The Quick Read: Usually no: putting down the minimum makes reserves matter more, not less, because a smaller down payment means a bigger loan, a bigger monthly obligation, and a larger dollar cushion at the same month count, and most programs we place files with still want about six months of PITIA documented after closing.
- Most DSCR purchases land at 75%-80% LTV, which means 20%-25% down. The “minimum down” is a leverage ceiling, not a cash floor.
- Reserves are a separate test from the down payment. The same dollars cannot satisfy both.
- Reserves commonly run about six months of PITIA, and loans above $1,500,000 typically step up to about nine months.
- Waivers exist, but they mostly show up on conservative rate-and-term refinances at modest leverage, not on high-leverage purchases.
- A bigger down payment can lower the reserve dollars and lift the coverage ratio, but it never removes the reserve rule.
Reserves are liquid funds you still hold after the deal closes. PITIA is the full monthly obligation on the property: principal, interest, taxes, insurance, and any association dues. LTV is the loan size as a percentage of the property’s value. This article walks through how those pieces interact, where the exceptions live, and how to plan cash so a purchase does not stall at the last step.
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What Does “Minimum Down” Actually Mean?
The minimum down payment is the smallest percentage a program lets you put in, and it is almost never the cash you will actually bring. On a purchase, most files across our wholesale network sit at 75%-80% LTV. That is 20%-25% down. Select high-leverage programs go further for borrowers with strong credit, roughly 700 or higher, subject to lender guidelines.
Three separate buckets of cash sit behind every purchase:
1. The down payment. This is your equity in the deal, and it must be your own money.
2. Closing costs and prepaid items. These are fees, escrow deposits, and the first insurance premium.
3. Reserves. This is what remains in your accounts after the first two are paid.
Many first-time investors budget for the first bucket and are surprised by the third. The lender checks the buckets in order. Funds to close come first, and reserves are whatever is left over. If you wire your whole savings account to the title company, you have nothing left to count.
So Can Minimum Down Skip Reserves?
No, and the reason is structural. The down payment tests how much equity you have in the property. The reserve test asks whether you can keep the payment current if a tenant leaves or rent dips. Passing one does not excuse the other.
Minimum down also makes the reserve test heavier in two ways. The loan is larger, so PITIA is larger, and the same month count turns into more dollars. Lower-down programs also tend to carry tighter pricing, which can make the coverage ratio harder to clear. A thinner ratio can trigger extra reserve months on top of that.
That is why the strongest files clear both tests: enough equity and enough rental coverage. A strong credit score helps, but it does not stand in for liquid cash.
A few lenders in the network will reduce reserves on certain files. In my experience those are almost always conservative structures, such as a rate-and-term refinance at modest leverage under $1,500,000. A purchase with the minimum down is the opposite profile. It is a highly leveraged acquisition with no seasoning on the property, so lenders want more cushion, not less.
What Decides Your Reserve Requirement?
Final terms depend on the lender’s guidelines, the property type, and the borrower’s complete credit picture.
Reserves vary by lender, leverage, loan size, and transaction type. Most programs we work with start from about six months of PITIA on the subject property. Then the file’s attributes push that number up or down.
| File factor | Typical effect on reserves |
|---|---|
| Higher leverage on a purchase | Reserves usually required |
| Loan above $1,500,000 | Often steps up to about nine months |
| Conservative rate-and-term refinance | Can be waived on some files |
| Coverage below 1.00 | Often adds reserve months |
| Interest-only structure | Measured on interest, taxes, insurance, dues |
| Additional financed properties | Extra months may apply |
Look at the coverage row first. Coverage is monthly rent divided by PITIA. 1.00 is where many select programs start. A separate select-lender path goes below 1.00, with leverage and terms adjusted. Scotsman Guide notes that DSCR terms vary by lender and that sub-1.0 programs exist. In practice, a thinner ratio rarely arrives alone. It comes with lower leverage, more cash down, or more reserve months, and that last piece catches people off guard.
Property count matters as well. Reserves can be reviewed per financed property, so an investor adding a fifth rental is not judged only on the new one. If you are scaling a portfolio, the cash requirement grows with each purchase. Lendmire’s piece Bank Statement vs DSCR Loan Reserves on a Jumbo Purchase shows how loan size changes the picture on bigger files.
