How Much Down Payment Do You Need On a Rental Property?

Written by Steven PorrelloSeptember 14th, 20224 minute read

At a glance | Down payment breakdown | Eligible loan types | Financing your down payment

If you want to buy a single-family home as a rental property, the minimum down payment is usually 15% of the purchase price. But that isn’t a hard and fast rule.

Lenders will look closely at your credit score, debt-to-income ratio (DTI), the number of units in the property, and the type of loan you’re applying for. In some cases, you might be required to pay as little as 3.5% or as much as 25% up front for a rental property.

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👉 Minimum down payment of 15%. For government loans or for multi-unit properties, lenders might require 3.5–25%.

👉 Minimum credit score of 700. For lower credit scores, you’ll need either a higher down payment or a lower DTI. For the best interest rate, try to have a credit score above 740.

👉 Maximum DTI of 45%. For higher DTIs, you’ll likely need a higher down payment.

👉 Cash reserves of 6 months or more. Many lenders will require you to have 6 months worth of mortgage payments in savings.

How much down payment will you need for a rental property?

For single-family homes, a 15% down payment is the standard on most conventional loans. For a multi-family house, you’ll need a 25% down payment. The exact amount you'll pay, however, will depend heavily on two factors: your credit score and debt-to-income ratio.

Here's an idea of how much down payment you’ll need for a single-family home:

If your DTI is...
And your credit score is...
You need a minimum down payment of...
36% or less
640–679
25%
680+
15%
37–45%
660–699
25%
700+
15%

How credit score impacts your down payment

Generally speaking, the higher your credit score, the less you’ll pay up front to buy a rental property. For conventional loans, you should aim to have a score of at least 700 if you want a 15% down payment.

How your debt-to-income ratio (DTI) impacts your down payment

The lower your DTI, the less down payment you'll need. For conventional loans, you should have a DTI below 45% — though you’ll get the most favorable terms if it’s below 36%.

How DTI, credit score, and down payment work together

Most lenders will base their loan terms on the Fannie Mae Eligibility Matrix to decide how much you need to put down. This matrix matches minimum DTIs and credit scores with down payments of 15% and 25%.

What type of loan should I use for my rental property?

You can finance your rental property using a conventional loan or some government-backed loans.

The down payment requirements for FHA and VA loans are significantly lower for conventional mortgages — as low as 3.5% for an FHA loan or 0% for a VA loan.

Loan type
Minimum down payment
Minimum credit score
Maximum DTI
Conventional (single-family)

15%

700

45%

Conventional (multi-family)

25%

700

36%

FHA

3.5%

580

43%

VA

0%

N/A

41%

» COMPARE: Conventional vs. government loan — which one is right for you?

Requirements for using an FHA loan to purchase a rental:

  • The rental property must be multi-unit. A single-unit property won't qualify unless it's a second home.
  • You have to occupy one of the units. In other words, the rental property is also your primary residence.
  • You have to rent out rooms for periods longer than 30 days. This weeds out "transient" rentals, such as vacation homes.

Section 203(b)

This is your typical FHA loan. Under this program, you can buy either single-family homes or multi-unit properties. The latter can be a rental property, but you have to occupy one of the units. Your down payment will be at least 3.5%.

Section 207

Under this program, you can use an FHA loan to build or rehabilitate a multi-unit property that can then be used as a rental. You'll have to prove demand to your lender and present a viable business plan. Your down payment will be at least 10%.

Requirements for using a VA loan to purchase a rental:

At least one of the following minimum service requirements:

  • 90 consecutive days during wartime
  • 181 days during peacetime
  • 6 years in the National Guard

Spouses of service members who died in the line of duty are also eligible.

Conventional vs. government-backed loans

Criterion

Conventional
Government-backed
Single-family units allowed?

Multi-family units allowed?

Do you need to occupy the property?

High credit score?

High down payment?

Conventional loan

Good for…

✅ Investors. You can use a conventional loan to finance either single- or multi-family unit properties, and it doesn’t have to be your primary residence.

Not ideal for…

❌ A weaker financial profile. Your finances have to be in top shape, not only to qualify for a loan, but also to get a favorable interest rate. You’ll also need to pay at least 15% for a single-family home (or 25% for multi-unit properties).

Government-backed loan

Good for…

✅ Aspiring landlords. You can only use a government-backed loan on a multi-unit rental. Additionally, you must live in one of the units.

✅ A less-than-sparkling financial profile. Looser requirements and a smaller down payment mean an easier barrier to entry. For FHA loans, you only need to put down 3.5%, and there's no minimum for VA loans.

Not ideal for…

❌ Absentee investors. You can't use a government-backed loan on a single-family home or on a multi-unit rental that you don't live in.

❌ Lower cash reserves. With a smaller down payment, your lender may charge you a higher interest rate or fees.

Funding your down payment on a rental property

Home equity loan

A home equity loan allows you to tap into the equity on a property you already own, such as your primary residence or another investment, typically as a lump sum. If you fail to make payments, though, you could put both properties at risk.

Home equity line of credit (HELOC)

A HELOC also allows you to tap into your home equity, but with a revolving line of credit, so you can borrow money repeatedly (like with credit cards).

You’ll have a credit limit (usually 80% of your equity), and after you repay what you borrow, you can borrow that amount again or close the account.

House-flipping loan

There are numerous housing-flipping loans for rental properties, such as hard money or portfolio loans. Each of these options come with different credit score and DTI requirements, though some have no down payment requirement at all.