Most DSCR loans require 20% to 25% down, depending on the lender, property, and loan program. Some programs allow qualified borrowers to put down as little as 15%. At Griffin Funding, 15% down is available with 740+ credit, and because there’s no minimum DSCR requirement, the down payment, not the ratio, is often the binding constraint.

A DSCR loan down payment is the cash an investor contributes upfront so the rental property’s loan amount fits the lender’s LTV, credit, and cash-flow requirements.

DSCR loans can finance eligible one- to four-unit long- and short-term rentals. Qualification primarily focuses on the property’s rental income rather than personal income documentation such as tax returns, W-2s, or pay stubs.

Your down payment affects three important numbers:

  1. The amount you borrow
  2. Your monthly PITIA (principal, interest, taxes, insurance, and applicable HOA dues)
  3. The property’s DSCR ratio

Why does that matter? A smaller down payment preserves more capital, but it also creates a larger loan. That larger balance can increase principal and interest, raise PITIA, and reduce the property’s DSCR.

How Much Do You Need Down for a DSCR Loan?

Plan for 20% to 25% down on most DSCR programs. Qualified borrowers can go as low as 15%, while higher-risk scenarios may require more.

$500,000 Purchase Example

Down payment Cash down Loan amount LTV
15% $75,000 $425,000 85%
20% $100,000 $400,000 80%
25% $125,000 $375,000 75%

The math is straightforward:

  1. Loan amount = purchase price − down payment
  2. LTV = loan amount ÷ property value

A higher down payment produces a lower LTV, which means the investor borrows a smaller share of the property’s value.

What Determines Your DSCR Loan Down Payment?

Your DSCR loan down payment is based on the overall risk of the transaction. Underwriters review the full file rather than relying on one qualifying number, so meeting a single minimum does not automatically secure the highest available LTV.

The main variables include:

  • Credit strength
  • Rental cash flow and DSCR
  • Property type and rental strategy
  • Purchase or refinance structure
  • Overall loan risk

1. Credit Score

A higher credit score can reduce the down payment required for a DSCR loan. Most DSCR programs set a minimum credit score around 620, although requirements vary by lender and program. A higher credit score can improve access to higher-LTV programs. Griffin Funding, for example, offers 15% down on eligible loans up to $1 million for borrowers with 740+ credit, on purchase and rate-and-term transactions with a DSCR of 1.0 or better.

Here’s the practical range:

  • 740+ credit may support 15% down
  • Many borrowers should plan for at least 20% down
  • Lower scores may require more equity or reserves

Stronger credit may also improve pricing. It does not guarantee approval or a specific down payment.

2. DSCR Ratio

A stronger DSCR ratio can support a lower down payment because the property shows more room to cover its monthly obligations.

The formula is straightforward:

DSCR = gross monthly rent ÷ monthly PITIA

At a 1.0 DSCR, rent and PITIA break even. Some DSCR programs allow ratios below 1.0. Griffin Funding has no minimum DSCR requirement: sub-1.0 ratios are funded when compensating factors support the deal, such as stronger credit, a larger down payment, or additional reserves. Lower ratios may require a lower LTV, additional reserves, or more cash at closing. 

Why does more cash down help? A smaller loan can reduce PITIA and raise the resulting DSCR.

Some programs go further and waive the ratio test altogether, often called a “no-ratio” DSCR loan, where the property’s rental income isn’t underwritten at all. These programs may require more equity and stronger credit to offset the added risk.

3. Property Type and Rental Strategy

Property type and rental strategy can affect the required down payment because income stability and expenses vary. Underwriting may differ for long-term rentals, short-term rentals, condominiums with HOA dues, and two- to four-unit properties.

Short-term rentals may need market data or operating history. HOA dues increase PITIA, while local rental restrictions can affect a property’s risk profile.

Program requirements for a short-term rental may differ from those for a standard long-term rental.

4. Purchase vs. Refinance

A purchase typically requires a cash down payment, while a refinance uses the property’s existing equity to meet the applicable LTV requirements. In both cases, the property’s value and permitted LTV determine the maximum loan amount.

DSCR Down Payment vs. LTV

Your down payment and LTV are two ways of describing the same deal. Put simply, more cash down means a lower loan-to-value ratio, while less cash down means a higher LTV.

  • Down payment = your cash or equity in the deal
  • LTV = loan amount ÷ property value

Lenders may calculate LTV using the purchase price or appraised value, depending on the transaction and underwriting guidelines.

Why does this matter? Lenders use LTV to size and evaluate DSCR loans, while investors usually think in terms of cash down. A lower LTV may produce a smaller loan, lower monthly PITIA, and a stronger DSCR.

