The Quick Read: On a purchase, an LLC borrower with partner money typically needs 20% to 25% down, or 15% on select high-leverage programs for borrowers with roughly 700+ credit. That cash must be documented as a member contribution or loan and traced to a verifiable source, not dropped into the account as an unexplained deposit. Partner funds are allowed as one source of the down payment, but the paper trail matters as much as the amount.
- Most purchase files in Lendmire’s wholesale network land at 75%-80% LTV on investment property, which means 20%-25% down.
- The LLC takes title, and one or more members usually guarantee the loan personally.
- The lender checks the rent against the payment, and it separately checks where the down payment came from.
- A larger down payment can lift the coverage ratio. It never erases leverage caps, credit floors, or reserve rules.
- Partner cash works best when it is wired into the LLC’s own bank account and matches the operating agreement.
How Does the Down Payment Work When an LLC Is the Borrower?
The LLC signs the note and takes title. Its members back the loan with personal guarantees. The down payment is a separate asset check: the lender confirms the cash exists, belongs to the LLC or its members, and traces to an acceptable source. The rent test runs alongside it.
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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.
Lending to an LLC is available on most programs in the network, subject to program terms. Many investors assume the entity changes the cash requirement. It usually does not. The entity changes who signs and which documents the lender reads.
Here is the other half of the file. DSCR means debt service coverage ratio. You get it by dividing the property’s monthly rent by its monthly PITIA, which is principal, interest, taxes, insurance, and any HOA dues. A result of 1.00 means the rent just covers that payment. A ratio of 1.00 is where many select programs start. A separate select-lender path takes coverage below 1.00, with leverage and terms adjusted. The loan is reviewed primarily on property-level rental income covering the payment, subject to lender guidelines.
Two tests run side by side. One asks whether you have enough equity. The other asks whether the rent has enough coverage. The strongest files clear both. If you want the full picture of how the pieces fit, Lendmire’s complete DSCR loans guide walks through the whole product.
What Moves the Down Payment Number
Leverage, credit, loan purpose, and property type set the minimum cash. Coverage strength and loan size shape the terms and the cash you hold after closing. Across the network, the figures below are typical ranges, not promises, and every file is underwritten individually.
| Factor | What programs typically do | Effect |
|---|---|---|
| Purchase leverage | 75%-80% LTV (20%-25% down) | Sets the minimum |
| Strong credit | About 700+ opens select 85% LTV (15% down) | Minimum and terms |
| Credit floor | 620 in parts of the network; most want about 660 | Minimum and terms |
| Coverage ratio | Stronger ratios open better terms and leverage | Terms and leverage |
| Cash-out refinance | Tops out around 75% LTV | Sets the minimum |
| Short-term rental purchase | Up to 75% LTV | Sets the minimum |
| Loan size | Reserves step up above $1,500,000 | Cash after closing |
Those LTV figures describe purchases of non-owner-occupied investment property unless the row says otherwise. Standard programs reach up to $3,000,000, and above $2,500,000 the network generally holds to 30-year fixed structures.
A higher credit score does more than improve terms. It can move you into a higher leverage tier, which means a smaller down payment. A stronger coverage ratio works the same way on many files. Do not count on either one to cut the cash requirement on a given loan, since each lender sets its own tiers.
Is There a Zero-Down Option?
No. Purchase programs in the network require real equity, and the thinnest cushion on select high-leverage programs is 15% down for borrowers around 700+. Most files sit at 20% to 25% down.
Investors who want to put in less of their own cash usually take one of two routes. The first is bringing in partner capital, which is the subject of this article. The second is buying with a standard down payment and recovering equity later through a cash-out refinance. Cash-out tops out around 75% LTV across most of the network, and about six months of seasoning is the common expectation. That route recovers cash. It does not avoid the original down payment.
Borrowing the down payment is the route that causes trouble. Most programs do not accept an unsecured personal loan as the source of down payment funds. Some programs also want unborrowed cash, so ask before you draw on any credit. Partner money is cleaner, because it is equity going into the entity rather than debt sitting on your personal credit.
Partner Money: Contribution, Loan, or Gift?
Partner money is normally an equity contribution or a documented loan to the LLC. It is almost never a gift. The label matters because each one is documented differently, and lenders treat them differently.
A capital contribution. The partner puts cash into the LLC and receives an ownership interest. The operating agreement records the amount and the partner’s percentage. This is the cleanest version for underwriting, because the cash is entity equity.
A member loan. The partner lends money to the LLC with a written note and repayment terms. Cash can move in by documented member contribution or loan, with a personal guaranty typical, subject to lender program eligibility. Programs differ on how they view loan-funded down payments, so ask your broker before the money moves.
