How Much Down Payment Does a 1099-Only Loan for Out-of-State Investors Need?

The Quick Read: It depends on the program: the down payment on a 1099-only loan for out-of-state investors is 100% minus the maximum loan-to-value the lender allows. A rental bought out of state usually runs through a DSCR loan instead, where credit, rent coverage, and loan size set that cap, not your home state. DSCR stands for debt service coverage ratio, and it compares a property’s rent with its monthly obligation. Here is what matters most:

• Your down payment is 100% minus the maximum loan-to-value (LTV, the loan as a share of the property’s value) the program allows for your file.
• On a primary residence purchase, bank-statement programs go up to 90% LTV on stronger files, which means roughly 10% down.
• For a rental, leverage depends on the lender and program, and the DSCR side is where investor-focused leverage lives.
• Your home state is not a published driver of the down payment. The property’s state and the lender’s licensing matter more.
• Cash to close is the down payment plus closing costs plus reserves, and reserves commonly run around 6 months of the housing payment on bank-statement files.

What a 1099-Only Loan Actually Is

A 1099-only loan is reviewed around income reported on 1099 forms instead of W-2s. It is a non-QM product, meaning it sits outside the standard agency box. Non-QM lenders write their own documentation rules.

Across the wholesale network Lendmire works with, 1099 earners are most often qualified with 12 months of business or personal bank statements. The lender averages your deposits and applies its own expense factor. Expense factors differ by lender, so no universal formula exists.

Here is the catch for investors. This documentation route is built mostly for owner-occupied homes. A self-employed investor who writes off most of their income can look weak on paper even with real cash flow. One BiggerPockets thread shows a 1099-only earner declined on paper income, with replies pointing to a DSCR loan that looks at the property’s rent instead.

How Much Down Payment Does a 1099-Only Loan Need?

On a primary residence purchase, bank-statement programs go up to 90% LTV through select lenders. That leaves roughly 10% down for the strongest files. Weaker credit, larger loans, or thinner deposit history usually pull the LTV cap lower and push the down payment up.

An asset-depletion alternative, which is reviewed against liquid assets instead of deposits, runs to about 80% LTV on a primary residence. Loan sizes on these programs generally run from $125,000 to $3,500,000.

Investment property is a different story. On a cash-out refinance of a rental, leverage tops out around 75% LTV. On an investment purchase with bank-statement documentation, the cap varies by lender, so treat any single number you see online with suspicion. Subject to lender guidelines, here is how the main factors move your cash in:

A true zero-down purchase does not exist on these programs. Anyone promising one is selling something else, usually a creative structure that still puts equity or borrowed funds at risk.

Does Buying Out of State Change the Down Payment?

Not directly. Lenders do not publish a rule that says out-of-state borrowers need more down. Your state of residence is not a listed LTV driver. Exact terms depend on lender and investor guidelines, credit profile, reserves, and property review.

What changes is the property side. The lender needs to be licensed and willing to lend in the property’s state. Practitioners in a BiggerPockets thread on out-of-state investing point to an investor-friendly lender licensed there as the practical requirement. A local bank that refuses distant borrowers is a relationship problem, not a rule that follows you to a wholesale lender.

Distance still costs you in indirect ways. You will want a property manager and a trusted way to confirm market rent. Taxes and insurance in the new market can also drag coverage down even when rent looks strong. (A cheap-looking market with heavy carrying costs is a classic trap.) If coverage slips, the lender sizes the loan down, and the gap lands in your down payment.

Which Loan Fits an Out-of-State Rental?

For most pure rental purchases, a DSCR loan fits better than a 1099-only loan. A DSCR loan is reviewed primarily on property-level rental income covering the payment, subject to lender guidelines. Your personal write-offs stop mattering to the application. The lender divides monthly rent by the monthly obligation (principal, interest, taxes, insurance, and association dues) and sizes the loan from there.

