DSCR Loan Down Payment Requirement [2023]

DSCR loan down payment is 20%-25%. Read on to understand how to prepare and what affects your down payment in this investment opportunity.

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Are you interested in taking out a DSCR loan for your business? A down payment is an essential part of the application process. Knowing what to expect and how down payments are determined can help you make a more informed decision when applying for DSCR loans.

A down payment is usually a requirement by lenders offering DSCR loans. The portion of a loan payment must come from an applicant’s funds and express as a percentage of the total loan amount.

What are the Down Payment Requirements for a DSCR Loan?

When obtaining a DSCR loan, down payment requirements form on several factors, such as the borrower’s debt service coverage ratio (DSCR) and net operating income (NOI). Generally, the conditions range from 20%-25% of the total loan amount.

Overall, the requirements for DSCR loans are based on several factors and may vary depending on the loan amount, down payment size, and the borrower’s credit score. Therefore, when calculating down payments for a DSCR loan, it is essential to factor in the loan-to-value ratio and any monthly mortgage payment that may be required.

DSCR loan down payment

DSCR Loan Down Payment Options Available to Qualified Borrowers

DSCR loans require borrowers to pay a 20-25% downpayment, which is calculated from the DSCR calculation in the loan agreement. Unfortunately, unlike other loan products, there are no assistance programs or alternative options to help you with the downpayment.
Most downpayment assistance programs are available for conventional mortgages, which helps people buy their primary residence. DSCR loan is an investor’s loan, and there is no down payment assistance available for this program.

Check your DSCR loan eligibility.

Common Down Payment Percentage Requirements for DSCR Loan

The down payment percentage required to secure a DSCR loan varies depending on the lender, type of loan, and borrower’s financial situation. Nevertheless, here are some points you should remember regarding the payment percentage requirements for DSCR loans.

  • Lenders require borrowers to put down at least 20%-25%% of the home’s purchase price as a down payment.
  • Additionally, borrowers may need to pay higher down payments with lower debt service coverage ratios (DSCR). For example, a borrower with a DSCR of 1.25 might need to pay 20% or more as a down payment to qualify for the DSCR loan.

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Ultimately, the amount of down payment required will depend on the lender and borrower’s financial situation. Therefore, it is crucial to understand the down payment requirements for purchase loans when applying for a DSCR loan.

Now, the question arises in buyers’ minds. How do lenders calculate the down payment? Let’s learn about that in the next section.

How Lenders Calculate Down Payments for DSCR Loans

Lenders typically calculate the down payment using a combination of factors, including the borrower’s debt service coverage ratio (DSCR), rental income, net operating income (NOI), and credit score.

The DSCR is an essential factor when determining eligibility for a loan and provides lenders with an indication of the borrower’s ability to make their monthly payments.

The borrower’s ability, such as the potential rental income and NOI, is also used to determine their down payment requirements, as these figures provide lenders with an indication of the cash flow generated by the property.

The borrower’s income is another factor that lenders consider when calculating the down payment. Ultimately, lenders use this information to determine how much of the loan should be covered by the down payment and how much can be covered by other financing options.

To calculate the down payment required for a DSCR loan, you can use the following formula:

Down Payment = Purchase Price – Loan Amount

For example, if you’re purchasing a property for $500,000 and the lender is willing to provide a loan of $400,000, the down payment required would be:

Down Payment = $500,000 – $400,000 = $100,000

In this case, you would need to come up with $100,000 as the down payment to secure the loan.

Note: DSCR loan downpayment can be higher than 20%, depending on your DSCR ratio. So, it’s crucial to get quotes from multiple DSCR lenders and pick the best one for you.

It’s crucial to talk to your lender to know the specific requirements.

Shop Around for the Right DSCR Loan Down Payment

Research the DSCR loan down payment options available to you. Unfortunately, not all lenders offer the same rates or policies for their products and services, so it is essential to shop around.

The national standards for conventional Fannie / Freddie Mac loans set the parameters of what a lender can approve as a “made sense” down payment requirement.

Therefore, you should prepare to find differences in the down payment requirements among different lenders offering DSCR loans.

Advantages of Making Down Payments on a DSCR Loan

Making a down payment on a DSCR loan can benefit borrowers. For instance, it can reduce borrowers’ monthly payments and help them build home equity. Additionally, a larger down payment can increase the chances of loan approval from lenders due to the lower LTV DSCR ratio and reduced risk of default.

The section below will examine the three main benefits of making a down payment on DSCR loans.

Lower Monthly Payments

Making a down payment on a DSCR loan can help reduce borrowers’ monthly payments because it reduces the amount of the loan they need to take out. Therefore, borrowers’ total debt will lessen with a smaller loan, and their monthly payments may decrease.

