The Quick Read: Most purchases through the wholesale network land at 20%-25% down, because select lenders typically cap leverage at 75%-80% LTV on an investment-property purchase. Being self-employed does not raise that number, and choosing an interest-only period does not lower it. Both change how the file is documented or how coverage is measured, not how much equity the lender wants. Programs differ and every file is reviewed individually, subject to lender guidelines.
- Typical purchase: 75%-80% LTV, which means 20%-25% down.
- Select high-leverage programs reach 85% LTV (15% down), generally with a score around 700 or higher.
- Cash-out refinance on a rental tops out near 75% LTV.
- Interest-only changes the payment used in the coverage math. It does not remove leverage caps, credit floors, or reserve rules.
- Down payment is only one piece of cash to close. Closing costs and reserves sit on top.
A self-employed investor asks this question for a good reason. Tax write-offs shrink adjusted income, and the usual worry is that a smaller income will force a bigger check at closing. It does not work that way here. This piece lays out how the down payment is set, what interest-only does and does not change, how to document the funds, and when the structure is worth choosing. Lendmire is a DSCR-focused mortgage broker arranging investor loans across 40 states plus Washington, D.C., and the figures below describe what select lenders in that network typically do.
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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.
How Is the Down Payment Calculated?
The down payment is the purchase price minus the loan amount. The lender sets a maximum loan-to-value ratio, and the gap between that cap and 100% is the equity you bring. As the federal consumer-finance regulator explains, a larger down payment lowers the LTV. At 75% LTV you bring 25% of the price. At 80% LTV you bring 20%. Final terms depend on lender guidelines, property type, leverage, and the borrower’s complete credit picture.
That cap is a ceiling, not a promise. Credit score, coverage ratio, property type, loan size and reserves can each pull the maximum lower. A file with a 700-plus score and strong rent coverage sits near the top of the range. A file with a 660 score and thin coverage sits lower. Here is how the common variables line up on a purchase of an investment property, based on typical network guidelines:
| Variable | Typical effect on leverage |
|---|---|
| Credit 700+ | Opens the strongest leverage tiers |
| Credit around 660 | Most programs are comfortable here |
| Credit 620 | Floor in parts of the network, lower leverage |
| Coverage above 1.00 | Better pricing and leverage |
| Loan above $1,500,000 | Reserve requirement steps up |
Some DSCR programs offer interest-only payment options, and under one you build no equity through payments while the interest-only period runs. The balance does not fall during that period. Your equity is whatever you put in at purchase, plus any appreciation.
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. That is why none of the owner-occupied low-down options apply. Zero down is not available on these loans.
Does Self-Employment Change the Down Payment?
No. Leverage follows the property and the credit profile, not your employment type. A W-2 employee and a business owner with identical credit, identical rent coverage and an identical property see the same leverage tiers.
What self-employment changes is the documentation burden you avoid. A DSCR file qualifies primarily on property-level rental income covering the payment, subject to lender guidelines. Your personal income is not the test, so write-offs that shrink your adjusted income do not shrink your borrowing power. Credit, down payment, reserves and the property’s rent carry the file.
Here is the catch. The loan is still a loan to you. Lenders look at credit, assets and liquidity. A self-employed borrower with a strong score and well-documented funds is in good shape. One with a thin credit file or messy accounts is not, and a bigger down payment will not fix that.
A bigger down payment helps in specific ways. It lowers the monthly obligation and can lift the coverage ratio. It never erases a credit floor, a reserve rule or a property restriction. The strongest files clear both tests: enough equity and enough rental coverage.
Does Interest-Only Change the Down Payment?
Not by itself. Interest-only changes the payment used in the coverage calculation, which can help a borderline file clear the ratio. It does not turn a 75% LTV cap into 85%. These specifics are subject to lender guidelines and a full review of property, leverage, and credit.
Here are the mechanics. A standard residential DSCR compares monthly rent to PITIA: principal, interest, taxes, insurance and any association dues. During an interest-only period, principal drops out of the denominator, leaving interest, taxes, insurance and dues. The same rent then produces a higher ratio. Interest-only periods and extended 40-year terms are available through select lenders in the network. The standard spine of the market is still the 30-year fixed.
