Exact terms depend on the lender’s guidelines, property type, leverage, and a full review of the borrower’s file.
These specifics are subject to lender guidelines and a full review of property, leverage, and credit.
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The Quick Read: For a first Airbnb, 25% down is the stronger default. It fits the 75% ceiling on short-term-rental purchases, shrinks the loan, and lifts the coverage ratio on the same rent. Fifteen percent down suits only a well-capitalized buyer with strong credit and strong rental coverage who wants cash left for furnishing and reserves, subject to lender guidelines.
- Across the wholesale network Lendmire places files with, short-term-rental purchase leverage tops out at 75% LTV on the strongest files. That is 25% down.
- The minimum credit score on short-term-rental files is 640, and about 12 months of host or landlord experience is usually expected.
- The coverage floor on a short-term-rental purchase is 1.00. A bigger down payment helps you reach it without any extra rent.
- Clearing the coverage floor is not the same as positive cash flow. Repairs, vacancy, management, and utilities sit outside the math.
- 15% down is a higher-leverage request. Published industry materials describe it as rarer and tied to stronger files.
The Honest Answer on Who Each Option Is For
Choose 25% down if you are a first-timer who wants the most room for approval. It suits you if your rent figure is a projection, not a track record, or if your credit sits in the middle of the range. Choose 15% down only if you have strong credit, strong coverage, and enough cash that the smaller down payment is a choice, not a necessity. The exact numbers vary by lender and program.
Two terms first. DSCR, short for debt service coverage ratio, is the rent a lender uses divided by the full monthly obligation. That obligation is PITIA: principal, interest, taxes, insurance, and any HOA dues. LTV, or loan-to-value, is the loan as a percentage of the price. Putting 15% down is an 85% LTV request. Putting 25% down is a 75% LTV request. Terms depend on the lender’s guidelines, the property type, the leverage, and a full review of the credit profile.
The loan is reviewed primarily on property-level rental income covering the payment, subject to lender guidelines. Your W-2 is not the test. That is why the down payment matters so much. Equity is the cushion the lender leans on when the income is unproven. A brand-new Airbnb has no income history at all.
Side-by-Side
The 25% column reflects the 75% short-term-rental purchase ceiling in the network guidelines. The 15% column reflects published industry norms for high-leverage requests, and those vary by program.
| Factor | 15% Down (85% LTV) | 25% Down (75% LTV) |
|---|---|---|
| Review basis | Property rent vs. full obligation | Property rent vs. full obligation |
| Credit expectation | Strongest credit tiers typically | 640 minimum on STR files |
| Documentation | Appraisal, rent figures, assets, entity papers | Same package |
| Property types | Standard rentals; same exclusions | Standard rentals; same exclusions |
| Entity vesting | LLC or personal name | LLC or personal name |
| Reserves | Often a heavier expectation | Varies by lender and loan size |
| Effect on coverage | Larger loan, lower ratio on same rent | Smaller loan, higher ratio on same rent |
| Cash left after closing | More for furnishing and cushion | Less for furnishing and cushion |
| Availability | Unevenly available across programs | Fits the 75% STR purchase ceiling |
Documentation does not change between the two. Either way you supply the appraisal with its rent schedule, a short-term-rental income projection, asset statements, and ID. If you buy through an LLC, you add the entity papers. LLC vesting is common on these loans, subject to lender program eligibility.
Key Terms Defined
Projected income is the rent estimate a lender accepts when the property has no hosting history. It usually comes from a market-data report on comparable Airbnb listings.
Haircut is the discount a lender applies to that projection before dividing. Lenders do this because projections run optimistic.
Form 1007 and Form 1025 are appraisal rent schedules. The 1007 covers single-family homes, and the 1025 covers two-to-four-unit properties. Both estimate what the property would earn on a traditional 12-month lease.
Reserves are liquid funds you hold after closing, separate from the down payment.
Vesting is how title is held, in your own name or in an LLC.
