Many advertised DSCR purchase programs use roughly 20%–25% down, but the actual requirement depends on the lender, credit profile, rental coverage and property. Down payment is not your total cash need. Closing costs, prepaid expenses and required post-closing reserves must be considered separately before you commit to a purchase.
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How Do Loan-to-Value and Down Payment Connect?
Loan-to-value compares the loan amount with the value used by the provider. For a purchase, the accepted value may be constrained by both the purchase price and appraisal. An appraisal above the contract price does not automatically replace your required contribution.
Plan Two Leverage Cases
For a $320,000 purchase, 80% financing would be $256,000 and leave $64,000 toward the price. At 75%, financing would be $240,000 and the price contribution $80,000. Add actual closing costs and reserves to each case before comparing.
Why Might I Need More Cash Than Expected?
A lower appraisal, weaker rental coverage, different credit tier or property-specific restriction may reduce the available loan. A higher insurance or tax estimate can also affect coverage. Review updated figures while there is still time to respond.
Ask which funds are acceptable and how they must be documented. Do not assume a gift, new borrowing or recently moved money will meet the provider’s requirements. Keep the source of your closing funds clear.
What Should My Cash-to-Close Worksheet Include?
- Purchase price minus expected loan proceeds.
- Lender, broker and third-party closing charges.
- Prepaid insurance, taxes and any escrow funding.
- Required reserves remaining after closing.
- A separate budget for immediate property needs.
Earnest money already paid may be credited in the closing calculation, but it is still part of your invested cash. Ask for a written estimate and update it when the loan amount or costs change. Avoid counting the same dollars as both your down payment and remaining reserve.
Educational information, not a loan offer. Availability and terms depend on the program, property or business, and borrower qualifications. Legal and tax questions should be reviewed with your advisers.