DSCR Direct

Down payment is one of the first questions every investor asks. With DSCR loans, the minimum is 15% of the purchase price (85% LTV), which is actually lower than most conventional investment property loans that require 20-25% down. But the amount you put down has a direct impact on your rate, monthly payment, and cash flow - so understanding the tradeoffs matters.

The 15% Minimum (85% LTV)

DSCR loans are available with as little as 15% down on purchases. On a $300,000 property, that is $45,000. This is the maximum leverage available and it comes with higher rates compared to putting more down. At 85% LTV, expect rates to be 0.50-0.75% higher than the same scenario at 75% LTV. The 85% option is best for investors who want to maximize leverage and deploy capital across multiple properties rather than concentrating it in one deal.

How Down Payment Affects Your Rate

Every DSCR lender prices based on LTV tiers. Common tiers are 85%, 80%, 75%, 70%, 65%, and 60%. Each step down typically saves 0.125-0.25% on rate. For example, on a $250,000 loan, moving from 80% LTV to 75% LTV might save you 0.25% in rate, which equals about $50/month in payment savings. Over 30 years that adds up to $18,000. The sweet spot for most investors is 75-80% LTV - competitive rates without tying up excessive capital.

Cross-Collateralization for Effectively No Money Down

Some DSCR lenders offer cross-collateralization, where you pledge equity in another property to reduce or eliminate the down payment on a new purchase. If you own a property with significant equity, the lender can use that equity as collateral instead of a cash down payment. This lets you buy a new property with little to no money out of pocket. Not all lenders offer this, but DSCR Direct sources from hundreds of lenders and can identify programs that do.

Seller Concessions

Seller concessions - where the seller pays some of your closing costs - can reduce the total cash needed at closing. Most DSCR lenders allow seller concessions of 2-6% of the purchase price. On a $300,000 purchase, a 3% seller concession covers $9,000 in closing costs that you would otherwise pay out of pocket. This does not reduce the down payment itself, but it significantly reduces total cash to close. In buyer-friendly markets, seller concessions are common and expected.

Gift Funds

Many DSCR lenders accept gift funds for the down payment and closing costs. A family member can gift you the funds with a simple gift letter stating the money does not need to be repaid. The gift donor typically needs to provide a bank statement showing they have the funds available. Gift funds can cover the entire down payment in some cases, making DSCR accessible even if your personal liquidity is limited.

Reserves vs. Down Payment Tradeoff

Remember that DSCR lenders also require cash reserves after closing - typically 6-12 months of the monthly PITIA payment. A larger down payment reduces your post-closing reserves. If you put 20% down and that leaves you with only 3 months of reserves, you may not qualify. It is often better to put 15% down and keep more cash in reserves than to stretch for 20% and come up short on reserve requirements. Balance both when planning your capital deployment.

Find Your Optimal Down Payment

Use the pricer at dscrdirect.net to compare rates at different LTV levels for your scenario. Try running the same deal at 85%, 80%, and 75% LTV to see how the rate and payment change. This helps you find the down payment amount that balances rate savings with capital efficiency for your specific investment strategy.