How the Down Payment Moves the Coverage Ratio
A larger down payment shrinks the loan. A smaller loan means lower principal-and-interest payments. The rent stays put, so the ratio rises. That is the structural link between these two options.
Run the numbers this way, using modeled assumptions and not market data. Say a property clears about 1.10x at 75% LTV on the lender’s accepted rent figure. Hold the rent steady and move to 85% LTV. The loan becomes roughly 13% larger. Principal-and-interest rises by about that much, while taxes, insurance, and HOA dues do not change. The ratio slides toward 1.00x and could land just under it. The exact numbers vary by lender and program and follow a full review of property, leverage, and credit.
Now add the haircut. If the lender discounts your projection, the rent figure shrinks too. The 25% file has room to absorb that. The 15% file may not. This is the real test for a first-timer: could the file still clear the floor if the projection comes in low?
Falling under 1.00 is not necessarily the end of the file. 1.00 is where many select programs start. A separate select-lender path takes coverage below 1.00, with leverage and terms adjusted. That usually means more cash down, not less.
When 15% Down Is the Better Fit
Every figure here varies by lender and program — guidelines, property type, leverage, and credit profile all apply.
Final terms depend on the lender’s guidelines, the property type, and the borrower’s complete credit picture.
Fifteen percent down works when cash is your scarce resource and the file is strong everywhere else. Think of a buyer with high credit, a property whose rent clears the floor with a visible cushion, and some landlord or hosting background. For that buyer, the smaller down payment preserves capital for the things that make an Airbnb earn money.
Those things are real. A short-term rental is a small business. It needs furniture, linens, cookware, photography, and operating cash while reviews build. A buyer who puts every spare dollar into equity can end up with a beautiful asset and an empty checking account.
Here is the catch. The 15% request is unevenly available. Published industry materials describe it as rarer than 20% or 25% down, and as dependent on strong credit, strong coverage, and experience. On the short-term-rental purchase guidelines this article uses, the leverage ceiling is 75% LTV. So treat 15% as a scenario to test with a broker before you build a purchase plan around it. Each figure is subject to lender guidelines and a complete review of property type, leverage, and credit.
It also changes the downside. A larger loan leaves a thinner cushion if bookings come in light. Strong files carry that risk comfortably. Thin files do not. This one is a genuine judgment call, and reasonable investors split on it.
When 25% Down Is the Better Fit
Leverage, reserves, and pricing vary by lender and program; the final terms follow the full file review.
Twenty-five percent down is the better fit for most first-timers. It matches the strongest leverage tier on short-term-rental purchases. It produces a higher coverage ratio on the same rent. It gives the lender more equity to rely on when the income is a projection.
Think about the credit side too. The minimum score on short-term-rental files is 640. A buyer near that floor will generally find that more equity opens more doors. Stronger scores unlock stronger leverage tiers. Weaker scores often mean a more cautious structure.
The 25% route also handles surprises better:
- A low appraisal rent figure. If the lender’s rent falls short of your projection, more equity keeps the ratio workable.
- A haircut. If the lender discounts the projection, the smaller loan absorbs it.
- A thinner hosting history. About 12 months of host or landlord experience is usually expected. A first-timer without it benefits from every bit of file strength available.
The cost is liquidity. You have less cash after closing. So budget furnishing and startup costs before you commit to this tier, not after. Terms vary by lender guidelines, property type, leverage, credit profile, and full file review.
What the Lender Accepts as Income
A first Airbnb has no operating history, so it normally is reviewed on projected income. The lender decides what income counts, and programs differ on whether they use a market-data projection at all. Ask early.
Many files have two possible rent figures. One is the long-term rent from the appraisal’s Form 1007 or 1025. The other is the short-term projection. If a lender will not use the projection, the file falls back to the long-term figure. That figure is often lower, and the ratio drops with it. A buyer who planned on 15% down can find the numbers only work at a larger down payment.
This is why the two options are less about preference than about the file. The down payment is the lever you control. The rent figure is the one you do not.
Short-term rental rules can vary by city, county, HOA, and property type, so investors should confirm local rules before relying on projected rental income.
