The Quick Read: Usually 20% to 25% down on a purchase, because most files land at 75% to 80% LTV on an investment property, and Michigan changes none of it. Across the wholesale network of DSCR lenders that Lendmire works with, the down payment is simply the mirror image of the leverage cap. A larger down payment helps the coverage ratio, but it never erases credit floors, reserve rules, or property eligibility.
- Purchase leverage typically runs 75%–80% LTV, so 20%–25% down on most files.
- Select high-leverage programs reach 85% LTV (15% down), generally with a score around 700 or higher.
- Cash-out refinances on a rental top out near 75% LTV across most of the network.
- Michigan has no state-specific LTV overlay in the network guidelines. The standard tiers apply.
- Clearing the coverage test and having enough equity are two separate tests. A file has to pass both.
What Actually Sets the Minimum Down Payment?
The leverage cap sets it. Borrow 80% of the purchase price or appraised value and you put 20% down. Borrow 75% and you put 25% down. The cap moves with credit score, coverage ratio, property type, and whether the deal is a purchase or a cash-out. Terms depend on the lender’s guidelines, the property type, the leverage, and a full review of the credit profile.
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Rate source: Freddie Mac 30-yr average via FRED® — Federal Reserve Bank of St. Louis · effective Oct 15, 2026
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Program parameters update from Lendmire’s centralized guideline source. Taxes and insurance are editable estimates.
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.
Why does the lender care? On a DSCR loan the property is the main protection if things go wrong. Your cash in the deal is the lender’s cushion. That is why a zero-down or FHA-style low-down DSCR purchase is not a normal product.
Across the network, most programs want about 660 on the credit side. A 620 floor exists in parts of the network, and 700 or higher opens the strongest leverage tiers. The 85% LTV (15% down) programs sit at the top of that range and come with tighter terms.
Michigan does not alter any of this. No state rule sets a different figure, and the network guidelines carry no Michigan LTV overlay. The title question is a Michigan question, but the answer is a national one. For the full program picture, see Lendmire’s complete DSCR loans guide.
Down Payment by Transaction Type
On a purchase, 75%–80% LTV is where most files land. A cash-out refinance on a rental tops out near 75% LTV, with about six months of seasoning as the common expectation. Short-term rental collateral is lower: purchases go to 75% LTV, refinances around 70%, and cash-out at 70%.
| Transaction | Typical max LTV | Typical cash in |
|---|---|---|
| Purchase, long-term rental | 75%–80% | 20%–25% down |
| Purchase, high-leverage select program | Up to 85% | About 15% down |
| Purchase, short-term rental | Up to 75% | 25% or more down |
| Cash-out refinance, standard rental | About 75% | 25% equity left in |
| Cash-out refinance, short-term rental | About 70% | 30% equity left in |
Short-term rentals also bring their own credit and history expectations: a 640+ score and about 12 months of hosting history. Short-term rental rules vary by city, county, HOA, and property type, so investors should confirm local rules before relying on projected rental income.
Why More Down Payment Lifts the Coverage Ratio
DSCR compares monthly rent to the full monthly obligation: principal, interest, taxes, insurance, and any association dues. A bigger down payment shrinks the loan. A smaller loan means a smaller obligation, and the ratio rises.
The reverse is the trap. Pushing leverage to the cap can drop a deal below the coverage floor. Picture an investor buying a rental where rent is modest against price. At 80% LTV the file reads just under 1.00x. At 75% LTV the same rent reads comfortably above it. Same property, same rent, different cash in. The exact numbers vary by lender and program and follow a full review of property, leverage, and credit.
That is the loop to understand. The down payment moves the ratio, and the ratio can move the allowed leverage. Where rent is low relative to price, coverage becomes the binding limit before the LTV cap does. Where rent is strong relative to price, which describes much of Michigan’s lower-priced housing, files tend to clear coverage more easily at higher leverage. Any individual file still depends on its own rent and price.
Here is the catch on the 1.00 number. It is where many select programs start, not a universal standard. A separate select-lender path takes coverage below 1.00 with leverage and terms adjusted. Stronger ratios open better pricing and leverage.
Clearing 1.00 also does not mean the property cash flows. Repairs, vacancy, management, utilities, and capex all sit outside the calculation. Treat it as a lending test, not a profit forecast.
Documenting the Rent and the Funds
Rent is evidenced with a lease or a market-rent opinion from the appraiser. For a one-unit property the appraisal typically includes a rent schedule, Form 1007. For two to four units it is the small-income-property report, Form 1025. Fannie Mae lists both on its appraiser and property underwriting page. That is a reference for the form names only. DSCR loans are not agency products.
The down payment funds need a clean paper trail. Expect to show bank statements covering the source of the cash. Most DSCR lenders will not allow a second-position loan at closing to supply the down payment. They want the investor’s own capital in the deal.
Most programs also want reserves on top of the down payment. They vary by lender, leverage, loan size, and transaction type. Commonly it is around six months of PITIA. Conservative rate-term files at modest leverage under $1,500,000 can see reserves waived. Loans above that size typically step up to about nine months. Budget for closing costs and reserves separately from the down payment itself.
Missing statements and unexplained deposits are among the most common reasons a file stalls. Pull two months of statements early and explain any large movement of cash.
Can You Do It With Little or No Money Down?
