The Quick Read: Most DSCR purchase loans in Tennessee need about 20% to 25% down, because typical purchase leverage runs 75% to 80% loan-to-value (LTV) on an investment property, subject to lender guidelines. Tennessee adds no state-specific leverage overlay, so the number matches every other state in the network.
- Down payment equals 100% minus the LTV. A 75% LTV means 25% down, and an 80% LTV means 20% down.
- Select high-leverage programs reach 85% LTV on a purchase (15% down), generally for borrowers with roughly a 700+ credit score.
- There is no legitimate zero-down DSCR purchase program.
- Reserves are separate from the down payment, commonly around 6 months of PITIA.
- A bigger down payment can lift the coverage ratio, but it never erases credit floors, reserve rules, or property eligibility.
A DSCR loan qualifies a rental primarily on property-level rental income covering the payment, subject to lender guidelines. That is why the cash you bring matters so much: with no personal income review, the equity in the deal does a lot of the lender’s risk work. Everything below comes from how Lendmire, a DSCR-focused mortgage broker, sees files placed across a wholesale network of lenders. Programs change, and every file is underwritten individually.
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Rate source: Freddie Mac 30-yr average via FRED® — Federal Reserve Bank of St. Louis · effective Oct 15, 2026
Prefilled with starting assumptions — enter your own rent or nightly figures, taxes, insurance, and HOA for a more accurate picture.
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.
What Is the Standard Down Payment in Tennessee?
Most purchase files land at 75% to 80% LTV, which means 20% to 25% down. Tennessee does not change that range. The network carries no state-specific LTV overlay, so a Nashville duplex, a Knoxville single-family rental, and a Memphis fourplex all start from the same purchase tiers. Terms depend on the lender’s guidelines, the property type, the leverage, and a full review of the credit profile.
The lender applies its maximum LTV to the lesser of the purchase price or the appraised value. You fund the gap. That detail catches people. If you buy a property below its appraised value, the built-in equity does not automatically reduce the cash you need, because the loan is typically sized off the lower purchase price.
Here is the relationship across the leverage tiers:
| Transaction | Typical max LTV | Cash you bring |
|---|---|---|
| Purchase, standard rental | 75%–80% | 20%–25% down |
| Purchase, high-leverage select programs | Up to 85% | About 15% down |
| Short-term rental purchase | Up to 75% | At least 25% down |
| Cash-out refinance, standard rental | Around 75% | Equity stays at 25% |
Those are typical ranges from select wholesale-network guidelines, not promises. Credit score, property type, loan size, and the coverage ratio all move a specific file up or down.
Can You Buy a Tennessee Rental With No Money Down?
No. A true zero-down DSCR purchase does not exist in legitimate programs. Lenders on loans without personal income review lean on equity, so some borrower cash is always in the deal.
Be careful with any offer that promises full-price financing. In practice it usually means either a misrepresentation or an undisclosed second lien. Most DSCR lenders also will not allow a second-position loan at closing to cover the down payment. Seller-carryback structures are often prohibited for the same reason.
Investors who want to buy without draining savings have real options, but each one still puts verified cash into the deal. The most common is pulling equity from another property you already own, which must be disclosed and seasoned. Lendmire’s piece on how a DSCR down payment can be funded covers that route in more detail.
What Moves the Down Payment Up or Down?
Five variables do most of the work: credit score, property type, rental strategy, loan size, and the coverage ratio itself. Across the wholesale network, the pattern is consistent even though individual lenders differ.
Credit score. A 620 floor exists in parts of the network. Most programs want around 660. A 700+ score unlocks the strongest leverage tiers, including the 85% LTV purchase programs. Stronger credit earns better leverage and pricing, but it does not waive the other requirements.
Property type. Condos, multi-unit properties, and short-term rentals often carry lower leverage caps than a plain single-family rental. A short-term rental purchase tops out at 75% LTV, and the network expects a 640+ score and about 12 months of hosting history. Refinances on short-term rentals run around 70%, and a short-term-rental cash-out stays at 70%. Manufactured homes, log homes, and barndominiums are not offered in these DSCR programs at all.