DSCR vs. conventional financing
There are two common ways to finance an investment property, and they qualify you differently — here’s how investors weigh them.
Why investors choose it
- Qualifies on the property’s rental income — no personal tax returns, W-2s, or pay stubs needed to document income.
- No personal debt-to-income ceiling to clear, so existing mortgages and obligations don’t cap your borrowing the same way.
- Can be closed in an LLC, keeping the property inside a business entity.
- Built for scaling — not held to the limit on number of financed properties that conventional financing applies.
- Underwriting centers on the deal: generally qualifies when the rent covers the payment, a 1.00x coverage ratio being a common baseline (confirmed in underwriting).
- Designed specifically for investment property, including long-term and, where the program allows, short-term rentals.
Where it’s strong
- Often the lowest ongoing financing cost for a buyer who fully qualifies on personal income — a fit for a first property or a cost-first purchase.
Trade-offs for investors
- Requires full personal income documentation and must fit within a debt-to-income limit — salary, existing debts, and other mortgages all count.
- Typically held in your personal name rather than a business entity.
- Caps how many financed properties you can carry, which can become a ceiling as a portfolio grows.
- Evaluates you as a borrower as much as the property, which usually means more paperwork.
How investors usually choose: a first or single property often optimizes for the lowest financing cost; portfolio builders often optimize for leverage, vesting in an LLC, and scaling past conventional caps. The right answer depends on your goals, the property, and current guidelines — both paths run through select lenders in Lendmire’s wholesale network, with eligibility and terms confirmed in underwriting.
Cash You Need Beyond the Down Payment
The down payment is one line in the cash budget. Closing costs are another. Reserves are another, and they are separate from the down payment. Reserves vary by lender, leverage, loan size, and transaction type. Many files expect several months of PITIA held in reserve. Loan size matters here. Standard programs reach up to $3,000,000, and larger balances generally come with stricter structure and heavier reserve expectations.
Then come the costs that fall outside the loan itself: furniture, supplies, listing setup, and a ramp-up cushion for the early months. DSCR loans are business-purpose loans, so they are generally exempt from TRID disclosures. The cleanest way to compare the two tiers is total cash, not down payment alone. Add up everything you need at each tier. Then ask what the extra 10 points of equity buys you in safety and what it costs you in flexibility.
Down payment funds, closing costs, and reserves generally need to come from documented, seasoned money. Ask your broker what a given lender will accept before you move funds around.
Looking ahead, your first purchase may not be your last. A 25% structure may leave more room to refinance later or to add another purchase, but that depends on the lender, the prepayment terms, and how the property performs. On a later cash-out, leverage tops out around 70% on short-term-rental collateral and around 75% on standard rentals.
Mistakes First-Timers Make
Treating coverage as cash flow. A DSCR compares rent to PITIA and nothing else. Clearing 1.00 does not mean the property pays you. Repairs, vacancy, management, utilities, and capex all sit outside the calculation. Model them separately, and treat any figure from a calculator or table, including gross revenue and cash flow, as an illustrative estimate, not a result for your file.
Chasing no money down. A lender-waived down payment is almost never real. No-ratio structures are available only through select lenders, generally for borrowers who already own a primary residence. They do not erase the equity requirement.
Assuming Airbnb income is automatic. Programs differ on whether they accept a projection, and on how much they trim it.
Buying an ineligible property. Manufactured homes, log homes, and barndominiums are not offered in these programs. DSCR loans also are not built for fixer-uppers or primary residences.
Ignoring the business-purpose paperwork. DSCR loans are designed for non-owner-occupied investment properties. Because they are business-purpose investor loans, they are reviewed differently from a standard owner-occupied mortgage. Both the CFPB’s Regulation Z page on exempt transactions and the eCFR text of 12 CFR 1026.3 cover the distinction. Expect to sign occupancy and business-purpose certifications.
Tax treatment can depend on how the funds are used and how the property is held; investors should keep clear records and speak with a qualified tax professional before relying on any deduction.
