The Quick Read: Portfolio funds work as a down payment when they sit in your own bank account, trace to a clear source, and leave cash for closing costs and reserves. Lenders review where every dollar came from, because the loan is reviewed primarily on property-level rental income covering the payment, subject to lender guidelines.
- Purchase leverage on most files runs 75%-80% LTV, which means about 20%-25% down on a duplex, triplex, or fourplex.
- Down payment, closing costs, and reserves are three separate pots. One dollar cannot fill two of them.
- Reserves commonly run around 6 months of PITIA, stepping up to about 9 months on loans above $1,500,000.
- Cash in the bank is the cleanest source. Sale proceeds, brokerage sales, and equity pulled from another rental all work only after they land as documented cash.
- Unrealized equity and unsold stock are not cash. The lender needs liquid funds it can see.
Every program has its own rules, and each file is underwritten individually. Treat these as typical ranges, not promises.
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As of Oct 15, 2026 · General Freddie Mac market benchmark, not a Lendmire loan offer. Rent, nightly rate, occupancy, taxes, and insurance are editable estimates. Short-term rental figures are estimates only and vary significantly by season, property type, management approach, and local short-term-rental rules — confirm local regulations before relying on them. Qualifying income for short-term rentals varies by program — some use appraisal market rent, others use documented STR history or projections — and is confirmed in underwriting. Not a Loan Estimate, approval, or commitment to lend. Program availability and eligibility are subject to lender guidelines, credit approval, property review, and underwriting.
What “Portfolio Funds” Actually Means
The phrase covers two different things, and investors mix them up. The first is money you hold in investment accounts: savings, brokerage balances, sale proceeds, retirement balances. The second is equity trapped in rentals you already own. The two reach the closing table by different routes.
| Source | Starts as | Must become | Main risk |
|---|---|---|---|
| Brokerage holdings | Securities | Cash in your bank account | Selling at a bad moment |
| Sale or 1031 proceeds | Settlement funds | Documented cash | Timing and paperwork |
| Equity in a rental you own | Home equity | Cash from a draw or refinance | New debt and new payment |
| Savings | Cash | Already there | Large recent deposits |
The common thread is conversion. A lender cannot count a number on a statement that you have not turned into spendable money. That holds for most programs in a wholesale network.
How Underwriting Treats the Money, Step by Step
The review follows a predictable order. Knowing it lets you build the paper trail before anyone asks.
1. Identify the source of each dollar. Before you apply, list where the down payment, closing costs, and reserves will each come from.
2. Move the money early. Experian describes seasoned funds as money held in your account for about 60 days, which cuts the need for explanations. Funds sitting in one or two accounts are the easiest to review.
3. Supply recent bank statements. Lenders generally want a couple of months of statements showing the balances.
4. Explain large deposits. Any deposit that stands out needs a short letter and a document behind it: a settlement statement, a brokerage sale confirmation, or a transfer record.
5. Check the buckets. The underwriter totals the verified cash and compares it with down payment plus closing costs plus reserves.
6. Test the rent. Separately, the lender divides monthly rent by the full monthly payment (principal, interest, taxes, insurance, and any association dues). That ratio decides whether the property supports the loan.
Large-deposit logic is not unique to investor loans. Agency mortgage guidelines, for instance, subtract unsourced deposits from verified funds on purchases. DSCR programs set their own rules, but the instinct is similar: if a deposit has no trail, expect it to be set aside.
Two Tests, Not One
A bigger down payment helps, but it does not rescue a weak file. The strongest files clear both tests: enough equity and enough rental coverage.
More cash down lowers the payment, which can lift the coverage ratio. It never erases leverage caps, credit floors, reserve rules, or property eligibility. Most programs we place files with want a score around 660. A 620 floor exists in parts of the network, and 700+ unlocks the strongest leverage tiers.
Coverage works the same way. Many select programs start at 1.00. A separate path through select lenders takes coverage below 1.00, with leverage and terms adjusted. A larger down payment is often the lever that makes that structure work.
One caution matters here. Clearing 1.00 is not the same as positive cash flow. The ratio compares rent to the full payment only. Repairs, vacancy, management, utilities, and capital expenses sit outside it.
Route by Route: Getting Each Source to the Closing Table
Savings and cash on deposit. The simplest route. Keep the balance steady, and avoid moving cash in and out of several accounts right before you apply.