A gift. A gift letter states that the money is a gift with no repayment expected. A partner who receives an ownership stake is investing, not gifting, so the gift label does not fit. Gift funds also carry their own conditions, and many programs require the borrower to bring some of their own money as well. The gift rules for a P&L loan down payment follow the same logic.
Route the cash cleanly. Open a separate bank account in the LLC’s name. Have the partner wire the money into that account before application, and label the transfer as a capital contribution or loan. Your operating agreement should cover initial capital contributions and any payback terms. Skip handshake deals, because an undocumented arrangement is the first thing an underwriter questions.
What Documents Will the Lender Want?
Expect two document sets: one for the entity and one for the money. Programs vary, but the typical list looks like this.
- Articles of organization, the EIN letter, the operating agreement, and often a certificate of good standing.
- The operating agreement’s ownership percentages, signing authority, and any member-consent rules.
- Bank statements for the account holding the funds, showing the money’s origin and owner.
- Transfer records for money moving between the partner and the LLC.
- A written explanation for any large recent deposit.
The deposit point deserves emphasis. Funds often do not need to sit for a fixed period, but a big recent deposit has to be explained. Seasoning, meaning how long money has sat in an account before you use it, varies by lender, so treat any waiting period as something to confirm up front. If the partner’s cash comes from a personal account, the lender will want to see how it left that account and where it landed.
Who Has to Sign the Guarantee?
At least one member usually signs a personal guarantee, and the lender reviews that guarantor’s credit, liquidity, and reserves. Even when the LLC holds title, the entity does not remove the guarantee. Depending on the operating agreement and lender policy, one member or a few may be required to sign.
No federal rule sets a guaranty percentage. Each lender draws its own ownership line. Passive members below that line usually do not sign, but they are often still disclosed. A silent money partner can therefore stay off the loan on many programs, though the lender still wants the partner’s identity and ownership on file. Layered ownership, such as a holding company inside the LLC, gets looked through to the individuals behind it.
Credit blends in ways that surprise people. With two guarantors, some programs use the lower of the middle scores, so the weaker partner can set the terms for the whole file. Some lenders accept a single guarantor who carries enough credit and reserves alone. In practice, a partner with a thin score is often better off as a passive investor than as a co-guarantor.
Worked Example: Two Partners, One Duplex
Run the numbers on a purchase at 75% LTV, which makes the down payment 25% of the price. These percentages are modeled assumptions, not market data. Final terms depend on the lender’s guidelines, the property type, and the borrower’s complete credit picture.
| Item | Partner A (cash) | Partner B (deal finder) |
|---|---|---|
| Share of the down payment | 70% | 30% |
| Ownership of the LLC | 50% | 50% |
| Guarantor | Yes | Depends on program |
| Money path | Wire into LLC account | Wire into LLC account |
The lender sees equal ownership but unequal cash. That mismatch is not fatal, yet it needs an explanation in the operating agreement. Partner A’s extra contribution might be recorded as a larger capital account, a preferred return, or a member loan. Each choice reads differently to underwriting, so pick one before the money moves.
The 25% down payment is separate from closing costs and reserves. Those are two more line items. Partners often agree on the down payment and forget the other two, then scramble at the end.
Cash You Need Beyond the Down Payment
Reserves are cash you keep after closing to cover payments if rent dips. They vary by lender, leverage, loan size, and transaction type, and a common figure is about six months of PITIA. Conservative refinances without cash-out at modest leverage under $1,500,000 can see reserves waived. Loans above that size typically step up to about nine months.
In an entity file, the guarantor’s liquidity is the number the lender reviews. A partner who does not guarantee may not help your reserve count unless the assets are documented under the program. Ask early whose statements will count.
Clearing 1.00 coverage is not the same as positive cash flow. The ratio compares rent to PITIA only. Repairs, vacancy, management, utilities, and capital expenses sit outside it, which is why reserves matter.
Where the General Rule Breaks
The 20%-25% down guideline holds for most purchases, but several situations change it.
- Cash-out or refinance. There is no purchase down payment. Equity does that job, capped around 75% LTV on a cash-out. A partner buyout changes the guarantor roster, so the remaining member may need to qualify alone.
- High price, low rent. Higher leverage may not pass the coverage test on a property where rent is thin against price. A bigger down payment can fix the ratio, which is why some investors put in more than the minimum.
- Coverage below 1.00. Select lenders in the network offer it, with leverage and terms adjusted. Expect more cash down, not less.
- Short-term rentals. Purchases go up to 75% LTV, with a 640+ score and about 12 months of hosting history typical.