Loan size. Standard programs run up to $3,000,000, and smaller balances route through select lenders in the network. Above $2,500,000, the network generally holds to 30-year fixed structures. Above $1,500,000, reserves typically step up.
Coverage ratio. A ratio of 1.00 is where many select programs start, and stronger ratios open better pricing and leverage. A separate select-lender path takes coverage below 1.00, with leverage and terms adjusted, which in practice means more cash down. It is a different path, not a lower floor on the same program.
Transaction type. Cash-out refinances on standard rentals top out around 75% LTV across most of the network, with about 6 months of seasoning as the common expectation. Purchase ceilings sit higher. The exact numbers vary by lender and program and follow a full review of property, leverage, and credit.
The Two-Test Problem: Equity AND Coverage
The down payment is only half the file. A DSCR loan has to clear an LTV test and a rent test, and the smaller loan result is what gets sized.
The rent test is simple. DSCR is the property’s monthly rent divided by its full monthly obligation: principal, interest, taxes, insurance, and any HOA dues (together, PITIA). If rent covers that obligation at the loan size the LTV allows, you are done. If it does not, the loan shrinks, and you bring more cash than the headline LTV implied.
This is where markets differ. In a higher-price, lower-rent area, the coverage test is often the limiting factor rather than the LTV cap. In a higher-yield area, the LTV cap usually binds first. Picture two Tennessee investors buying at the same price. One buys a duplex where rent comfortably covers the full obligation at 75% LTV. The other buys a single-family home in a pricier pocket where coverage lands near 0.9x at the same leverage. The first investor puts down 25%. The second either accepts a lower-leverage structure from a select lender, or brings more cash until the ratio works.
A larger down payment lowers the loan and the monthly obligation, so it can lift the ratio. That is the most useful lever an investor controls, and it is why running the numbers before you make an offer beats guessing.
One caution on language. Clearing 1.00 does not mean the property produces positive cash flow. DSCR compares rent to PITIA only. Repairs, vacancy, management, utilities, and capital expenses sit outside the calculation, so a deal can pass the test and still be thin.
More Down or Less? The Investor Decision
Putting less down preserves cash for the next deal, but it costs you in two ways. Higher leverage typically worsens pricing, and it thins the coverage cushion.
The 85% LTV programs make sense for an investor with a 700+ score, a property that covers comfortably at that leverage, and a specific use for the preserved cash. They are the wrong call if the deal only barely clears the ratio at 75%. Stretching leverage on a borderline file compounds the problem. Final terms depend on the lender’s guidelines, the property type, and the borrower’s complete credit picture.
Putting more down makes sense when the property sits in a low-yield pocket, when you want better pricing, or when you would rather hold a stronger ratio than chase another acquisition. The flip point is opportunity cost. If your next deal would earn more than the pricing benefit of the extra equity, lower leverage is the more expensive choice.
For a Tennessee investor with a small portfolio, the practical test is simple. Model the deal at 75%, 80%, and 85% where you qualify. Pick the leverage where coverage clears with room to spare, not the highest leverage you can get.
Reserves and Other Cash Beyond the Down Payment
The down payment is not your total cash to close. Reserves are separate: liquid assets held after closing, commonly around 6 months of PITIA. Conservative rate-and-term files at modest leverage under $1,500,000 can see reserves waived, and loans above that size typically step up to about 9 months. It varies by lender, leverage, loan size, and transaction type, so treat any single number as a starting point.
Budget as well for the appraisal with a rent schedule, closing costs, and entity setup if you are buying through an LLC (subject to lender program eligibility). Gift funds are sometimes allowed for the down payment under specific programs, but generally not for reserves.
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.
Where the Down Payment Can Come From
The cash must be your own, documented, and sourced. Savings, proceeds from a sale, and equity pulled from another rental are the usual routes. A cash-out refinance on an existing property is a common way to recycle capital, but the proceeds must be disclosed and seasoned. Lenders review asset statements, so money that appears from nowhere raises questions.
Expect a document set that includes the purchase contract, an appraisal with rent schedule, a lease or market-rent opinion, entity documents for an LLC purchase, asset statements, and a gift letter if gifts apply. Because qualification centers on property income, personal income documentation is generally not the focus of the file.