Selling brokerage holdings. Sell, move the proceeds to your own bank account, and keep the sale confirmation. The statement trail is short and clean. Selling can trigger taxes, and you give up market exposure. Tax treatment varies; consult a qualified professional.
Brokerage and retirement balances as reserves. Some programs credit non-cash assets toward reserves, usually at a discount to face value, and not as cash to close. Whether a given lender counts them, and at what discount, varies by program. Ask before assuming. Retirement accounts also carry penalties or taxes if you liquidate them.
Sale or 1031 proceeds. The settlement statement is your proof. Net proceeds count, not the sale price. If you are using an exchange, the IRS statutory identification and exchange periods run on their own clock and are separate from anything on the loan side.
Equity from another rental. A cash-out refinance on a rental you own tops out around 75% LTV across most of the network, and about 6 months of seasoning is the common expectation. The draw is new debt on that property, and its payment lands on your books. Lenders look at it more closely than plain savings. Each figure is subject to lender guidelines and a complete review of property type, leverage, and credit.
A mix. Many investors stack sources: savings for part of the down payment, a cash-out for the rest, and a brokerage balance held back for reserves. That works if each pot is covered and each dollar is traceable. For a lender-side look at the paperwork, see Lendmire’s piece How to Document DSCR Down Payment Funds for a 2-4 Unit Rental.
Sell or Borrow Against It?
This is the real decision, and it depends on the investor.
Selling is simpler on paper. It leaves no new debt, no new payment, and no collateral to worry about. But it can trigger a taxable gain, and it takes you out of the market.
Borrowing against other assets keeps your holdings invested. It adds a payment and a new set of risks. If you pull equity from a rental, that rental’s cash flow shrinks. The new payment is not part of the coverage ratio on the 2-4 unit, but it comes out of the same pocket.
Selling tends to fit investors with concentrated positions, large unrealized gains they were going to rebalance anyway, or thin cash flow across the portfolio. Borrowing tends to fit investors with strong coverage on existing rentals who want to stay invested and can absorb another payment. Honestly, it is a toss-up for many people, and the answer can flip with market conditions.
The Edge Cases Where the Rule Bends
- Gift funds. Allowed on some loans, and consumer guidance says gifts need proof of origin and a signed statement that the money is not a loan. Investment-property programs are often tighter. Confirm program by program.
- Entirely borrowed plans. A plan funded wholly by new debt can fail on that point alone. Some programs want a portion of the investor’s own funds in the deal.
- Crypto. Most lenders do not count it toward reserves.
- Deposits during the application. A large transfer after you apply raises new questions. Hold steady.
- Sub-1.00 coverage and very large loans. Both can push reserve requirements up.
- Eligible property types. Manufactured homes (single- and double-wide), log homes, and barndominiums are not offered in the network’s DSCR programs. Funds cannot fix that.
Some borrowers hear about 15% down on a 2-4 unit. The network does reach 85% LTV on select high-leverage purchase programs, with roughly a 700+ score. That is the exception, and it depends on the file. Leverage, reserves, and pricing vary by lender and program; the final terms follow the full file review.
A Worked Example: Mixed Sources on a Fourplex
Run it with percentages. Say an investor targets a fourplex at 75% LTV on a purchase, so 25% down, with a mid-700s score. The rents on the appraiser’s schedule produce coverage of roughly 1.2x on the full payment. Terms vary by lender guidelines, property type, leverage, credit profile, and full file review.
Funding plan:
- Part of the 25% comes from cash in a savings account, held for months.
- The rest comes from a cash-out on an existing rental, drawn well before applying, at no more than 75% LTV on that property.
- Closing costs come from savings.
- A brokerage balance stays invested and is offered as reserve support, subject to the lender’s treatment of non-cash assets. Exact terms depend on the lender’s guidelines, property type, leverage, and a full review of the borrower’s file.
Two checks follow. On the new fourplex, coverage clears 1.0 with room. The other check is the effect of the cash-out on the existing rental, which is invisible on the new loan’s ratio, and it is where investors get surprised.
If the borrower reaches for a higher-leverage tier to keep more cash on hand, coverage and credit requirements tighten together. For the vacation-rental version of this puzzle, Lendmire’s piece How to Meet DSCR Loan Down Payment Requirements for a 2-4 Unit Vacation Rental covers the different leverage caps.
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.
