Investment property mortgages typically require 15% to 25% down, compared to 3% to 5% for a home you'll live in

Lenders treat investment properties differently from primary residences because the risk is higher — if you can't pay, you're more likely to walk away from an investment than from your own home. That's why they ask for a larger down payment upfront. The exact amount depends on the type of property, how many rental units it has, your credit score, and the lender you choose.

A single-family rental house usually requires 20% down as a baseline. A multi-unit building (a duplex, triplex, or four-plex) often requires 25% down. Some lenders will go as low as 15% if you have strong credit and savings, but you'll pay a higher interest rate to offset their risk. A few specialized lenders offer 10% down on investment properties, but these are uncommon and come with steep rate premiums.

The down payment is only part of what you'll need to bring to closing. You'll also pay closing costs (typically 2% to 5% of the purchase price), property inspections, appraisals, and possibly cash reserves that the lender requires you to keep on hand after closing.

Key Takeaways

  • Investment property down payments range from 15% to 25%, with 20% being the most common requirement for single-family rentals.
  • Multi-unit properties (duplexes, triplexes, four-plexes) typically require 25% down because lenders see them as higher risk.
  • Your credit score, savings history, and the lender's own rules all affect whether you can put down 15% or must put down 25%.
  • Down payment is separate from closing costs and cash reserves, which together can add another 5% to 10% to your total cash needed.

Why investment properties require more down than your primary home

When you borrow to buy a house you live in, the lender knows you have a strong personal incentive to keep paying — you need somewhere to sleep. When you borrow to buy a rental property, the lender is betting that rental income will cover the mortgage. If that income dries up, you might decide the investment isn't worth saving.

Lenders also know that investment properties are harder to sell quickly if something goes wrong. A primary residence in a decent neighborhood usually has many potential buyers. A rental property in a declining area or with problem tenants has fewer. The larger down payment is the lender's cushion against that risk.

The property type matters too. A single-family house is easier to rent out and easier to sell than a four-plex, so single-family rentals get slightly better terms. A four-plex is considered commercial real estate by some lenders, which triggers stricter rules and higher down payment requirements.

How down payment changes based on property type

A single-family rental house — one house you rent to tenants — typically requires 20% down. This is the most common investment property type, and lenders have the most experience with it. If your credit is excellent and you have significant cash reserves, some lenders will accept 15% down, though your interest rate will be higher.

A duplex, triplex, or four-plex (a building with 2, 3, or 4 units) usually requires 25% down. These are classified as commercial properties by many lenders, which means stricter underwriting and higher down payments. The logic is that managing multiple tenants and units is more complex, and vacancy hits harder — if one unit is empty, you still have rent from the others, but if your single-family house is empty, you have zero income.

A condo or townhouse you plan to rent out may require 20% to 25% down, depending on the lender and the condo association's rules. Some condo buildings have restrictions on how many units can be rented out at once, which makes lenders nervous. Always check the condo documents before you make an offer.

A commercial building (office space, retail, warehouse) follows different lending rules entirely and usually requires 20% to 30% down, plus proof of tenant leases and commercial experience. This is beyond the scope of most first-time investment property buyers.

What affects the down payment amount you'll actually need

Credit score: A score above 740 may get you 15% down on a single-family rental. A score between 680 and 720 will likely require 20%. Below 680, most conventional lenders won't touch you, and you'll need to look at portfolio lenders or hard money lenders, which charge much higher rates and fees.

Debt-to-income ratio: Lenders calculate how much of your monthly income goes to existing debts (car loans, credit cards, student loans, your primary mortgage). For investment properties, they typically want this ratio below 43%, sometimes lower. If you're already carrying debt, you may need a larger down payment to offset the risk in the lender's eyes.

Cash reserves: Lenders want to see that you have money left over after closing. Many require you to hold 6 to 12 months of the property's mortgage payment, property taxes, insurance, and estimated maintenance costs in a separate account. A larger down payment reduces the loan amount, which reduces the reserves you need to hold, so sometimes putting down more actually makes the deal work.