Increased Equity 

Explain Increased Equity: Making a large down payment can also increase the borrower’s equity in their home. Equity is the difference between the property’s market value and the amount still owed.

A larger down payment can increase borrowers’ equity, making them more likely to be approved for future loans.

Reduced Risk of Default 

By putting more money down on loans, borrowers are less likely to default (or not repay their loans). Lenders view this as an indicator of lower risk, making them more likely to approve the loan.

Increased Chance of Loan Approval with Larger Down Payments 

Overall, making a sizeable down payment can increase the likelihood of loan approval from lenders. It is because a larger down payment indicates to lenders that the borrower is financially stable and more likely to repay their loans on time.

Additionally, a lower loan-to-value ratio (LTV) reduces the risk of default and increases the chances of loan approval.

Potential for Interest Rate Discounts with Higher Down Payments

Finally, a larger down payment can also lead to interest rate discounts. Again, it is because lenders view borrowers who put more money down as lower risk and are, therefore, more likely to offer them better interest rates.

In conclusion, the DSCR loan program’s down payment offer qualified borrowers assistance. Understanding how lenders calculate the down payment and the gains of making a down payment on DSCR loans can help borrowers prepare for the loan process and increase their chances of loan approval.

In summary, DSCR loans offer borrowers the chance to access funds for a down payment on residential loans. Making a down payment can help reduce monthly payments, increase equity, reduce the risk of default, and increase the likelihood of loan approval.

You can read this article if you want to find the best loan lender in 7 easy steps. You can also effortlessly connect with expert loan lenders from HomeAbroad to get started on the DSCR loan program down payment process asap.

Alternatives to DSCR Loan Down Payment

A. Traditional loan options

Rather than a DSCR loan down payment, those seeking to purchase real estate could look into traditional loan choices such as conventional mortgages. This type of financing typically has more manageable initial payments compared with DSCR ones and therefore are available for borrowers who don’t have substantial money readily available. That being said, there might be stricter criteria associated with these options, so check your eligibility. Also, conventional mortgages are mostly for buying primary residence, whereas DSCR serves real estate investors.

B. Financing options

Aside from DSCR loan down payments, borrowers can also look into financing options such as leasing to free up cash flow for their down payment on the property.

C. Seller financing

As another alternative to the DSCR loan down payment, consider seller financing. In this situation, the seller of the house agrees to finance either part or all of the cost. This might permit the borrower to bypass a deposit entirely or lower it significantly. Unfortunately, though, seller funding could come with steeper interest rates and shorter periods for repayment than conventional loans – resulting in possibly requiring a greater purchase price as compensation for financing!

Ultimately, it is of utmost importance to consider the advantages and disadvantages of each option while determining which alternative will be the most beneficial down payment for a DSCR loan. Working with competent lenders or financial advisors can be incredibly helpful in choosing the right direction that best suits your individual needs and objectives.


In conclusion, DSCR loans generally require a downpayment of 20% to 25% based on your DSCR. The DSCR loan downpayment requirements may vary from lender to lender, so make sure to shop around and compare quotes to get the best possible loan terms.

DSCR is a non-QM mortgage, and not every lender offers this program. HomeAbroad can connect you with the best DSCR loan lenders so that you can compare and choose the best one for you.

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Frequently Asked Questions

Q. Is it hard to get a DSCR down payment?

There are no down payment assistance programs available for DSCR loans. So, you need to arrange the down payment to get the DSCR loan.

Q Why do DSCR loans require a down payment?

DSCR loans require a down payment to ensure the borrower has a financial stake in the property and to reduce the lender’s risk. It also provides sufficient equity to cover any potential losses in case of default.

Q How much down payment is required for a DSCR loan?

The required down payment for a DSCR loan varies depending on the lender and the borrower’s financial situation. Typically, the down payment requirement for a DSCR loan is higher than that for traditional loans and can range from 20% to 25% of the property’s purchase price.

Q Can I negotiate the down payment requirement with the lender?

It’s possible to negotiate the down payment requirement with the lender, although the amount that can be negotiated will depend on the lender’s policies and the borrower’s financial situation. It’s important to work with a trusted lender to determine the best course of action for your specific situation.

Q Can I get a DSCR loan with no money down?

It’s unlikely you can secure a DSCR loan with no money down since these loans usually need an extensive upfront payment. Generally speaking, the required down payment for a DSCR loan is between 20% – 25% of the property purchase cost to lessen the lender’s risks and guarantee that you have skin in the game.
While you may be able to negotiate with the lender regarding the down payment requirement, it’s highly improbable that a DSCR loan can be obtained without having to pay anything initially.

About the author:
Amresh is the Founder & CEO of HomeAbroad. With over 14 years of mortgage industry experience, he specializes in foreign national mortgages and Non-QM mortgages. He is also a licensed mortgage originator (NMLS # 2549148).

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