What the 2-4 Unit Lender Looks At
Multi-unit properties are reviewed on combined rent. The appraiser’s rent schedule supports the number, and actual leases help where units are occupied. More units spread vacancy risk, but programs usually hold a 2-4 unit to the same leverage tiers as other purchases. Loan sizes run up to $3,000,000 on standard programs (smaller balances available through select lenders), and above $2,500,000 the network generally holds to 30-year fixed structures. Reserves usually run around 6 months of PITIA, and they may step up with loan size or lower coverage. Conservative rate-term files at modest leverage under $1,500,000 can see them waived.
For the broader picture of how these loans are built, see the complete DSCR loans guide.
Mistakes That Sink the File
- Counting equity as cash. It is not cash until it is drawn.
- Double-counting. The same dollars cannot fund the down payment and the reserves.
- Moving money mid-application. Fresh deposits need new paper.
- Ignoring the payment on the draw. The new debt lowers cash flow elsewhere.
- Assuming retirement balances count dollar for dollar. Expect a discount, and expect penalties if you cash out.
- Skipping the broker call. Programs differ. Ask before you sell or draw anything.
Pre-Draw Checklist
1. Which pots does each source fill: down payment, closing costs, or reserves?
2. Does the program count borrowed funds toward the down payment?
3. How are non-cash assets credited toward reserves?
4. How long should the money sit before I apply?
5. What paper will each deposit need?
If you are buying or refinancing a rental property and want to see how the numbers work, Lendmire, a broker arranging DSCR loans through select lenders across 41 markets including Washington, D.C., can help you compare loan options based on the property income, credit profile, leverage, and investor goals.
Key Terms Defined
DSCR: Debt service coverage ratio, which divides a property’s monthly rent by its full monthly payment.
PITIA: Principal, interest, taxes, insurance, and association dues, the full monthly housing payment.
Seasoning: The time funds have sat in your account, which helps show they are yours.
Reserves: Liquid cash left after closing, measured in months of PITIA.
Cash to close: The down payment plus closing costs due at the table.
Cash-out refinance: A new loan on a property you own that returns some equity as cash.
Frequently Asked Questions
Can I use stock I have not sold as my down payment?
Not directly. The lender needs cash it can verify, so the shares are sold and the proceeds moved to your bank account first. Some programs may credit unsold holdings toward reserves, usually at a discount to face value. Ask before relying on that.
Do retirement funds count?
They may count toward reserves at a discount on some programs, but they are not cash to close until withdrawn. Withdrawals can carry taxes or penalties, so many investors prefer other sources first.
Can gift money fund the down payment?
Sometimes, but investment-property programs are often stricter than owner-occupied ones. Expect a signed gift letter and proof of where the money came from. Confirm the program rule first.
Does the payment on a HELOC or cash-out count in the coverage ratio?
Not on the new property, because the ratio compares that property’s rent to its own payment. The new debt still reduces cash flow on the property that secured it, so run both numbers.
Can I put zero down?
On a purchase, no. Most files land at 75%-80% LTV, and select high-leverage programs reach 85%. Every file is underwritten individually.
About Lendmire
Lendmire is a non-QM mortgage brokerage (NMLS# 2371349) arranging DSCR investor loans in 41 markets, including Washington, D.C. DSCR eligibility is generally reviewed around property-level rental income rather than personal income, subject to lender and program guidelines, a fit for self-employed investors and LLC-owned portfolios. Lendmire was recognized as a Scotsman Guide Top Mortgage Workplace in 2025 and 2026.
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References
1. Experian: What Is Seasoned Money for a Down Payment
2. Fannie Mae Selling Guide: Depository Accounts
3. CFPB: Where Can I Get Money for a Down Payment
This article is part of Lendmire’s DSCR loan program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: Can a Mortgage Broker Place a Ten-House DSCR Portfolio Loan? · Can a Foreign National Refinance Rentals With a Portfolio DSCR Loan? · Is the Down Payment Higher on a Short-Term Rental DSCR Loan?
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Important disclosures. Lendmire (NMLS# 2371349) is a licensed mortgage brokerage. Lendmire is not a direct lender, depository institution, or financial advisor. All loan inquiries are subject to lender underwriting; this article does not constitute a commitment to lend. Rates, terms, and program guidelines are subject to change without notice and vary by borrower profile, property type, and state. Information in this article is general in nature and is not financial, legal, or tax advice. Equal Housing Opportunity. NMLS Consumer Access: nmlsconsumeraccess.org.