Programs that accept coverage below 1.00 are available through select lenders in the network, though LTV and terms adjust. Stronger coverage tends to earn better leverage. For the full mechanics, see Lendmire’s complete DSCR loans guide.

Choose bank-statement documentation when you are buying a home you will live in. Choose DSCR when the property is a rental and you want the file judged on its income.

A Modeled Example, in Percentages

These inputs are illustrative assumptions, not sourced market data. Picture a self-employed consultant paid on 1099s who lives in one state and wants a rental in another.

• Own home, same borrower. A primary residence purchase on bank statements can reach up to 90% LTV, so the down payment can be as low as about 10%.
• Rental purchase. The deal works to DSCR. Rent that clears the monthly obligation at around 1.2x coverage generally supports stronger leverage than a ratio sitting near 1.0x.
• Weak coverage. If coverage dips below 1.0x, select lenders may still review it, but the LTV cap tends to fall. A lower cap means a bigger down payment.
• Cash to close. Add closing costs and reserves to the down payment. Reserves sit beside the down payment, not inside it.

The editable calculator on this site can turn those percentages into illustrative dollars. Treat it as an estimate, not a quote.

Costs Beyond the Down Payment

Plan for three layers of cash: the down payment, closing costs and prepaid items, and reserves. On bank-statement files, reserves commonly run around 6 months of the housing payment. DSCR files carry their own reserve requirement, which varies by lender.

Investor loans may also carry a prepayment penalty, meaning a fee for paying off the loan early. Ask about it before you pick a structure. Holding the property in an LLC may be possible on business-purpose files, subject to lender program eligibility.

Where the Down Payment Can Come From

Savings are the simplest source. Equity pulled from another property is common among investors, and Lendmire’s piece Rental Cash-Out Refinance Down Payment for Out-of-State Investors explains how that equity can fund the next purchase. Gift funds and borrowed funds follow program-specific source-of-funds rules, so no universal rule applies.

Lenders also want funds documented and sitting in your account, not arriving the week before closing. Move money early and keep a paper trail.

What If You Are Short on Cash?

You have a few honest options. Bring in a partner who contributes capital. Buy a lower-priced property or a different market where rent covers more of the obligation. Improve coverage with a larger down payment, which shrinks the loan and lifts the ratio. Or hold off and build reserves.

What does not work is stretching into a deal where coverage is thin and cash is thinner. Out-of-state ownership gives you less room for surprises.

Which Disclosure Rules Apply?

Occupancy decides the regime. 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.

An owner-occupied bank-statement loan is a consumer mortgage, and TRID disclosure rules apply. A bank-statement or DSCR loan on a non-owner-occupied rental, including a short-term rental, is business-purpose and exempt from TRID. Purpose is decided case by case, and the federal commentary notes that an owner who expects to occupy the property more than 14 days in the coming year can fall outside the rental treatment, per CFPB Regulation Z, section 1026.3. 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.

Key Terms Defined

LTV (loan-to-value): The loan amount as a percentage of the property’s value. Your down payment is 100% minus the LTV.

DSCR (debt service coverage ratio): Monthly rent divided by the full monthly obligation on the property. A higher number means more cushion.

Non-QM: A loan that does not follow standard agency documentation rules, so each lender sets its own.

Reserves: Liquid savings the lender wants you to hold after closing, counted separately from your down payment.

Business-purpose loan: A loan made primarily for investment or commercial use rather than for a home you live in.

Next Step

Lendmire is a mortgage broker that arranges financing through select lenders in its wholesale network. For owner-occupied bank-statement loans, consumer mortgage licensing covers 16 states.

This article is general information, not legal or tax advice. 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. Consult an attorney or CPA about your own situation. Program terms are subject to lender guidelines, and nothing here is 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. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.

References

1. BiggerPockets, 1099-only borrower thread

2. BiggerPockets, Out of State Investing thread

3. CFPB, 12 CFR 1026.3 Exempt Transactions