Picture a rental that covers roughly 0.95x on a fully amortizing payment. On an interest-only payment the same rent can read closer to 1.1x. Those are modeled ratios for illustration, not a quote. The file looks better on paper. The equity requirement did not move.
Two things can still shift leverage on an interest-only file. First, the lender may cap leverage lower on interest-only than on amortizing, and that varies by program. Second, a file that clears only because of the interest-only payment is a thinner file, and thin coverage tends to come with tighter terms. Ask for the program sheet before you assume the maximum LTV applies to the interest-only version.
1.00 is where select programs start for coverage. Coverage below 1.00 is available through select lenders in the network, with leverage and terms adjusted. That is a separate path, and it usually means more cash down, not less.
One more point catches people. Clearing 1.00 is not the same as positive cash flow. DSCR compares rent to PITIA only. Repairs, vacancy, management, utilities and capex sit outside the calculation. A Business Insider piece on Yahoo Finance warns that plans leaning on rising rents and cheap money can backfire, and it recommends stress-testing with conservative assumptions for insurance, maintenance and vacancy. That advice applies doubly when interest-only is what gets the file over the line.
What Happens When the Interest-Only Period Ends?
The payment rises. Once the period ends, principal has to be repaid over the remaining term, so the monthly obligation steps up.
Two questions to put to the loan officer before you commit:
1. Is coverage tested on the interest-only payment, the later amortizing payment, or both?
2. Are reserves sized on the interest-only payment or the fully amortized one?
The answers can differ inside the same file. Some programs qualify coverage on the interest-only payment and size reserves on the amortized payment. You want to know before the appraisal is ordered, not after.
Then run the reset yourself. If rent would not cover the stepped-up payment at 1.00x, you are relying on a refinance, a rent increase or a sale at the end of the window. That is a plan, not a guarantee. Interest-only works best when you have a reason to expect stronger rent, a value-add that matures, or a defined exit.
How Much Cash Do You Actually Need at Closing?
More than the down payment. The down payment is the largest piece, but it is not the whole check. Total cash to close is the down payment plus closing costs, prepaid items, escrow deposits and the reserves the lender wants to see.
| Cash item | What it covers |
|---|---|
| Down payment | Price minus the loan |
| Closing costs | Lender, title and settlement charges |
| Prepaids and escrows | Insurance, taxes, interest set aside upfront |
| Reserves | Liquid funds held after closing |
Reserves vary by lender, leverage, loan size and transaction type. They commonly run around 6 months of PITIA. Conservative rate-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. Reserves are verified, not spent, but they must sit in documented accounts.
Plan the capital wall honestly. Many investors qualify on the loan and stall on the cash. A cash-out refinance on an existing rental, at around 75% LTV with about 6 months of seasoning as the common expectation, is the usual way to free capital for the next down payment. Lendmire’s complete DSCR loans guide walks through how those pieces fit together. Terms depend on the lender’s guidelines, the property type, the leverage, and a full review of the credit profile.
Where Does the Down Payment Money Come From?
It must be sourced and documented. This is where self-employed borrowers see the most friction, and it has nothing to do with income.
Lenders want to see the funds in your accounts, with a paper trail. For a self-employed investor the common problems are:
- Commingled accounts. Business and personal money in one account makes the source hard to trace. Move the funds to a personal account well before the file goes in, and keep the transfer record.
- Large deposits. A deposit that does not match your regular pattern gets a written explanation and a source document.
- Business-account funds. Money held in a business account may need a letter or additional paperwork to show it is available and that taking it will not hurt the business.
- Cash-out proceeds from another property. These are generally usable, provided the earlier refinance has settled and the settlement statement is in the file.
- Gift funds. Treatment depends on the program, so confirm before relying on them.
Beyond the funds, a clean file usually includes ID, the purchase contract, a lease or rent data, insurance and tax bills, asset statements covering the down payment, closing costs and reserves, and entity documents if you borrow through an LLC, subject to lender program eligibility. When no lease exists, the appraiser provides a rent schedule for lender review, using Form 1007 for single-family and Form 1025 for 2-4 units. An existing lease can serve where the program allows it. Missing entity documents and unclear rent evidence derail more files than the down payment does.