A Side-by-Side Look at Cash Needed
Run the logic on two buyers purchasing the same property at the same price, with the same credit and the same rent. These are modeled assumptions, not market data.
| Item | Buyer A: 20% down | Buyer B: 25% down |
|---|---|---|
| LTV | 80% | 75% |
| Loan size | Larger | Smaller |
| PITIA | Higher | Lower |
| Coverage ratio | Lower | Higher |
| Reserve months | About six | About six |
| Reserve dollars | Larger | Smaller |
| Cash to bring | Less up front | More up front |
Buyer A brings less cash to the table but carries a bigger reserve target and a thinner ratio. Buyer B brings more up front, yet the reserve target shrinks and the coverage number improves. Neither buyer skips reserves. Both have to show the funds after closing.
Here is the trade-off. Putting more down uses cash that could have been your cushion. Putting the minimum down preserves cash but raises the monthly obligation, the reserve dollars, and the risk of a short ratio. Choosing between them is a real judgment call. If your liquid cash is limited, a middle path often works better than either extreme. Put down enough to clear the coverage ratio comfortably, and keep enough to document the reserve months without scraping the bottom of your accounts.
What Counts as Reserves?
Reserves are documented liquid funds you hold after closing. The lender looks at account statements that show the money is available. Lenders may ask for seasoning, meaning the funds have sat in the account for a period, and for a paper trail on large deposits.
A few rules show up on most files:
- The same dollar cannot do two jobs. Cash used for the down payment or closing costs does not also count as reserves.
- Borrowed funds are a problem. Lenders want your own capital in the deal, so a loan from another party, or a second lien on the property, does not work as a down payment. Pretty much every DSCR lender disallows other liens on the subject property.
- Interest-only files change the math. Reserves on those loans are generally measured against interest, taxes, insurance, and dues rather than full PITIA.
- Asset types get different treatment. Bank accounts count in full. Retirement and brokerage balances may count at a reduced value. Lenders differ on the details.
- Gift funds vary. Some lenders accept them for the down payment with a gift letter, and others do not. Ask before you rely on them.
On a purchase there are no loan proceeds, so there is nothing to lean on except your own liquid assets. That is another reason the purchase is the strictest version of the reserve test.
Reserves Are Not a Repair Budget
Reserves are a qualification floor, not a capex fund. A common mistake is to see six months of PITIA sitting in the bank and treat it as roof money. The lender counts that cushion as protection for the payment, and you should too.
The same applies to the DSCR ratio itself. DSCR compares rent to PITIA only. Clearing 1.00 does not mean the property produces positive cash flow, because repairs, vacancy, management, utilities, and capital expenses all sit outside the calculation. A property can show a healthy coverage number and still lose money in a bad year. Plan your own operating cushion on top of whatever reserves the program requires.
Why No Rule Settles This for You
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, and the federal consumer-credit rules carve out business-purpose credit. The practical result is that reserve rules come from each lender and its investors rather than from a regulator.
That is why the numbers differ from one program to the next. Scotsman Guide reports that DSCR is non-QM, that each lender sets its own requirements, and that some may make exceptions. Non-QM means the loan sits outside the standard agency mortgage box. Seeing many lenders’ guidelines side by side is what lets a broker spot the program that fits your cash position.
Where Do the Exceptions Live?
Exceptions exist, but they follow a pattern.
Rate-and-term refinances. A conservative refinance at modest leverage under $1,500,000 can see reserves waived on some files. That is a different transaction from a minimum-down purchase, so do not borrow its logic.
Strong compensating factors. Higher credit scores, lower leverage, and a stronger coverage ratio can soften reserve rules on some files. In my experience they soften the rules at the margin, they do not erase them.
Sub-1.00 coverage. This is available through select lenders in the network, with leverage and terms adjusted, and the file often needs more reserves rather than fewer.
Large loans. Loans above $1,500,000 typically step up to about nine months. Loans above $2,500,000 generally hold to 30-year fixed structures across the network, which is a separate constraint on large files.
No-ratio structures. These are available only through select lenders, generally for borrowers who already own a primary residence. They are a different path with their own terms, not a way around reserves.
If your plan depends on one of these exceptions, ask about it before you write an offer. The worst time to learn the reserve number is after your earnest money is at risk.
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 If You Are Short on Reserves?
Come up short and you still have honest options. Each has a trade-off.
1. Put less down only if the cushion survives. If a smaller down payment leaves you short on reserves, a larger down payment usually fixes the ratio but drains cash. Model both before you commit.
2. Lower the price or leverage. A smaller loan means a smaller PITIA and a smaller reserve target.
3. Build or season the funds. If your cash arrived recently, waiting until it ages in the account can solve a sourcing problem.