Rental income documentation: If you already own rental properties, lenders will count a portion of that income toward your ability to pay. If this is your first rental, they won't count projected rental income at all — they only count your W-2 income or business income. This can make it harder to may have access to, and a larger down payment helps offset that.

Down payment versus closing costs and reserves

The down payment is what you put toward the purchase price itself. On a $300,000 property with 20% down, that's $60,000. But you also owe closing costs, which typically run 2% to 5% of the purchase price — another $6,000 to $15,000. These cover the appraisal, title search, title insurance, loan origination fees, and attorney fees.

On top of that, most lenders require you to have cash reserves after closing. For a single-family rental, this is usually 6 months of the mortgage payment plus property taxes, insurance, and HOA fees (if any). For a multi-unit building, it's often 12 months. On a $300,000 property with a $240,000 mortgage at 6.5%, that could mean holding $8,000 to $16,000 in reserves.

So on that $300,000 property, you might need $60,000 down, $10,000 in closing costs, and $12,000 in reserves — a total of $82,000 in cash before you close. Budget for this when you're deciding how much to save.

Lender types and their down payment rules

Conventional lenders (banks and credit unions) typically require 20% down for single-family rentals and 25% for multi-unit. They have the strictest rules but the lowest interest rates if you may have access to. They want strong credit, low debt, and documented income.

Portfolio lenders are banks that keep mortgages on their own books instead of selling them to investors. They have more flexibility and may accept 15% down, lower credit scores, or non-traditional income. The tradeoff is a higher interest rate. These are harder to find — call local and regional banks and ask if they hold mortgages in portfolio.

FHA loans are government-backed mortgages that allow as little as 3.5% down for a primary residence, but they do not cover investment properties. You cannot use an FHA loan to buy a rental house.

Hard money lenders are private investors who lend based on the property's value, not your credit or income. They typically require 20% to 30% down and charge 8% to 12% interest, plus origination fees. Use these only if conventional lenders have turned you down and you plan to refinance quickly.

How to calculate what you can afford

Start with the purchase price you're considering. Multiply it by 0.20 (for 20% down) or 0.25 (for 25% down). That's your down payment. Add 3% of the purchase price for closing costs. Then calculate your monthly mortgage payment using an online calculator — plug in the loan amount (purchase price minus down payment), the interest rate, and a 30-year term.

Multiply that monthly payment by 6 or 12 (depending on whether the lender requires 6 or 12 months of reserves). Add property taxes, insurance, and maintenance estimates for that same period. That's the total cash you need to bring to closing.

If that number is more than you have saved, you have three options: save longer, look at less expensive properties, or find a lender with lower down payment requirements (knowing you'll pay a higher interest rate). Running the numbers before you start house hunting saves time and disappointment.

Frequently Asked Questions

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

Yes, most lenders allow down payment gifts from family members. You'll need a signed gift letter stating the money is a gift, not a loan, and the lender will verify the funds came from the family member's account. Some lenders limit gifts to a percentage of the down payment, so ask before you accept the money.

What if I put down less than 20%?

You'll pay a higher interest rate, and you may have to pay mortgage insurance (PMI), which protects the lender if you default. On investment properties, PMI is more expensive than on primary residences. You'll also need larger cash reserves to offset the lender's increased risk. The math often doesn't work out in your favor unless you plan to refinance quickly.

Do I need a down payment for a second or third rental property?

Yes, the same rules explore. Each investment property is underwritten separately. However, if you have strong rental income from existing properties, that income counts toward your debt-to-income ratio, which can help you may have access to for a lower down payment on the next one.

Can I borrow the down payment from my 401(k)?

You can take a loan against your 401(k) in most cases, but you'll owe it back with interest, and if you leave your job, the loan becomes due when ready. This is risky and expensive. Saving the down payment separately is almost always better. Talk to a tax professional before you consider this route.

What happens if the property appraises for less than the purchase price?

The lender will only lend based on the appraised value, not the purchase price. If you agreed to pay $300,000 but it appraises at $280,000, you'll need to come up with the $20,000 difference in cash at closing, or renegotiate the price with the seller. This is why having extra cash reserves matters.