Not as a normal DSCR purchase. The lowest leverage in the network’s high-leverage programs is about 15% down, and that tier is for stronger credit. Final terms depend on the lender’s guidelines, the property type, and the borrower’s complete credit picture.
There are legitimate ways to reduce fresh cash at the table. A BRRRR-style plan buys with cash or a short-term structure, then refinances later. A cash-out refinance on a property you already own can supply cash for the next purchase, subject to the 75% LTV ceiling and seasoning. Those are different transactions with their own rules, not a no-down DSCR purchase. Lendmire’s related piece How Much Second Home Down Payment a Cash-Out Refinance Funds covers a close cousin of that idea. Each figure is subject to lender guidelines and a complete review of property type, leverage, and credit.
What Michigan Investors Should Watch
The loan mechanics are national. Michigan files differ in the property, not the program. A few practical points:
- Rent against price. Lower-priced single-family and small multifamily properties tend to run stronger coverage than high-priced coastal markets, which helps at higher leverage.
- Ineligible property types. Manufactured homes (single- and double-wide), log homes, and barndominiums are not offered through the network’s DSCR programs.
- Owner occupancy. 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. Under Regulation Z’s exempt-transactions section, the business-purpose treatment can be lost if the owner expects to occupy the property more than 14 days in the coming year.
- Business purpose is not a free pass. A law-firm analysis, Hunton’s note on business-purpose loans, points out that some states license residential lenders regardless of loan purpose. It is older and qualitative, but the point stands: use a broker and lenders that handle the licensing correctly.
In practice, a Michigan file clears best when the property type is eligible, rent is documented, and the investor brings enough cash for both the down payment and reserves.
Key Terms Defined
LTV (loan-to-value): The loan amount divided by the purchase price or appraised value. It sets the down payment.
DSCR (debt service coverage ratio): Monthly rent divided by the full monthly obligation of principal, interest, taxes, insurance, and dues.
PITIA: Principal, interest, taxes, insurance, and association dues, the monthly obligation used in the coverage test.
Seasoning: The ownership period a lender expects before cash-out is available on a recent purchase. About six months is common.
Reserves: Liquid funds held after closing, commonly around six months of PITIA, varying by file.
Business-purpose loan: Credit used to buy or hold non-owner-occupied rental property, rather than a home you live in.
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.
Deciding How Much to Put Down
Put down more than the minimum when the coverage ratio sits near the floor, when you want stronger pricing, or when the property type already carries a leverage cap. Put down the minimum when coverage is comfortable and preserving cash for the next purchase matters more.
Each purchase is reviewed on its own. DSCR files qualify primarily on property-level rental income covering the payment, subject to lender guidelines, so there is no pooling of personal income across properties. Every property needs its own down payment and reserves. 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.
Loan sizes run up to $3,000,000 on standard programs (smaller balances available through select lenders), with the network generally holding to 30-year fixed structures above $2,500,000. Extended terms and interest-only periods are available through select lenders, and ARM structures exist for investors who want them. LLC-titled purchases are common, subject to lender program eligibility.
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. Reach the team at 828-256-2183 or request a quote. Program details change and every file is reviewed individually; this is not a commitment to lend.
Frequently Asked Questions
Is the down payment different in Michigan than in other states?
No. The network guidelines carry no Michigan-specific LTV overlay, so the standard purchase tiers apply: typically 75%–80% LTV, or 20%–25% down. What differs by market is rent against price, which affects whether the coverage ratio clears at that leverage.
Can I get a DSCR loan with 15% down?
Sometimes. Select high-leverage programs reach 85% LTV on a purchase, generally with a score around 700 or higher. Expect tighter terms and a coverage ratio that holds up at that leverage. Most files still land at 20%–25% down.
Can I borrow the down payment?
Generally not. Most DSCR lenders do not allow a second-position loan at closing to cover it, because they want your own capital in the deal. Documented funds in your accounts are what lenders look for.
Does a bigger down payment improve my DSCR?
Yes. A smaller loan means a smaller monthly obligation against the same rent, so the ratio rises. It does not override credit floors, reserve rules, or property eligibility.
Is the down payment higher for a cash-out refinance or a short-term rental?
In effect, yes. A standard-rental cash-out tops out around 75% LTV, so 25% equity stays in. Short-term rental collateral is lower: purchases up to 75% LTV and cash-out about 70%. Leverage, reserves, and pricing vary by lender and program; the final terms follow the full file review.
About Lendmire
As a DSCR and non-QM mortgage broker, Lendmire — NMLS# 2371349 — connects investors with wholesale lending channels across 41 markets, including Washington, D.C. The property’s rental income, not the borrower’s tax returns, is central to lender review, which works for self-employed operators and portfolios beyond four financed properties. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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References
1. Fannie Mae – Appraisers & Property Underwriting
2. CFPB – Regulation Z § 1026.3, Exempt transactions
3. Hunton – Beware of “Business Purpose”
This article is part of Lendmire’s DSCR loan program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: How to Qualify a Suburban Florida Airbnb on a DSCR Loan · DSCR Loan Down Payment: 20% vs. 25% at Purchase and What Shifts · Putting 15% Down vs. 25% Down on a Short-Term Rental DSCR Loan
Guides: DSCR Loans in Michigan
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.