4. Adjust the structure. Interest-only periods are available through select lenders in the network, and they change the reserve measurement. They also change the loan’s long-term profile, so weigh that carefully.
5. Pick a different property. A deal with stronger rent coverage can qualify with more flexibility than a marginal one.
What does not work is borrowing the reserves, moving funds around right before closing without a clear paper trail, or counting business money that belongs to someone else.
Pre-Application Checklist
Before you request a quote, gather these items:
- The purchase price and the leverage you are targeting, as a percentage.
- Expected rent, with a rent schedule or lease if the property is occupied.
- Estimates for taxes, insurance, and any association dues.
- Statements for the accounts that will cover the down payment, closing costs, and reserves.
- A clear sense of which funds are earmarked for which bucket.
- Your credit profile. A 620 floor exists in parts of the network, most programs want around 660, and 700 or higher unlocks the strongest leverage tiers.
Lendmire’s complete DSCR loans guide covers the full qualification picture if you want the broader context behind these steps.
Key Terms Defined
Reserves: liquid funds you still hold after closing, usually expressed as a number of months of PITIA.
PITIA: principal, interest, taxes, insurance, and association dues, the full monthly obligation on the property.
LTV (loan-to-value): the loan amount as a percentage of the property’s value.
Funds to close: the cash needed at closing for the down payment, fees, and prepaid items.
Seasoning: the time funds have sat in your account, which lenders use to confirm they are really yours.
Non-QM: a loan outside standard agency mortgage rules, underwritten to the lender’s own guidelines.
Frequently Asked Questions
Can I put zero down on a DSCR purchase?
No. Programs require borrower equity, and most purchases sit at 75%-80% LTV. Select high-leverage programs go further with strong credit, but none removes the down payment. The lender wants your own capital in the deal, and a loan from another party generally does not count.
Will a larger down payment reduce my reserves?
It can reduce the reserve dollars, but not the rule. A larger down payment shrinks the loan and PITIA, so six months of PITIA becomes a smaller number. Coverage also improves. The lender still verifies reserves after closing, and the cash you spent on the down payment cannot be counted twice.
Are reserves ever waived on a DSCR loan?
Sometimes, on specific files. Conservative rate-and-term refinances at modest leverage under $1,500,000 can see reserves waived through some lenders. A minimum-down purchase is a different profile, and waivers there are rare. Treat any waiver as a lender-specific exception rather than something to plan around.
Do reserves differ for a first-time investor?
They can. Lenders tend to be more cautious with borrowers who have no landlord track record, and that can show up as tighter reserve or leverage terms. The details depend on the program, the property, and your credit profile, so ask for the specific requirement before you count on a number.
Does a better coverage ratio lower my reserve requirement?
Indirectly. A stronger ratio opens better pricing and leverage options, and it can keep a file out of the tiers that add reserve months. Coverage below 1.00 is available through select lenders in the network with leverage and terms adjusted, and those files often carry more reserves. A strong ratio does not replace the reserve test.
Next Step
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. As a broker, Lendmire arranges financing through select lenders in its wholesale network across 41 markets, including Washington, D.C. Programs change, every file is underwritten individually, and nothing here is a commitment to lend.
About Lendmire
Lendmire (NMLS# 2371349) is a mortgage brokerage built around DSCR investor lending, with programs available in 41 markets, including Washington, D.C. DSCR lenders commonly evaluate rental-income coverage instead of personal income paperwork — a practical fit for LLC-owned and multi-property investors. Terms vary by lender, property, leverage, and program. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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References
1. Scotsman Guide: Invest in Your Future
2. CFPB: Regulation Z, 12 CFR 1026.3 Exempt Transactions
3. Scotsman Guide: Reach Real Estate Investors by Becoming an Expert in These Loans
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 Recycle BRRRR Capital With a HELOC Before a DSCR Refinance · Can You Use Gap Funding for the Down Payment on a First DSCR Rental? · How to Use a DSCR Loan on Your Own Rental as an Agent
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
- Mortgage Loan Originator · NMLS# 1129696 · Verify on NMLS Consumer Access
- North Carolina Real Estate Broker · License# 343312 · Verify on NCREC
- North Carolina Insurance Producer · License# 19053198 · Property, Casualty, Life, Health · Verify on NAIC SBS
- Lendmire LLC · Firm NMLS# 2371349 · Verify firm licensure
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.