- Ineligible property. Manufactured homes, log homes, and barndominiums are not offered in the network, no matter how much cash you bring.
- A HELOC held by a partner. A partner who draws on an equity line is routing personal money into the LLC. Treat it as a personal-funds transfer and confirm how your program reads borrowed cash. Each figure is subject to lender guidelines and a complete review of property type, leverage, and credit.
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.
Does a Business-Purpose Loan Change Anything?
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 CFPB’s Regulation Z page removes credit extended primarily for business purposes from consumer-lending coverage, and the creditor decides the primary purpose in each case. A Compliance Alliance bulletin adds that the test looks at the purpose of the loan itself, not so much the property securing it. For you, the point is practical: the lender will ask you to confirm the loan is for investment.
Common Mistakes With Partner Funds
- Wiring money into a personal account first, then moving it again.
- Making a large deposit close to application with no explanation.
- Assuming the LLC makes the loan non-recourse. The guarantee stands outside the entity.
- Assuming only the majority owner signs. Several members can be required.
- Writing a verbal partnership instead of an operating agreement.
- Treating a down payment shortfall as a reserve.
Step-by-Step Checklist
1. Decide who contributes, who guarantees, and how each partner exits.
2. Finalize the operating agreement, including capital contributions and any loan terms.
3. Open an LLC bank account and fund it by documented contribution or loan.
4. Gather source statements and written explanations for large deposits.
5. Confirm guarantor credit, liquidity, and reserves against the program.
6. Check that the rent covers the full payment at your intended leverage.
7. Sign at closing as the LLC, with each required guarantor signing alongside.
Key Terms Defined
LTV (loan-to-value): the loan amount as a percentage of the property’s price or value. A lower LTV means a bigger down payment.
PITIA: principal, interest, taxes, insurance, and any association dues, the full monthly payment used in the coverage ratio.
Personal guarantee: a signed promise by a member to repay the loan if the LLC does not.
Seasoning: the time money sits in an account before you use it, or the time you own a property before a cash-out refinance.
Capital contribution: cash a member puts into the LLC in exchange for ownership.
Reserves: cash you keep after closing to cover payments if income dips.
Where to Start
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. Lendmire is a mortgage broker that arranges these loans through select lenders in its wholesale network, covering 41 markets including Washington, D.C. You can reach the team at 828-256-2183 to talk through a partner-funded purchase before the money moves. This is not a commitment to lend, and approval depends on lender guidelines and underwriting.
This article is general education, not legal or tax advice. Consult a qualified attorney or CPA about how to structure your partnership and your own situation.
Frequently Asked Questions
Can my partner’s money count toward the down payment?
Yes, when it is documented as a capital contribution or a loan to the LLC and traces to a verifiable source.
Does the money have to pass through the LLC’s bank account first?
It is the cleaner path. A separate LLC account makes the origin and ownership easy to show, and it matches an operating agreement that records the contribution.
Can a partner fund the deal without being on the loan?
Often yes. Passive members under a lender’s ownership line usually do not sign the guarantee, though the lender still wants them disclosed. Lenders set their own line, so ask which one applies to your file.
Does a higher coverage ratio lower my down payment?
It can help. Stronger ratios open better terms and leverage on many programs, but they do not erase leverage caps, credit floors, or reserve rules. Plan for the standard 20%-25% on a purchase.
Is a gift different from a partner contribution?
Yes. A gift carries a gift letter and no repayment, and many programs add a borrower-contribution requirement. A partner who receives ownership is investing, so the money is a contribution or loan instead.
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. CFPB, Regulation Z §1026.3 exemptions
2. Compliance Alliance, Regulation Z and Investment Properties
This article is part of Lendmire’s DSCR loan program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: Can an LLC With a Partner Use Gap Funding on a DSCR Purchase? · DSCR Insurance Premium Requirements After a Renewal Doubles · DSCR Loan Requirements After a Short Sale or Lost Property
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
- Mortgage Loan Originator · NMLS# 1129696 · Verify on NMLS Consumer Access
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- Lendmire LLC · Firm NMLS# 2371349 · Verify firm licensure
Disclosures. The information presented in this article is general market commentary, not financial, legal, or tax advice. Lendmire is a mortgage brokerage (NMLS# 2371349) — not a direct lender or depository institution — and loan placement is subject to lender underwriting. Nothing in this content represents a commitment to lend. Loan terms, pricing, and program availability vary based on borrower qualifications, property characteristics, and state of subject property, and are subject to change at any time. Lendmire complies with Equal Housing Opportunity requirements. Consumer access: nmlsconsumeraccess.org.