Short answer: For conventional loans sold to Fannie Mae, investment purchases can go up to 85% loan-to-value on a one-unit property and 75% on 2–4 units, so at least 15% or 25% down. Individual lenders may require more.
The down payment
Rental (non-owner-occupied) loans usually need more down than a home you live in. For conventional loans sold to Fannie Mae, the eligibility matrix allows a maximum loan-to-value of 85% for a one-unit investment property and 75% for 2–4 units on a purchase, which means at least 15% or 25% down. Many lenders and borrowers use 20–25% in practice, and investment loans also carry extra pricing adjustments.
If you plan to live in one unit of a small multifamily first ("house hacking"), owner-occupied programs such as FHA have different rules. Check HUD's loan overview and talk to a lender.
Closing costs
Closing costs are the fees to finalize the purchase and loan: lender fees, title, appraisal, prepaid taxes and insurance, and more. The CFPB explains what they include. They vary by state and lender, so get a Loan Estimate rather than guessing.
In the example below we assume 3% of the price purely for illustration.
A cash cushion (reserves)
Furnaces break and tenants move out. Lenders often require reserves for investment loans, and even when they don't, you should keep them. In the example we assume six months of mortgage, tax and insurance as a personal safety net.
Red flag: Draining every dollar for the down payment. One big repair in year one can turn a good deal into a forced sale.
Add it up
For a $220,000 single-family rental, here's down payment + closing costs (3%, assumed) + six months of reserves (assumed):
| 15% down | $33,000 + $6,600 + $9,445 = $49,045 |
| 20% down | $44,000 + $6,600 + $9,006 = $59,606 |
| 25% down | $55,000 + $6,600 + $8,566 = $70,166 |
A bigger down payment costs more up front but lowers your mortgage, which raises cash flow and DSCR.
Worked example
A $220,000 single-family rental at $2,050/mo rent, 20% down at 7% for 30 years, closing costs assumed at 3% ($6,600).
| Down payment (20%) | $44,000 |
| Closing costs (assumed 3%) | $6,600 |
| Cash to close | $50,600 |
| Monthly mortgage (P&I) | $1,171 |
Frequently asked questions
How much down payment do you need for a rental property?
For conventional loans sold to Fannie Mae, investment purchases can go up to 85% loan-to-value on a one-unit property and 75% on 2–4 units, so at least 15% or 25% down. Individual lenders may require more.
Are closing costs included in the down payment?
No. Closing costs are separate fees paid at closing. Ask lenders for a Loan Estimate to see the real number.
How much should I keep in reserves?
There is no single rule. Lenders may require reserves for investment loans, and many investors keep several months of payments set aside for repairs and vacancies.
Keep learning
- What is a good cap rate?
- Cash-on-cash return, explained
- Is the 1% rule still realistic?
- How to analyze a rental property (step by step)
- Rental analysis glossary
Sources
- Fannie Mae Eligibility Matrix (investment property LTV limits)
- Fannie Mae Selling Guide: Occupancy types
- CFPB: What are closing costs?
- HUD: Loans for buying a home
Educational content, not financial advice. Loan programs and requirements change; confirm with a lender.