How Much Cash Do You Really Need for a DSCR Loan? A Full Breakdown
Most investors focus entirely on the down payment when budgeting for a DSCR loan. But the down payment is just one piece. There are several layers to how much cash you actually need — where the money has to come from, how reserves are calculated, and what factors determine your down payment in the first place. Here’s the full picture so you’re never caught off guard.
The Three Down Payment Tiers
DSCR loans have three standard down payment levels, and which one applies to you depends on the property’s rental income, your credit score, and the deal structure.
15% down — The minimum available, but most properties won’t qualify at this level. To put 15% down, the rental income needs to fully cover the mortgage payment at a 1:1 DSCR ratio with a smaller loan balance. That’s harder to hit than most investors expect. You also need strong credit and documented landlord experience. No PMI is required, which is a meaningful advantage.
20% down — The most common approach. The larger down payment lowers the monthly mortgage payment, making it easier to hit the 1:1 DSCR ratio. Most investors end up here because the rental income isn’t quite strong enough to support 15% down.
25% down — Typically required when there are concerns about rental income, limited comparable data in the market, lower credit scores, or a unique property that’s harder to appraise. This is also the standard for certain loan programs like the no ratio loan or the one-time close construction loan.
Closing Costs — What to Budget
On top of the down payment, you’ll need to account for closing costs. Nationally, closing costs on a DSCR loan typically run between $6,000 and $10,000 depending on the state, property taxes, and lender fees. A reasonable average to plan around is about $8,000.
The good news: as an investor, you can negotiate a seller concession or seller credit of up to 2–6% of the purchase price to cover closing costs. Many investors close having only brought in the down payment because the seller covered everything else. It’s always worth asking — the worst they can say is no.
Reserves — The Component Most Investors Forget
After closing, the lender requires you to have a certain amount of money left in the bank. This is called the reserve requirement, and it’s separate from your down payment and closing costs.
One month of reserves equals one month of mortgage payments. Most DSCR lenders require a minimum of three months of reserves. On a property with a $2,500 monthly payment, that’s $7,500 you need to have remaining after closing — not including the down payment or closing costs.
Reserves can come from bank accounts, retirement accounts, 401k, or investment accounts. The key is they need to be documented and verifiable.
Real Numbers: What You Need on a $400,000 Purchase
Here’s what the full cash requirement looks like at 20% down on a $400,000 property:
- Down payment (20%): $80,000
- Closing costs: ~$8,000 (or $0 if covered by seller concession)
- Reserves (3 months at $2,500/month): $7,500
- Total: approximately $95,500 out of pocket
If you negotiate the seller to cover closing costs, that drops to roughly $87,500. If the property qualifies at 15% down, the down payment drops to $60,000 and your total need drops significantly.
Where the Money Has to Come From
This is where investors often get surprised. It’s not just about having enough cash — it’s about where that cash has been sitting.
60-day seasoning requirement — All funds used for the down payment and closing costs need to be verified with two months of bank statements. If you have a large cash deposit that recently hit your account, the lender will want to know exactly where it came from. Unsourced large deposits — cash that can’t be traced to a verifiable source — typically cannot be used in a transaction.
Gift funds — If you’re short on the down payment, gift funds from a family member or friend are an acceptable source. In 2026 this is more flexible than it’s ever been — lenders have eased significantly on gift fund rules compared to years past. The gift does need to be documented with a gift letter confirming it doesn’t need to be repaid.
Seller concessions — Up to 2–6% of the purchase price can be negotiated from the seller to cover closing costs, reducing how much cash you need to bring to the table.
FAQ
What is the minimum down payment for a DSCR loan? 15% is the minimum, but most properties require 20% or 25% depending on rental income strength, credit score, and property type.
Do I need cash for closing costs on top of the down payment? Yes, unless you negotiate a seller concession to cover them. Closing costs typically run $6,000–$10,000 nationally.
What are reserves and how much do I need? Reserves are funds you must have remaining after closing — typically 3 months of mortgage payments. They can come from bank accounts, retirement accounts, or investment accounts.
Can I use gift funds for a DSCR loan down payment? Yes. DSCR loans allow gift funds from family or friends. The gift needs to be documented and confirmed as not requiring repayment.
Why does my money need to be in the bank for 60 days? Lenders require two months of bank statements to verify the source of funds. Large recent deposits that can’t be traced to a verifiable source cannot be used toward the transaction.
Can the seller cover my closing costs? Yes. You can negotiate a seller concession of 2–6% of the purchase price to cover closing costs, which reduces your total cash needed significantly.
Need help running the numbers on a specific property to figure out exactly how much cash you’d need? Reach out and I’ll walk through it with you. Austin Clarence | NMLS #1509690 | (602) 737-2576 | aclarence@nexamortgage.com