push your debt-to-income ratio over the lender's limit. Most investors pay closing costs out of pocket to keep the loan amount down.

You may also want to budget for when ready repairs, a property inspection, and the first month's property management fee if you're hiring someone. These aren't part of the down payment, but they're part of the total cash you need to have ready before you close.

Frequently Asked Questions

Can I use a gift for the down payment on an investment property?

No. Lenders require that the down payment on an investment property come from your own funds. Gifts are allowed on primary residences, but not on rentals. The lender wants to know that you have skin in the game and that you're not overleveraged.

What if I have 10 percent down but the property is in a hot market?

Most conventional lenders will not approve a loan with less than 15 percent down on an investment property, regardless of market conditions. Your options are to save more, look for a portfolio lender (which may have different rules), or consider a co-borrower who can bring additional funds or income to the process.

Do I need the full down payment before I make an offer?

You need to show proof of funds—a bank statement or letter from your lender—when you make an offer, but you don't hand over the down payment until closing. The earnest money deposit (usually 1 to 3 percent of the offer price) goes into escrow when the offer is accepted, and the rest of the down payment is due at closing.

Will a lower down payment hurt my chances of getting approved?

Yes. A 15 percent down payment is riskier from the lender's perspective than 25 percent, so you'll face stricter scrutiny on your income, credit, and reserves. You may also be charged a higher interest rate. If your debt-to-income ratio or cash reserves are already tight, a lower down payment can push you over the lender's limits.

Can I put down less if I'm buying a property that's already rented out?

Sometimes. If the property has a long history of stable rent collection and the current lease is in place, some lenders view it as lower risk and may accept 15 to 20 percent down instead of 25 percent. You'll need to provide the lease, rent history, and proof that the tenant is current on payments.