The short answer
Loans for a rental you will not live in usually need a larger down payment than loans for a home you will occupy. Buying a two to four unit building and living in one unit can open FHA and VA options with smaller down payments. Lenders set their own terms within each program's limits, so compare offers in writing.
On this page
Occupancy drives the down payment
Lenders and loan programs sort properties by how the borrower will use them. HUD's FHA handbook defines an investment property as one the borrower does not occupy as a principal or secondary residence, and a principal residence as the home the borrower occupies for most of the calendar year; a person may have only one at a time. As the limits below show, that label can change the minimum down payment a great deal.
Conventional loans for an investment property
For the conventional loans it buys, Freddie Mac publishes maximum loan-to-value (LTV) ratios. For a purchase, the limit is 85 percent for a one-unit investment property and 75 percent for a two to four unit investment property. In down payment terms, that means at least 15 percent and 25 percent. Individual lenders can require more.
Living in a two to four unit building
Moving into one unit changes the math. Freddie Mac's purchase limits for a primary residence reach 95 percent LTV for two to four units on loans its automated system accepts. Lower limits apply to super conforming and manually underwritten loans: 85 percent for two units and 80 percent for three or four. A 95 percent limit means a down payment as low as 5 percent, before your lender's own requirements.
FHA loans
HUD says an FHA down payment can be as low as 3.5 percent of the purchase price, and FHA loans are available on one to four unit properties. Credit scores set the ceiling. With a minimum decision credit score of 580 or higher, a borrower is eligible for maximum financing. Between 500 and 579, the loan is limited to 90 percent LTV, which means at least 10 percent down. Below 500, the loan is not eligible for FHA insurance.
FHA is for owner occupants. HUD's handbook requires at least one borrower to occupy the property within 60 days of signing the security instrument and to intend to stay for at least one year, and FHA will not insure a mortgage designed to obtain investment properties.
VA loans
VA-backed purchase loans can be used for a single-family home or a property with up to four units, as long as you will live in the home you are buying. VA says there is no down payment as long as the sales price is not higher than the home's appraised value, though you may need to pay the VA funding fee.
A worked example
Take a two-unit building with a $400,000 price that matches its appraised value. Using the program limits above as minimums:
- As an investment property under Freddie Mac's 75 percent limit, the down payment is at least $100,000.
- Living in one unit under Freddie Mac's 95 percent limit for an accepted loan, it can be as low as $20,000.
- With an FHA loan at 3.5 percent and a qualifying credit score, it can be as low as $14,000.
- With a VA-backed loan, an eligible Veteran may need no down payment, plus any funding fee.
A second home is a separate category; Freddie Mac's purchase limit for one is 90 percent LTV. Describe your real plans for the property on every application, because the occupancy type decides which limits apply.
Budget beyond the down payment
- Closing costs and any loan fees or points.
- Cash reserves, if your lender requires them.
- Repairs and turnover costs before the first renter moves in.
- A vacancy cushion for the months a unit sits empty.
- Mortgage insurance or funding fees, depending on the program.
A smaller down payment means a larger loan and a larger monthly payment, so run the rental's cash flow at the loan amount you would actually carry.
Questions to ask each lender
- What is the minimum down payment for this property and occupancy type?
- Do you count expected rent from the other units when you qualify me, and how?
- What reserves do you require after closing?
- What credit score do I need for the down payment you quoted?
- Can I get a written loan estimate so I can compare offers?
This guide is general information, not financial or legal advice. Program rules change, so confirm current terms with each lender before you make an offer.
How Rentari helps
When you close, Rentari's accounting can record your down payment as an owner contribution, set up the building as a fixed asset with depreciation entries, and book mortgage payments from your bank feed.
Sources and further reading
Common questions
Can I use an FHA loan to buy a rental?
Only one you will live in. FHA requires at least one borrower to occupy the property within 60 days and intend to stay at least a year, so it can work for a two to four unit building where you live in one unit.
Can I buy a fourplex with a VA loan?
Yes, if you are eligible. VA-backed purchase loans can be used for up to four units, as long as you live in the home.
Do I need 20 percent down for an investment property?
Not always. Freddie Mac's maximum LTV of 85 percent for a one-unit investment purchase means 15 percent down can be enough under its rules, while two to four unit investment properties need at least 25 percent. Lenders can ask for more.
Does my credit score change the FHA down payment?
Yes. A minimum decision credit score of 580 or higher qualifies for maximum financing, while 500 to 579 limits the loan to 90 percent of value.
Archive years group longstanding rental topics. This Rentari guide was published on 2026-11-14.
The Rentari team writes and updates this guide. Examples illustrate decisions and do not describe customer results. Found an error or an unclear step? Send a correction with a link to this page and the wording you’d change.