How This Compares With Conventional Investment Loans
A conventional investment loan can sometimes allow lower cash down on a one-unit purchase, but it works from traditional personal-income documentation and debt-to-income ratio. DSCR trades more cash down for a file that centers on the property. For a borrower with several financed properties, self-employment income that is hard to document, or an LLC-held portfolio, that trade often favors DSCR. For a W-2 borrower with one rental and clean documentation, conventional can carry a lower cost.
Why Tennessee Doesn’t Change the Number
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. The Federal Register’s discussion of ability-to-repay rules treats business-purpose loans as outside those consumer provisions, and investment-purpose loans are treated as business-purpose. No federal rule sets a DSCR minimum down payment, and no Tennessee rule does either. Each lender sets its own leverage caps based on credit, coverage, and property type.
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. Tax treatment varies; consult a qualified professional.
For the full picture of how these programs work, see the complete DSCR loans guide.
Key Terms Defined
LTV (loan-to-value): The loan amount divided by the lesser of purchase price or appraised value.
DSCR (debt service coverage ratio): Monthly rent divided by the full monthly obligation of principal, interest, taxes, insurance, and HOA dues.
PITIA: Principal, interest, taxes, insurance, and association dues, the full monthly housing obligation.
Reserves: Liquid cash held after closing, commonly around 6 months of PITIA.
Seasoning: The length of time you have held a property or funds before a lender counts them, with about 6 months common on cash-out refinances.
For deeper background on how consumer-purpose rules differ, see the CFPB ATR/QM small-entity compliance guide.
Frequently Asked Questions
Is 15% down possible on a Tennessee DSCR purchase?
Yes, through select high-leverage programs reaching 85% LTV, generally for borrowers with a 700+ credit score and a property that covers comfortably. Most files sit at 75% to 80% LTV instead. Less down usually means weaker pricing and a thinner coverage cushion.
Can I use gift funds for the down payment?
Sometimes. Gift funds are allowed under certain programs for the down payment, but generally not for reserves, and some programs require a minimum contribution from your own funds first. Check the specific program before relying on a gift.
Does a short-term rental need more down?
Typically yes. Short-term rental purchases top out at 75% LTV, so at least 25% down. The network also expects a 640+ credit score and about 12 months of hosting history. Refinances run around 70%.
Does buying through an LLC change the down payment?
Not by itself. Entity purchases are common for DSCR loans, subject to program terms, and the leverage tiers are the same. You will need entity documents, and the personal credit of the guarantor still matters.
What happens if my rent can’t cover the payment at 75% LTV?
The loan size shrinks or the structure changes. Coverage below 1.00 is available through select lenders in the network, with leverage and terms adjusted, which usually means more cash down. A larger down payment also lowers the monthly obligation and can bring the ratio up.
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. Qualification is subject to lender guidelines and credit approval. This is not a commitment to lend.
About Lendmire
Lendmire (NMLS# 2371349) is a mortgage brokerage focused on DSCR investor financing, helping arrange programs through wholesale and investor-lending channels in 41 markets, including Washington, D.C. DSCR loans are evaluated by the lender on property cash flow rather than personal income, subject to lender guidelines, supporting LLC closings and accommodating investors with four or more financed properties. Scotsman Guide Top Mortgage Workplace in both 2025 and 2026.
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References
1. Federal Register – Ability-to-Repay and Qualified Mortgage Standards
2. CFPB ATR/QM small-entity compliance guide
This article is part of Lendmire’s DSCR loan program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: How Much Down Payment Does a DSCR Loan in Virginia Require? · How Much Down Payment Does a DSCR Loan in California Require? · How Much Down Payment Does a DSCR Loan in Iowa Require?
Guides: DSCR Loans in Tennessee
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Required disclosures. Lendmire (NMLS# 2371349) operates as a licensed mortgage broker, not a direct lender or depository. The discussion in this article is general in nature and should not be relied upon as financial, legal, or tax advice — every investment scenario is unique and should be reviewed by a qualified professional. Any loan inquiry is subject to lender underwriting, and this article is not a commitment to lend or a guarantee of approval. Mortgage rates, loan terms, and program guidelines vary by borrower, property, and state, and may change without notice. Equal Housing Opportunity. Verify licensure at NMLS Consumer Access.