# How to Buy a Rental Property with Minimal Down Payment
The 20% down payment myth stops many investors cold. Rental property purchases don't require that much capital upfront. Multiple financing paths exist for buyers willing to explore them.
Conventional loans with 15% down represent one option. Lenders like Fannie Mae and Freddie Mac allow investors to put down less than 20%, though mortgage insurance kicks in to protect the lender. This route works for borrowers with solid credit scores and stable income documentation.
FHA loans permit investors to buy with as little as 3.5% down on owner-occupied properties. The catch: you must live in the unit for at least one year. After that period, you can move out and rent the entire property. This approach suits investors targeting duplexes or small multifamily buildings where owner-occupancy makes financial sense initially.
Portfolio loans from local banks and credit unions bypass Fannie Mae and Freddie Mac guidelines entirely. These lenders keep mortgages in-house and set their own terms. Down payments drop to 10% or 15%, though interest rates typically run higher. Relationship banking pays here—established customers get better pricing.
DSCR loans (debt service coverage ratio loans) focus on property cash flow rather than personal income. Lenders approve based on rental revenue alone. Down payments start at 20%, but some specialized lenders go as low as 15%. This works particularly well for investors with irregular W-2 income or those buying in hot markets where rents support the mortgage.
Hard money lenders provide fast capital with minimal documentation. Down payments range from 20% to 30%, but closings happen in weeks, not months. Exit strategies matter here—this financing suits house flippers and value-add investors planning refinances within 12-24 months.
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