Some DSCR lenders may reduce maximum LTV to 75% or 70% in certain states, markets, or property scenarios because of lender-specific program overlays or risk considerations.

DSCR Loan Down Payment Example

A simple example shows how your down payment affects both cash-to-close and DSCR. 

  • Purchase price: $500,000
  • Down payment at 20%: $100,000
  • Loan amount: $400,000

Now bring in the property income:

  • Monthly rent: $3,600
  • Monthly PITIA: $3,000

Here’s the key calculation:

DSCR = $3,600 ÷ $3,000 = 1.20

A 1.20 DSCR means the property’s gross monthly rent equals 120% of its monthly PITIA. It does not account for maintenance, vacancy, management, or other operating expenses.

What happens if the investor puts more down?

Assume the lower loan amount reduces monthly PITIA to $2,800.

DSCR = $3,600 ÷ $2,800 = 1.29

Same property. Same rent. Higher DSCR.

The right balance depends on the investor’s strategy, available reserves, property income, and underwriting. A property that works at 20% down may not produce the same qualifying ratio at 15% down.

Closing Costs and Reserves Come on Top of the Down Payment

The down payment is not your complete cash-to-close estimate. A DSCR borrower may also need funds for:

  • Lender, title, and escrow fees
  • Appraisal and recording charges
  • Prepaid taxes, insurance, and interest
  • Escrow deposits
  • Discount points, if the loan carries them
  • Required cash reserves

Two of these routinely surprise first-time DSCR borrowers. Points are separate from the down payment and due in cash at closing, so a loan priced with points needs room in the budget beyond the equity contribution. And reserves are liquid funds you must still have after closing, measured in months of PITIA: at $3,000 PITIA, a six-month requirement means $18,000 in eligible reserves on top of everything above. For the full breakdown of reserve requirements and eligible reserve assets, see our DSCR loan requirements guide.

Can You Put Less Down on a DSCR Loan?

Yes. Some borrowers may qualify with 15% down on eligible DSCR programs. Putting less down preserves capital, but it also creates a larger loan, which can increase PITIA, reduce DSCR, and affect pricing or reserve requirements.

Where Can DSCR Down Payment Funds Come From?

Eligible funds may come from several sources, subject to documentation and underwriting:

  • Personal savings
  • Business or LLC accounts
  • Cash-out proceeds from another investment property
  • Gift funds
  • Properly documented 1031 exchange proceeds

At Griffin Funding, gift funds are typically permitted, although some DSCR programs may require the borrower to contribute at least 10% of their own funds. Documentation, sourcing, and seasoning requirements vary by program and loan structure.

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Frequently Asked Questions

1. Can built-in equity replace part of a DSCR loan down payment?

Built-in equity does not necessarily reduce the cash required for a DSCR loan. A property purchased below its appraised market value may have built-in equity on day one, but that equity does not automatically reduce the required cash contribution. If the lender sizes the purchase loan based on the lower purchase price, the investor may still need to provide the required down payment based on that purchase price.

2. Can a seller credit replace the required DSCR down payment?

Seller credits may reduce eligible closing expenses, but they generally do not replace the investor’s required equity. Seller credits generally apply to lender charges, title expenses, prepaid taxes, or insurance costs rather than the down payment used to establish LTV.

3. Does earnest money become part of the DSCR down payment?

Earnest money can generally be credited toward the down payment at closing when it is properly documented and credited. Earnest money represents money the investor has already contributed to the transaction rather than a separate charge added to the down payment. Keep a clear record showing the source of the deposit and its delivery to the title or escrow company.

4. Can 1031 exchange proceeds be used for a DSCR loan down payment?

Properly documented 1031 exchange proceeds may supply some or all of the investor’s cash to close, subject to underwriting and exchange structure. A 1031 exchange does not reduce the required down payment percentage. Instead, the proceeds supply some or all of the investor’s cash contribution while the loan must still meet the applicable LTV.

Bill Lyons is the Founder, CEO & President of Griffin Funding. Founded in 2013, Griffin Funding is a national boutique mortgage lender focusing on delivering 5-star service to its clients. Mr. Lyons has 25 years of experience in the mortgage business. Lyons is seen as an industry leader and expert in real estate finance. Lyons has been featured in Forbes, Inc., Wall Street Journal, HousingWire, and more. As a member of the Mortgage Bankers Association, Lyons is able to keep up with important changes in the industry to deliver the most value to Griffin's clients. Under Lyons' leadership, Griffin Funding has made the Inc. 5000 fastest-growing companies list six times in its 12 years in business. Follow his updates on LinkedIn.