A Practitioner’s Read on Thin Files
Across the programs a wholesale network offers, the first-timer’s file usually fails in one of three places: the rent figure comes in under the projection, the host history is short, or the reserves are lighter than the lender wants. More equity helps with the first, and sometimes the third. It rarely fixes the second. A larger down payment never erases a leverage cap, a credit floor, a reserve rule, or a property restriction. The strongest files clear both tests: enough equity and enough rental coverage.
The Verdict
Twenty-five percent down is the safer path to approval and the better default for a first purchase. It lines up with the 75% ceiling on short-term-rental purchases, lifts the coverage ratio, and gives a projection-based file room to absorb a haircut. The price is less cash on hand.
Fifteen percent down is a narrower tool. It fits a buyer with strong credit, strong coverage, and some experience, who would otherwise starve the business of working capital. It is also the request most likely to meet stricter overlays, and the one most worth testing early with a broker.
If the projection is uncertain and the credit is average, go with 25%. If everything is strong and the cash is tight, ask about 15%, and plan for the answer to be file-specific. Every file is underwritten individually, and program details change. For the full picture of how these loans work, read the complete DSCR loans guide.
Frequently Asked Questions
Can I get a DSCR loan for an Airbnb with no hosting history?
Sometimes, though about 12 months of landlord or host experience is usually expected on short-term-rental files. A first-timer may qualify on a market-data projection, or on the appraisal’s long-term rent, depending on the lender. Ask each lender which income figure it will use before you apply.
Does a bigger down payment make approval certain?
No. More equity lowers the loan and lifts the coverage ratio, but it does not override credit floors, reserve rules, or property eligibility. The file still has to clear the 640 minimum on short-term-rental loans and the coverage test.
Do reserves shrink at 15% down?
Not as a rule. A higher-leverage request often draws a heavier expectation, so budget for reserves on top of the down payment at either tier.
Can I buy my first Airbnb inside an LLC?
Often, yes. LLC vesting is common on DSCR loans, and the entity papers go into the file. The choice between 15% and 25% down does not change that.
What about furnishing costs?
They come out of your own cash, separate from the down payment and closing costs. Many buyers underbudget here, which is the strongest practical argument for modeling total cash at each tier.
Next Step
If you are buying or refinancing a rental property and want to see how the numbers work, Lendmire can help you compare DSCR loan options based on the property income, credit profile, leverage, and investor goals. Lendmire is a mortgage broker that arranges DSCR financing through select lenders in its wholesale network, across 41 markets including Washington, D.C. Qualification is subject to lender guidelines. This is not a commitment to lend.
About Lendmire
Lendmire (NMLS# 2371349) is a DSCR-focused mortgage broker that helps arrange investor financing across 41 markets, including Washington, D.C., through wholesale and investor-lending channels. DSCR eligibility is generally reviewed by the lender around the property’s rental income rather than personal income documentation, subject to lender guidelines. That works for self-employed investors, LLC operators, and portfolios above four financed properties. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
Investors focused on short-term rentals can review DSCR loans for Airbnb and short-term rentals.
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References
1. CFPB – Regulation Z, Section 1026.3 Exempt Transactions
2. eCFR – 12 CFR 1026.3 Exempt Transactions
This article is part of Lendmire’s short-term rental loan program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: How to Choose DSCR or Conventional for Your First Airbnb · How to Finance an Airbnb Through an LLC With a DSCR Loan · How to Switch a Vacation Home Turned Airbnb to a DSCR Loan
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Disclosure information. Lendmire is a state-licensed mortgage brokerage under NMLS# 2371349. Lendmire is not a depository institution, direct lender, or financial advisor — all loans referenced are placed through wholesale lender partners and are subject to each lender's underwriting standards. This article is provided for general informational purposes and is not a commitment to lend, nor does it constitute financial, legal, or tax advice. Loan programs, terms, rates, and qualification standards change without notice and depend on borrower profile, property type, and the state in which the subject property is located. Equal Housing Opportunity provider. NMLS Consumer Access: nmlsconsumeraccess.org.