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.
Purchase vs. Refinance: Is There a Down Payment on a Refi?
No, not in the purchase sense. A refinance is sized on value and the new loan amount, and your equity is what is already in the property. Cash-out refinances carry a lower cap than purchases, around 75% LTV across most of the network, and about 6 months of seasoning is the common expectation on a recent purchase. Files that assume the seasoning away get kicked back. The exact numbers vary by lender and program and follow a full review of property, leverage, and credit.
Short-term rentals run tighter. Leverage on a purchase goes to 75% LTV, on a refinance around 70%, and on a cash-out 70%. Expect a 640-plus score, about 12 months of hosting history and a 1.00 coverage floor on purchases and refinances. 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. Final terms depend on the lender’s guidelines, the property type, and the borrower’s complete credit picture.
Property type matters too. Manufactured homes (single- and double-wide), log homes and barndominiums are not offered in these programs. Condos and 2-4 unit properties can carry their own review items.
Is Interest-Only Worth It? (A Short Decision List)
Interest-only is worth it when the structure solves a real problem. Skip it when it only hides one.
It tends to make sense when:
- The property is near 1.00x on an amortizing payment and interest-only moves it clearly above.
- You have a defined plan for the reset, such as a refinance, a stabilization after a renovation, or a planned sale.
- You value the lower monthly obligation for cash management more than building equity through payments.
It tends not to make sense when:
- The file only works on the interest-only payment and fails the moment principal returns.
- You have no exit and no cushion for the stepped-up payment.
- The extra leverage restriction on the program cancels the benefit.
This is a genuine trade-off. Interest-only lifts the number and leaves your equity untouched, which feels like a win until reset day. If the property cannot carry the full payment at 1.00x or better, the structure is borrowing time, not creating value.
Key Terms Defined
Loan-to-value (LTV): The loan amount divided by the property’s value or price, expressed as a percentage.
Down payment: The purchase price minus the loan, which is your equity at closing.
PITIA: Principal, interest, taxes, insurance and association dues, the full monthly obligation used in standard DSCR math.
ITIA: The same obligation with principal removed, used during an interest-only period.
Reserves: Liquid funds held after closing, commonly measured in months of PITIA.
Seasoning: The ownership period a lender expects before a cash-out refinance on a recent purchase.
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.
Frequently Asked Questions
Can I buy a rental with an interest-only DSCR loan and put nothing down?
No. Zero down is not available on these investment-property loans. Typical purchases sit at 75%-80% LTV, so expect to bring 20%-25%, and select high-leverage programs reach 85% LTV (15% down), generally with a score near 700 or higher. Closing costs and reserves are additional.
Does being self-employed mean a larger down payment?
Generally not. Leverage follows credit, coverage, property type and loan size, not employment type. The file qualifies primarily on property-level rental income covering the payment, subject to lender guidelines. Self-employment mainly affects how you document the source of your down payment funds.
Is the interest-only payment used to qualify, or the full payment?
It depends on the program. Some lenders test coverage on the interest-only payment and size reserves on the fully amortized payment. Ask which payment drives each test before you commit, because the answer affects both approval and the cash you need to hold.
Can I use cash-out proceeds from another rental as my down payment?
Often yes, once that refinance has settled and the settlement statement is documented. A cash-out refinance tops out near 75% LTV across most of the network, and about 6 months of seasoning is the common expectation on a recent purchase.
What if my rent does not reach 1.00x?
Coverage below 1.00 is available through select lenders in the network, with leverage and terms adjusted, which usually means more cash down. No-ratio structures exist only through select lenders, generally for borrowers who already own a primary residence. A stronger ratio opens better pricing and leverage.
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.
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. CFPB: What Is a Loan to Value Ratio and How Does It Relate to My Costs
2. Business Insider via Yahoo Finance
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 an Interest-Only Super Jumbo DSCR Loan Need? · How Much Can You Borrow With a 40-Year Super Jumbo DSCR Loan? · How to Document a Jumbo 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.